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Is the Indy Grand Prix worth Louisiana’s investment? 

Matt Brennan on the state’s $4.5 million gamble on a racetrack in Avondale

click to enlarge Drivers participate in an IndyCar aero kit test.

Photo by Chris Owens (INDYCAR)

Drivers participate in an IndyCar aero kit test.

Built on 750 acres of former cypress swamp, NOLA Motorsports Park in Avondale is an unlikely stage for the stars and cars of the Indianapolis 500. Though the $70 million facility is in a part of the country traditionally associated with NASCAR, the park's twisting, 2.74-mile road course will instead play host to the Verizon IndyCar Series, which draws a fraction of the popular stock car association's TV ratings. As organizers make final preparations for the inaugural Indy Grand Prix of Louisiana April 10-12, the challenge is clear: Can open-wheel racing attract enough interest to fulfill the high expectations for the event's economic impact and justify the $4.5 million in public funding that helped bring the race to the state?

  "To outsiders not familiar with the series, you do think to yourself, 'Why would IndyCar be interested in New Orleans?''' said Mike Kitchel, IndyCar's director of communications. "But if you're a sports fan, once you get a chance to come out to the racetrack to see those cars race at 200 mph wheel to wheel, you can't come out to one of these races for a weekend and not want to come back."

  To appeal to potential spectators who may have little or no prior exposure to IndyCar, particularly in a market already saturated with entertainment options, organizers have planned a full complement of ancillary attractions, including midway rides, music and food, all with a focus on local culture.

  "Even if you're not into racing, we've got all the festival components," said NOLA Motorsports Park President Kristen Engeron. "In order to convert [attendees] to IndyCar fans, they need to experience what they know, which is south Louisiana festivals. And if we don't do that, we won't be able to appeal to that 80 percent who are nonracing fans, who are looking for a new festival to go to."

  This multifaceted approach is necessary not only because Louisiana is new to the schedule, but also as a function of IndyCar's reliance on last-minute ticket sales. Engeron estimates that up to 70 percent of tickets for race weekend will have been purchased in the two weeks preceding the event, and the season-opening Grand Prix of St. Petersburg, Florida, now in its 11th consecutive year, still sells 60 percent of tickets this way, according to former Grand Prix of St. Petersburg President and current Grand Prix of Louisiana General Manager Tim Ramsberger.

  "The fragile model is really the result of the fact that IndyCar racing in and of itself is a highly walk-up market to begin with," Ramsberger said. "For long-term stability, we've got to get people to show up here. ... We don't want them to sit home in Mobile or Pensacola and watch it on TV."

  In order to secure the current three-year sanctioning agreement with IndyCar, the nonprofit NOLA Motorsports Host Committee, headed by Engeron, requested $4.5 million in state appropriations, which the Legislature approved as part of the $24.6 billion budget passed last May. According to Engeron, $2.8 million went toward track improvements, including safety upgrades, and the remainder was devoted to marketing and advertising.

  Despite the "fragile model" on which IndyCar depends, the preliminary economic impact assessment cited in the request to the Legislature predicts the event will create "significant positive returns for New Orleans, the surrounding civic municipalities, tourism and hospitality vendors and other stakeholders." The two-page report, prepared for the host committee by the consulting firm Formula LLC, projects an annual economic impact of $27.8 million, or more than $83 million over the course of the current three-year deal. (A second economic impact assessment will be conducted after the race, Engeron said.)

  As a result, the event has won the support of elected officials, including Gov. Bobby Jindal and Senate President John A. Alario Jr., as well as the New Orleans Convention and Visitors Bureau and the Jefferson Convention and Visitors Bureau (JCVB).

  "The event is, of course, an international event, it's going to be internationally televised, so the kind of exposure that Jefferson Parish, as well as the New Orleans region, is going to get is going to be tremendous," said JCVB President and CEO Violet Peters, noting that Jefferson Parish hoteliers already have seen an impact from IndyCar teams holding test sessions at the NOLA Motorsports Park.

The predicted fiscal impact appears to be less rosy. The Formula study cites an estimated attendance of 75,000, with 30 percent predicted to come from outside the New Orleans metropolitan area, which is on the high end of the 60,000 to 80,000 spectators Engeron said she anticipates. Even with this sanguine view of potential attendance, the report's authors forecast that this year's race will generate just $2.2 million in taxes, or less than half the amount granted by the Legislature. And while the one-time payout is a tiny portion of the overall budget, such subsidies have come under scrutiny as the state grapples with an ongoing fiscal crisis.

