Formula 1 has grown enormously since the days it raced in predominantly European venues. A circuit must be awarded an FIA license to host an F1 race, and the criteria for acceptance are extensive and exacting.
Of course this is good for all as safety for the competitors and the quality of the facilities for the fans are high on the agenda. Yet the costs of delivering such a facility which in effect hosts 1 premier event per year are astronomical.
Sochi will come on board next year, and this is a circuit which snakes through the Winter Olympic Park which will hold the 2014 international event. Whilst the costs are shrouded in secrecy, estimates suggest that the final bill will be 260m euros – double that of the original estimate.
The most recent entrant to the F1 calendar is the impressive venue in Austin Texas. Privately funded predominantly by American billionaire Red McCombs, the construction costs have been reported somewhere between $350-450m – a rather broad financial spread it has to be agreed.
The Shanghai International Circuit came in at $450m and so the Korea project was a bargain at a mere $250m.
Street circuits of course are a lot less expensive to deliver in up-front capital expenditure, yet the project in New Jersey requires $100m to get the project off the ground. Much of this will relate to the setup costs required which will be a one off.
The problem with street circuits is the annual cost of setting up the track, the grandstands, the temporary paddock and then removing them. Ecclestone commented 2 years ago that Melbourne in the long run would have been better building a dedicated facility instead of the street venue of Albert Park.
“I suppose in reality it would have been the right thing to do. It would have been 10 years ago or whatever and it would have been built cheaper than it would be today”.
By the time the hosting fee is paid along with the circuit set-up and tear down costs, somewhere like Singapore is into the best part of $60m a year.
FOM and Ecclestone have been promoting F1 to new hosts for some time. The marketing department of FOM can be very persuasive; they have a team of highly paid lawyers who approach potential new F1 hosts, often national and regional governments because they have deep pockets and present to them a financial model which tells tales of unbridled economic wealth and treasures that will flow as a result of hosting an F1 race.
Billions, not millions of dollars are cited as the income that will be derived from the International prestige and tourism receipts over the life of an F1 contract.
Yet, the reality for South Korea will be a loss to the regional government of around $6-700m. The promise of vast swathes of international investment that would bring enormous economic benefit and regeneration to this neglected southern region of South Korea failed completely to materialise.
The cold hard reality is that local tax payers will be left with what must be the largest white elephant in the F1 history.
Valencia too bought into the dream. They signed a 7 year deal with Ecclestone to host an F1 weekend. The first race was held in 2008 and the last 2 years short of completing the contract in 2012.
The circuit was not universally loved by F1 fans and the circuit layout tended to deliver processional races. Valencia hoped to do a deal with Barcelona to alternate the Spanish GP as happens in Germany.
The Circuit de Catalunya was in financial trouble and negotiations began. The Mayor of Valencia Alberto Fabra hit out this week at his Catalunya counterpart Artur Mas, for reneging on plans to alternate with Valencia the Spanish GP. “We had talks with Mas, but he changed his criteria. First he agreed, and then he did not. I regret the change of position, as administrations should be loyal to their word and commitments,” Fabra commented on regional TV.
The bottom line was the cost to the tax payer was unjustifiable my the cities administrators as Fabra reveals, “I cannot say to an essential supplier ‘I cannot pay you because we have Formula One’.”
The concern of course was that Ecclestone would still enforce the hosting fee’s for the 2 years Valencia failed to fulfil the contract with FOM. This would have been 54m euro’s, yet Fabra assures his constituents he has a legal agreement with Ecclestone which releases them from this obligation. “The document is being finalised, but I can announce that we will not pay any financial penalty. What we have agreed is that we will not use any equipment in other circuits”.
Slightly deluded, Alberto concludes “In meetings with Ecclestone I explained how difficult it is right now for us to cover the budget, but I left the door open for the future should there be different economic conditions and a private sector collaboration.”
As it turned out, at the 11th hour, the Barcelona municipality delivered up sponsorship to fund the Catalunyan event. The name of the circuit has since been changed to the Circuit de Barcelona-Catalunya.
We’ve seen many things in F1, but the sight of Cathedrals of motor racing falling into decay just a few years from them taking their first breath of life – is something new. And as sure as eggs are eggs, there will be a number of these derelict wastelands appear over the coming years.
India will take a ‘sabbatical’ for 2014 and Korea’s life expectancy is now short. But the pictures from the once glamorous Valencia – “the Spanish Monaco” – are shocking for us all to see.
pictures courtesy of ’20minutos’