06/01/2014
NEWS STORY
The question of whether a Grand Prix will ever take place in New Jersey has been intensified by today's revelation that three years ago Formula One's boss Bernie Ecclestone considered hosting a race on a permanent circuit in the area.
It is no secret that Ecclestone has long desired a Grand Prix in the New York area and, by his own admission, he has given "too much leeway" to Port Imperial Racing Associates (PIRA), the group which has been planning a street race there for the past two years. PIRA is named after Port Imperial, a district in the New Jersey towns of West New York and Weehawken, where the race is planned to be held. A 3.2-mile track on public roads has been designed by F1 track architect Hermann Tilke and has the striking Manhattan skyline as its backdrop.
Known as the Grand Prix of America, the race has the dubious distinction of being the only proposed event in the 64-year history of F1 to be dropped from the calendar twice and, as we revealed last year, it still needs £61m ($100m) to go ahead. Far from being the first of many options in the area, it seems that the street circuit was chosen after other alternatives were rejected which raises the question of what the back-up plan might be if it fails to get the green light. It is a real possibility.
In an interview for American motoring magazine Autoweek Ecclestone recently said "what is amazing with New Jersey is that the people signed a contract." He added "you have got to assume they knew what they had signed. They should have never made the commitment. We could sue them."
The race has had more than its fair share of false starts since it was announced with great fanfare in October 2011 at a press conference hosted by New Jersey's governor Chris Christie. The cracks soon started to appear as in August the following year its president Tom Cotter unexpectedly resigned. As Pitpass revealed, the next month saw the exits of Trip Wheeler, the chief marketing officer of the Grand Prix of America, and Michael Cummings, PIRA's chief financial officer.
In September 2012 the race was listed on the provisional 2013 F1 calendar which caused PIRA to release a statement saying that it was "proud that years of hard work have brought us to this point and we look forward to bringing world-class Formula One racing to New Jersey."
It was followed by a statement from Christie who said that he had spoken to the race promoter Leo Hindery junior a sometime racer and managing partner of private equity fund InterMedia Partners. "I asked if he needs any help and he said, 'No.' I am not looking for problems. I heard there may be problems, so I called. And he told me it's not a problem." In fact there was indeed a problem because the race did not take place in 2013.
The wheels came off the race at almost the same time that it was listed on the calendar as Ecclestone revealed that Hindery's 10-year contract had been torn up after he failed to comply with its terms. I have been one of the most vocal critics of the New Jersey race plan right from the start and there is good reason for this.
As Pitpass has reported extensively, the key hurdle with the New Jersey plan seems to be the lack of state funding. Few F1 races get revenue from trackside advertising or the sport's corporate hospitality outfit the Paddock Club. It means that ticket sales are their largest source of income and this rarely covers the race hosting fee and running costs.
Accordingly, F1 races rarely make a profit and it is therefore tough to get investment in a company which promotes them. Investors will provide funding if the business has assets which their money can be secured on. The most obvious asset is a circuit itself but of course it is hard for organisers to own the track in the case of a race held on public roads, such as the one planned for New Jersey. Government funding is usually needed to compensate for the difficulty of raising private investment and it gives a good return.
Permanent race venues are located outside city centres because building them requires large amounts of free land. As a result, few local landmarks are seen in the background when the race is taking place and in turn this limits the promotion it gives to the host nation. In contrast, street races are usually located in the heart of the city and showcase buildings and attractions as the track weaves around them.
Governments pay handsomely to get this kind of promotion particularly if the race could not go ahead without it due to the lack of an asset to secure investment on. It is no coincidence that council funding was even granted to the humble Formula 3000 Superprix, which was held from 1986 to 1990 on the streets of Birmingham. Bearing this in mind, it is even more surprising that PIRA decided not to get government funding for a race on the streets of New Jersey and it is no surprise that it has not yet got off the ground.
