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JUNE 28, 2006

Why the State of Indiana might pay for the United States Grand Prix

The negotiating between the Formula One group and Indianapolis Motor Speedway over the terms for a future contract for the United States Grand Prix has resulted in some rather ill-advised remarks in recent weeks, not least the suggestion from Bernie Ecclestone that Formula 1 does not need America. That is clearly not the case as remarks from various teams have shown. Everyone wants the US Grand Prix to be a success, indeed some teams want more that one race in the United States. That is entirely logical given the vast consumer markets that America offers. At the same time Tony George is like many other promoters and is not keen on paying the Formula One group so much money that he cannot make a decent profit on the race. And it is fair to say that he has a right to be a little irritated after the mess F1 made last year.

The key point in all of this is that if Ecclestone wants more money and George does not want to pay there is a danger that the race will disappear - and that would be a big blow for not only the Indianapolis Motor Speedway and Formula One but also for the city of Indianapolis and the state of Indiana. The race is estimated to bring in around $100m each year to the city from the teams and from tens of thousands of fans who fly in for the event. Indianapolis has not had an easy time in recent years. A trip around the town reveals a great deal of factory space available. Indianapolis likes to think of itself as the capital of auto racing in the United States of America but in recent years the IRL-Champ Car split has damaged the business considerably and there is pressure on the city from Charlotte where the NASCAR teams have created an impressive motor racing cluster. The Grand Prix is an important element for Indianapolis to maintain its former status.

The good news is that the local authorities have shown themselves to be willing to offer incentives to teams and there has been talk for some time of a major NASCAR team being lured to Indiana with subsidies. Today Honda has announced that it will be opening a major new car factory at Greensburg, an hour from Indianapolis, where Honda will produce 200,000 vehicles a year. This has come about thanks to subsidies on offer from Indiana governor Mitch Daniels who is rumoured to have granted around $50m in incentives to Honda in order to beat off other bids from Ohio where Honda already has several production plants. Getting the factory is a major coup for the state and it is likely to kick-start the stagnant economy in eastern Indiana.

It is also worth noting that the state has money in its coffers having recently landed $3.85bn for leasing out the Indiana Toll Road for the next 75 years. This road runs across the north of Indiana and carries a huge volume of traffic east and west across the state and the decision to create a toll gave the state the opportunity to sell the operation of the road. That money can now be invested in helping Indiana to revive its economy, through such projects as the new Honda factory. There are also rumours that a plan is being discussed for a major Disney auto racing theme park to be built on land to the south of the Indianapolis Motor Speedway, in order to create an attraction to pull in more tourists. The 280-acre site is believed to be separate from the large tract of land owned by George on the south side of the Speedway. This is currently used for parking but there have been discussions for years about a major development including a hotel and convention centre that would be connected to the race track by walkways across 16th Street. The plans and rumours are vague but clearly Indianapolis needs to maintain its traditions in racing if such projects are to be successful and in order to do that it makes sense to keep F1.