Is it a car race

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Is it a car race

    Newsletter of Save Albert Park Inc.

     November 2008

Is it a car race? Is it a rock

     concert? ...... whatever

     An advertisement headed „FIRE UP MELBOURNE‟,

    published in The Age on November 1, shows how the

    Victorian Government intends to showcase its attitude to

    saving the planet, and how, in a world in economic crisis, it

    will demonstrate its ability to make effective use of precious

    public funds.

     Our government will spend about $90 million to import the

    Formula One „demolition derby‟ and a musical instrument „destruction stage show‟ from overseas and stage an

    entertainment in a temporary car racing circuit in a public park.

    The stated purpose is to bring economic benefits to Victoria.

     The set-up and take down of the temporary circuit in Albert

    Park, with 40,000 tonnes of race material trucked in and out over

    a period of 3-4 months will be an outstanding example of waste

    of human effort and resources, and harm to the environment

     At the event, there will be fast cars, fast food and alcohol in

    abundance, grid girls and grid boys, and Ferrari cars with

    Marlboro barcode logos to remind us to smoke ourselves to

    death, and hearing-damaging noise from „The Who‟. Tens of thousands of litres of motor fuel will be burnt.

     Victorians will buy two thirds of the tickets, diverting about

    $30 million which otherwise would have been spent elsewhere

    within the state economy. All of this and more will be sent

    overseas to pay the race licence fee set by the Formula One

    „ringmaster‟, Bernie Ecclestone, plus a million or so to pay the

    UK rock band, „The Who‟.

     All up, the Victorian government will lose $45 million on

    staging the event, and this shortfall will be taken from public


     Some interstate and overseas visitors will fly here to attend the

    event, and will spend money in hotels, restaurants, and the

    casino. This increased turnover will be the much vaunted

    „economic impact‟, the net profit from which will go mainly to the

    airlines, hotels, and hospitality businesses. This profit will

    represent „corporate welfare‟, a handout to private business from

    the Victorian public.

     Then there will be the profit earned by the construction and

    trucking firms and the hirers which participate in the $25 million

    government contract to build and dismantle the temporary circuit.

     So what is this really? Is it a project intended to benefit

    all Victorians? Or is it actually a racket, a fraud perpetrated

    on the Victorian public by an unprincipled government for

    the purpose of currying electoral favour with big business?

     That‟s what it really looks like.

     2008 GP loss no surprise

     The 2008 annual report of the Australian Grand Prix

    Corporation (AGPC), issued on October 30 (along with over

    200 reports from other state government agencies), revealed

    that the 2008 F1 Grand Prix event incurred an operating loss

    of $40.136 million. This was no surprise: The graph on page

    1 of SAP‟s May 2007 newsletter predicted this result.

     Predicted losses for 2009 and 2010 are $45 and $50,which

    will bring the total operating losses since 1996 to $255. From

    2010, the graph shows steep further increases, mainly caused by

    an expected 15% annual increase in the race licence fee.

    There are indications that Formula One might moderate its

    demands, because a number of host circuits can no longer afford

    the fee. If this happens the curve will flatten out somewhat,

    reflecting the 10% annual increase which was the norm up to

    about 2006. However, because Formula One‟s main owner, CVC

    Capital Partners, is heavily in debt, and the race teams are

    demanding more of the revenue, the current loss trend shown on

    the graph may continue.

     Gems from the Grand Prix

     Corp.’s annual report

     The AGPC annual report attributed the $40 million operating

    loss to increases in the event staging fee, (ie Formula One‟s

    race licence fee), the participation of the V8 Supercars, increases

    in circuit construction costs, and the provision of other

    entertainment (mainly the American „Kiss‟ rock band concert).

     The AGPC now expects „the deficit between costs and

    revenue to increase by 10% a year‟. This means the loss on

    the 2009 race will be over $44 million, close to SAP‟s 2007

    estimate of $45 million.

     Increased ticket sales revenue of 5.8% was attributed largely to

    „the Kiss concert, the Sidetracked music festival and the offer of

    free admission to children 12 and under‟. There was no mention

    of the effect of the V8 Supercars, stated to have provided

    „thrilling support for Formula One with three days of racing‟.

     So costs increased because of the Supercars and the

    music concerts, but it was the music concerts (and giving

    little kids free admission) which increased ticket sales. Has

    the AGPC considered whether the Supercars provide value

    for money? It seems the „nag‟ factor exerted by little kids

    might far outweigh the pull of the V8s.

     The chairman, Ron Walker said that the event continues to

    provide „enormous benefits to Melbourne and Victoria‟, and Greg

    Hywood from Tourism Victoria was quoted as repeating the old

    bit of hype that the event had „massive‟ worldwide television

    audiences. However, it might be significant that the 2008 report

    contained no reference to the NIEIR economic impact studies,

    and its hugely inflated claims. Also, attendances were stated to

    be „estimated‟, not in terms of established fact.

