The campaign to save Albert Park

THIS EVENT IS A LOSER!

Factsheet 78/2, 21 February 1998

The State Government has claimed that Victoria benefited financially to the tune of $95.6 million from the 1996 Grand Prix. Given the huge sums that have been spent, you wonder how that can possibly be so. Save Albert Park has analysed the economic impact evaluation report, the Auditor General’s report, the Grand Prix Corporation’s report, and many others. What emerges is a ‘benefits scam’.

1. How much is spent? These amounts are all taken from official reports.

Item	$ first year only	$ per annum
Establishment Costs
Track construction	13,200,000
Pit buildings	10,900,000
Park restoration/mounds etc	9,304,000
Grandstands, barriers, etc	19,861,000
Grand Prix Corp funding, 1993-5	4,800,000
Compensation for damaged houses	200,000
PTC tramway works	1,600,000
MP&W tree removal, road works, etc	1,410,000
VicRoads signage, road works	2,940,000
Local Government planning costs[1]	200,000
Total establishment cost	64,415,000
Equivalent annual amount [2]		8,752,000

Every year
Grand Prix Corp administration		5,328,000
Preparation of track, grandstands, etc.		15,379,000
Marketing, promotion, catering		8,416,000
Event ‘management and staging’[3]		22,066,000
Park restoration and re-surfacing [4]
Depreciation costs[5]		4,580,000
Annual running costs		55,769,000
Total annual costs (inc. establishment)		64,521,000

As well, an additional $15 million has been spent on Albert Park by Parks Victoria since 1994, and a further $65 million has been spent on the construction of the Melbourne Sports and Aquatic Centre.

2. In the 1997 race, receipts were as follows:

Item	$ per annum
Ticket sales	17,895,000
Corporate packages (minus commissions)	19,528,000
Sponsorships, naming rights	10,277,000
Other revenues, interest, etc.	770,000
Total receipts	48,470,000
Subtract total annual expenses	64,521,000
Total annual deficit	16,051,000

If Victorian taxpayers are subsidising the race to the tune of $15 million for each year the race is run at Albert Park, are there really the $95.6 million benefits that the Government keeps talking about? Please read on.

The ‘benefits’ to Victoria

An independent report, ‘Grand Prixtensions’, prepared by consultants Economist At Large & Associates (EAL) has found that much of the benefits claimed by the Government is unproven and inflated by the misleading use of a gross benefit figure.

The Government has claimed a benefit of $95.6 million when its own report stresses that “the community resource cost of the event” (such as the benefits foregone from diverting public sector investment from schools, hospitals) must be taken into account before benefits are estimated. Buried in the report is a net benefit equivalent to $57 million. This is the amount the Government should have used.

However, the Government has claimed benefits for which there is no or insufficient evidence (from the patron surveys). When these are subtracted (see table below), the proven actual economic impact or net benefit (i.e. increase in Gross State Domestic Product) is only $24 million.

Item	They say	EAL say
Overseas and interstate visitor expenditure ^{note 6}	37,800,000	23,7000,000
Retained Victorian Expenditure ^{note 7}	10,600,000	5,900,000 ^{note 10}
Induced Tourism ^{note 8}	6,000,000	n/a ^{note 10}
Enhanced Resident Expenditure ^{note 9}	9,900,000	n/a ^{note 10}
Total direct benefit ^{note 10}	64,300,000	29,600,000
The ‘Multiplier’ ^{note 11}	1.487	1.487
Total gross economic benefit (direct benefit x multiplier) 1996 Total net economic benefit 1996	95,600,000 57,000,000	43,930,000 23,670,000
Total estimated net wealth generated by the AFOGP after 10 years		21,870,000

When the Grand Prix is analysed as an investment and wealth creation project, which takes account of the annual losses of the Grand Prix, the findings are even more serious. ‘Grand Prixtensions’ finds that Victoria’s investment in the Grand Prix would yield only $22 million after a 10 year period, a minus 20% return on investment. A very cautious alternative investment of the taxpayers’ funds could have earned Victoria $128 million.

The report concludes that the Government’s claim that the Grand Prix is a an economic winner “is simply not sustained on the evidence”(p.130).

6. The NIEIR report claims the GP attracted 5,178 international and 11,738 interstate visitors. The patron surveys fail to ask the key question - Would you have visited Melbourne in March 1996 if the Grand Prix were not held? EAL believe that the number of visitors is over-estimated.

7. ‘Retained Victorian Expenditure’ is claimed to be the money spent by Victorians who would otherwise have gone to Adelaide and spent it there! $10.6 million is an extraordinarily high estimate and is not supported by the 1992 Adelaide evidence.

8. ‘Induced Tourism’ refers to those who saw the event on TV and just had to book a holiday in Melbourne as a result! $6 million represents about 25,000 visitor nights every year! If you believe this you believe in the tooth fairy. The government’s report admits there is no evidence on the impact of the international exposure from major events.

9. ‘Enhanced Resident Expenditure’ is the money that Melburnians spent on the race that they wouldn’t have spent on something else. In other words, money from their savings. And this at a time when all governments are scolding us for not saving enough!

10. None of these three items is traditionally included in Major Event Impact Studies. They weren’t included in the 1992 Adelaide Grand Prix study, the 1995 Melbourne International Festival study or the 1995 Tennis Open study.

11. Any original expenditure by visitors has a flow-on effect in the economy. This is called the ‘multiplier’ effect. To turn $64.28 million (which is itself questionable) into $95.6 million, the government has used an effective multiplier of 1.487. In contrast, the Adelaide GP study used 1.09, and the Sydney Mardi Gras used 1.2.

[1]. Planning and other costs of other government departments have not been released.

[2]. This is the annualized cost of the $64 million over 10 years, including interest payments and repayment of capital to the Victorian tax-payer.

[3]. The secret franchise fee paid to Bernie Ecclestone is believed to be included in this figure.

[4]. It is not clear whether the AGPC pays the full restoration costs.

[5]. Most of the permanent Grand Prix structures have been passed to Parks Victoria which will carry the depreciation costs ($1.28 million in 1996-97).

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