It was dropped from the provisional 2013 calendar but in May last year Ecclestone signed a new 15-year contract with PIRA after it agreed to work with Chris Pook who founded the Long Beach Grand Prix. During the same month rumours came to light that F1 had invested in the company promoting the race and this suggested that its place on the calendar was secure.
As the Autoweek article points out, the origin of the rumours about F1 investing in the New Jersey promoter was an article written by Reuters' Formula One correspondent Alan Baldwin. Ecclestone told him that F1 has "put money behind it to pay a lot of the things off, a lot of their debts." A headline saying that "F1 has invested in New Jersey race, says Ecclestone" was then extrapolated from this. It would be perfectly reasonable to assume from the headline that F1 had bought a stake in the New Jersey race organiser but in fact this is far from the case.
As Pitpass reported what actually happened is that the F1 Group, which runs the sport, provided a £6.1m ($10m) loan to PIRA so that the race preparations could continue. The loan is personally guaranteed by Hindery so there is a greater chance that the F1 Group will get the money back.
In short, F1 has not bought any shares in the New Jersey race organising company as you might think from being told that F1 "has invested" in it. It did not even buy the right to repayment of its debt, which could be classed as an investment.
Granted, the Reuters piece was not a specialist business article but it still shouldn't confuse a loan and an investment. The New Jersey organisers already have plenty of the former but little of the latter and that is precisely what they need to get the green light.
The F1 Group simply gave the race organising company a loan and it has yet to be repaid. "We gave them money and I have never seen anything from them. We could sue them," says Ecclestone. He adds that the reason he hasn't taken legal action about it is that he wants to keep the prospect of the race alive as other groups are considering taking over the contract from Hindery.
"I've kept it going because somebody might come up and there have been two or three people who are interested and are looking into it." He adds that "all it needs is somebody serious to come up and say we will get behind this and make it happen. I have given Hindery too much leeway. I wanted to believe that he would do it."
If the F1 Group had indeed bought a stake in the race promoter then the situation might be different though that is no sure thing. As long-standing Pitpass readers will remember, the promoter of the Grand Prix in Turkey was owned by the F1 Group but this didn't stop the race from being cancelled.
The misplaced optimism was not restricted to Reuters. In May last year one F1 blogger proclaimed that "there will be three Formula 1 Grands Prix in the United States by 2016. The United States GP in Austin, the Grand Prix of America in New Jersey and the Long Beach Grand Prix in California... Pook makes things happen."
So far, Pook has failed to pull off a Grand Prix in New Jersey and recent comments from him seem to call his knowledge into question. Speaking to American motorsport magazine Racer last month Pook described the Grand Prix of America track as "the first temporary circuit that Tilke has done." You don't have to be a street circuit expert to know that this is not accurate. A quick check on F1's official website reveals that the street circuit in Valencia, for example, was "designed by Hermann Tilke."
After just a few months of Pook being on the job Ecclestone told me that the New Jersey Grand Prix "is not on the cards for next year" because the organisers "haven't got any money." This was then confirmed by my former colleague Will Buxton who is now pit reporter for the NBC Sports Network which broadcasts F1 in the United States. He Tweeted "New Jersey Grand Prix news appears to be true, sadly" and later added "seems sources were correct. No New Jersey on 2014 calendar." It was hard for some to swallow.
The blogger who believes there will be three US races by 2016 said "I am constantly amazed by the know it alls who say things won't happen without any idea about what has been going on." On this occasion the "know it alls" did indeed know it all as last month New Jersey was dropped from the 2014 calendar. The blogger didn't take it too well.
One of his readers suggested that the Grand Prix of America "will happen about the same time Maldonado wins the WDC." In response, the blogger replied "you should change your name to Humble Pie." He added "I still believe it will happen... the business model in New Jersey will make people rich. If they did not believe that, it would not have got this far." With no race on the horizon after two years of talking it has clearly not got far enough.
by Christian Sylt