     It‟s clear that money (the public‟s money) is not a

    problem at the AGPC. The annual report showed that the

    $40 million operating loss included the awarding of about

    $165,000 in bonuses to its top executives, and that figure

    included a $50,000 bonus for the CEO, Andrew Ward,

    bringing his annual salary to about $355,000, equal to or

    better than that of the Prime Minister

     The Auditor-General replies but

     doesn’t answer the question

     The previous issue of this newsletter advised readers that SAP

    had written to the Victorian Auditor General seeking clarification

    as to what was meant by the statement his May 2007 report,

    State Investment in Major Events, that major events have

    undoubtedly delivered „economic value’ to Victoria.

     SAP received a reply on October 13 which still did not clarify

    what „economic value‟ was supposed to mean. The final

    paragraph of the letter read as follows: „A positive economic

    effect however does not automatically represent a net economic

    benefit to the Victorian economy. An audit evaluation in the form

    of a cost-benefit analysis suggested a negative overall net

    benefit for Victorians from the 2005 Formula 1 Australian Grand

    Prix of $6.7 million, using the most reliable data and best

    estimates for benefits and costs. The first sentence apparently means that economic impact does not necessarily translate to

    net economic benefit. The second sentence re-states the finding

    of the cost-benefit analysis, but uses different words.

     The audit report itself stated in its ‘In brief’ summary:

     „... according to the study’s best estimate costs exceeded

    benefits by $6.7 million.’ But it did not follow up this conclusion

     page 37 of the report: by the all-important statement, buried on

    „.... if costs exceed benefits there is a negative net social

    benefit and the project should be modified or not supported’.

     Instead, the Auditor-General‟s report led off its „Findings‟ section with the sentence: ‘Major events have undoubtedly

    delivered economic value to Victoria’, and made no reference

    to the findings of the cost-benefit analysis.

     This is an important issue because the State Government

    was able to seize on this statement and use it to justify the

    extension of the Grand Prix contract, despite huge operating

    losses on the event. SAP has made a submission to the current

    inquiry by the Public Accounts and Estimates Committee into the

    findings of the Victorian Auditor-General‟s 2007 reports, pointing

    out apparent serious deficiencies in the Grand Prix audit report.

Skate park VCAT re-hearing adjourned

     On November 10, VCAT agreed to adjourn to February 9 its re-

    hearing of objections to the building of a skate park in Albert Park

    Reserve. This means that the hearing will be delayed until after

    the election of a new City of Port Phillip council.

     The history behind this decision is lengthy and emotionally

    charged. The City of Port Phillip (COPP) decided on April 24

    2007 to grant a permit for a skate park at the corner of Fitzroy

    Street and Lakeside Drive. This decision was driven by a desire

    to provide what was seen as a needed recreational facility for

    young people, and was preceded by a search for suitable sites

    and considerable public consultation.

     The proposal was opposed by „Save Our Park‟ (SOP), a group

    which comprised the council of the St Kilda Park Primary School,

    residents, and some commercial interests. Save Albert Park and

    the Park Community Association and others had also lodged

    objections. SOP took the matter to VCAT for review, where the

    COPP proposal was approved. SOP then sought an appeal to

    the VCAT decision through the Supreme Court, and won, and on

    May 5, 2008, the court sent the matter back to VCAT for a re-

    hearing. Save Albert Park and others joined SOP in providing

    new evidence for the re-hearing. SAP‟s evidence was that a site on the foreshore near the St Kilda marina was environmentally

    and economically superior to the park site.

Campaign to save Sydney’s

    Olympic Park from V8 street

racing gathers strength

     The‟ Save Olympic Park – No V8 Racing‟ campaign in Sydney has grown rapidly since the agreement by the

    NSW Premier to fund a V8 Supercar event on a park

    circuit from 2009, with up to $86 million over four years

    (see September and October Newsletters).

     The campaign has publicised the potential impact on the

    park trucking and construction, loss of trees, relocation of

    services and the threat it poses to the area‟s masterplan

    as “a showcase of urban renewal and environmental

    sustainability”. Opposition quickly formed through a broad

    coalition of residents and environmentalists, and motor

    sports groups who favour a return to the permanent track at

    Eastern Creek.

     At a protest rally at the park on October 19, the key speaker,

    Federal Labor MP Laurie Ferguson, called the government‟s

    decision “a sell-out of the people of this state”. Greens NSW

    Senator Lee Rhiannon declared it a continuation of “the bad

    old policies of deals done behind closed doors with no

    public consultation”. Local councillor Malikeh Michels, who

    had been interviewed on SAP‟s 3CR program on 13 October,

    saw the race as one for “the big end of town”. A Total

    Environment Centre speaker dubbed the decision “an act of

    environmental vandalism”.