  "Four and a half million dollars doesn't make or break the state budget, but all of these things do add up, and when you have a $1.6 billion shortfall, spending money on IndyCar racing is probably not a luxury the state can afford," said Jan Moller, director of the Louisiana Budget Project. "I have no doubt there will be money flowing into the state ... but in general I'm skeptical that spending $4.5 million to subsidize a privately owned and operated IndyCar event is going to have a positive net return" on the state's fiscal outlook.

  Though NOLA Motorsports Park owner and developer Laney Chouest, of the offshore support company Edison Chouest Offshore, is not a member of the NOLA Motorsports Host Committee, which owns the event, he stands to benefit from the race. In addition to paying IndyCar a sanctioning fee, the committee entered contracts with Andretti Sports Marketing, which employs Ramsberger, to manage race weekend logistics, and with NOLA Motorsports Park to rent the facility for the duration of the event. Engeron said the park will charge the host committee the same rate that corporations such as Lexus, Ducati and Michelin have paid to hold events at the park.

  "It's very transparent," Engeron said. "Anybody could come and audit that and we are clean as a whistle."

  Engeron defends the state's expenditure as a small investment in what could prove to be a major economic driver for Jefferson Parish, though she admits it's premature to rule out further requests for public funding down the road.

click to enlarge Drivers participate in an IndyCar aero kit test. - PHOTO BY CHRIS OWENS (INDYCAR)
  • Photo by Chris Owens (INDYCAR)
  • Drivers participate in an IndyCar aero kit test.

  "The Super Bowl Host Committee got just as much money and didn't come back with a Super Bowl, so if you're going to criticize us for asking for $4.5 million, we've delivered on a three-year event," Engeron said. "Again, can I absolutely guarantee we're never going to ask for any money in 15 years, in 10 years? I can't answer that question because the future's uncertain. ... We're not looking for handouts, by any means."

  In addition, Engeron said, having an event in south Louisiana on the IndyCar schedule may induce teams to relocate their research and development facilities to the region. Jindal echoed this sentiment when plans for the race were announced last May.

  "Verizon IndyCar Series events serve as the gathering point for automotive industry leaders and IndyCar sponsors, most of which are Fortune 500 companies," Jindal said in a statement. "As a result, NOLA Motorsports Park expects racing-related businesses and teams to locate to Louisiana once the race is scheduled, which will create more great jobs and economic momentum for Jefferson Parish and our state."

  But the logistical costs of such a move are likely prohibitive, according to Brant James, motorsports writer for USA Today.

  "Given the sort of mid-level financial structure of IndyCar, I'd be surprised if they would split operations," James said. "And I'd be surprised if anybody moved. The whole industry is based in Indianapolis."

  Though the potential relocation of IndyCar teams is not mentioned in the Formula report or the host committee's request for funding, races themselves have fallen short of economic impact projections before and not all become fixtures on the calendar like the Grand Prix of St. Petersburg, Florida, or the long-running Grand Prix of Long Beach, California. For instance, the inaugural Grand Prix of Baltimore in 2011 created $47 million in economic activity, or two-thirds of the predicted $70 million. After the initial organizers encountered financial trouble and attendance failed to return to 2011 levels in two subsequent editions, scheduling conflicts have kept the race off the calendar two consecutive seasons. A Grand Prix of Baltimore in 2016 now appears unlikely.

  With firm data on attendance and economic impact still pending, there are no guarantees, but the Grand Prix of Louisiana does enjoy several advantages. Holding the event at a permanent road course protects against variables such as street closures, roadwork, and the scheduling conflicts that have plagued the Grand Prix of Baltimore, Ramsberger said. The widespread political support for the race also bodes well, according to James of USA Today.

  "One thing that was really on the side of the [Grand Prix of St. Petersburg] promoters was political," he said, adding that the city's mayor at the time of the inaugural race was "undoubtedly an open-wheel racing fan."

  "The politicians in St. Petersburg looked at this race as basically a two-hour Chamber of Commerce ad that they were going to get on ABC or ESPN every year," James added. "First and foremost, having a political base that's really into it gets the ball rolling."

  As Kitchel notes, there are certain markers IndyCar will consider before renewing the sanctioning agreement for the Grand Prix of Louisiana in three years' time.

  "There's always teething issues," he said when asked about IndyCar's definition of success. "Are we seeing those incremental improvements in attendance? How well is the event received locally? ... If there's a continuation of the agreement, what are we projecting for that fourth, fifth, sixth year?"

  Kitchel is nonetheless confident that IndyCar's core product ­— racing — will make the Grand Prix of Louisiana a popular addition to the area's entertainment landscape.

  "Standing by a racetrack watching cars go by at 200 mph, what it does to you emotionally, what it does to you physically, you want to experience it again," Kitchel said. "Once you get [spectators] to the racetrack, and they have the sensory experience that I'm talking about, that's what gets the hooks in."

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