     Save Albert Park‟s guest speaker, Keith Wiltshire,

    drew parallels with the many gaps between promise and

    reality which the Grand Prix in Albert Park has shown from

    its inception: “no net loss of open space”; “no permanent

    race facilities”; “no long-term damage”; “just four days a year”; “no drain on the public purse”; “1000s of jobs

    created”; “no negative impact on residents” – and no

    credibility. With the suspension of relevant legislation and

    attempted suppression of opposition, our campaign was

    also presented as one for civil rights and the democratic

    process as well as for public parkland. Though we wished

    them quicker success, SAP‟s long campaign was reported

    as “inspiring” for SOP supporters.

     Tom Bohan, an SOP-No V8 spokesperson, reminded the NSW Premier that people want government accountability,

    better public transport services and properly funded

    schools and hospitals, “not this financially risky and

    environmentally destructive car race”. Voters‟ decisions on

    October 18 seemed to support this view. The biggest swings

    ever recorded in State or Federal by-elections included the

    defeat, in the seat of Ryde, of the ALP candidate an

    “environmental manager” who had in fact dissented from

    the Premier‟s V8 decision. As well as Olympic Park‟s open

    space and stadiums, Ryde contains the green Olympic

    Village reborn as an even greener residential suburb, and

    nearby wetlands.

     The SOP-No V8 campaign is now focused on the defeat of the

    enabling legislation in the NSW upper house, the Senate. Four

    cross-benchers have been especially targeted, with one, Rev

    Dr Moyes, already persuaded to vote against the bill.

     The Opposition has said it opposes the race, but leader

    Barry O‟Farrell and Labor members with known

    environmental sympathies have also been heavily lobbied,

    with a coming mini-budget as the next hurdle. Bicycle NSW

and the Australian Council of Motor Clubs have urged

    members to campaign actively against the plan.

     The government has already been embarrassed by a “clerical

    error” in its recent anti-tobacco advertising legislation, with a clause which would have allowed tobacco companies to sponsor

    motor racing. This sparked speculation (SMH, Oct. 24) that there

    is a strategy to win Formula One from Melbourne using a “low-

    impact” V8 event at Olympic Park as a persuasive precedent for

    a Grand Prix street circuit.

     A more serious question of probity was raised by the

    ABC‟s Stateline NSW program on October 31. The government‟s new lobbyist code of conduct was tested by questions about the

    relationship between the Minister handling the V8 deal, Ian

    Macdonald, and two businessmen associated with V8 Supercars,

    including David Coe of Allco Finance Group.

     The two businesses have been donors to the ALP, but the

    Minister claimed that neither “put any special pressure” on

    him. His decision, he insisted, was based on his discussions

    with companies with Olympic Park interests, such as hotels.

    He also claimed that V8 organisers won‟t return to Eastern

    Creek “due to the difficulties of getting crowds there. . . “

     The financial implications may yet be a factor. The Allco

    Finance Group went into receivership on November 4, with

    debts of $1 billion, though any direct Supercar liability

    seems unlikely. The organisers of Adelaide‟s 2008 Clipsal

    500 have claimed a profit of $850,000, but only on the back

    of $2.5 million in State Government grants.

     With major events seen as an electoral lifebelt, the NSW

    Premier has refused to release three feasibility studies, the

    V8 contract and related documents which would shed light

    on the actual triple-bottom-line for taxpayers. The NSW FOI

    legislation is likely to be unhelpful to opponents.

     Tony Cochrane of V8 Supercars Australia says the event has

    “engraved very much in the Australian psycho (sic) of all the good things Australia represents: mateship and great sporting rivalry” –

    which surely outspins even Ron Walker and John Brumby.

     Meanwhile, the „Save Olympic Park – No V8 Racing‟

    campaign is shaping as much more determined than

    the race proponents had expected. SAP has pledged its

    continuing support.

     Interesting times in Montreal

     There is a serious problem with the Canadian Grand Prix

    in Montreal. F1 „ringmaster‟ Bernie Ecclestone has taken

    the race out of 2009 calendar, because, it appears, the

    circuit hasn‟t paid the licence fee for the 2008 race. There

    is a disagreement about the amount to be paid, but also

    there is no financial backer for future races.

     The Montreal circuit has a contract with Formula One

    which has several more years to run. The existence of the

    contract apparently doesn‟t worry Ecclestone. No race fee

    paid up, no race. However, there is no talk at all about a

    cancellation fee supposed to be paid by a circuit if it can‟t

    meet its contract obligations. It seems that if it wants to, the

    Montreal Grand prix promoters can settle their 2008

    account and just walk away from the contract.

     The Montreal promoters want to get the race back, but

    they need a generous new backer. The race fee has been

    quoted as $US30m (now about $A44m) a year, but the race sales revenue is only $US15m.

     Readers of this newsletter will recall that when the Canadian Government banned all tobacco advertising a few years back, the Montreal circuit had to find about $A18m a year to replace the lost sponsorship. This was provided by a brewery and the Quebec province government. It seems these sources have dried up. Perhaps the local government and the brewery realised they weren‟t getting value for money.

     All this has interesting connotations for the Melbourne race. What sort of contract has the Victorian Government signed up to? Is there a force majeure or an exit clause, or has Brumby locked us into horrendous losses on the race for seven more years to come?

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