$4 million car race subsidy approved
By Barry WittMercury News

SAN JOSE TO KEEP GRAND PRIX DESPITE LACK OF PUBLIC COMMENT

Rejecting criticism that they were jamming through another ``back room deal'' with little public participation, the San Jose City Council on Tuesday approved a $4 million subsidy to keep the San Jose Grand Prix alive for at least two more years.
The 8-3 vote came after more than two hours of debate and testimony, with downtown hotel and restaurant managers and labor leaders urging the council to approve the measure while a handful of residents told the council the city has more important priorities -- like keeping its streets swept and parks clean.
Councilmen Dave Cortese, Chuck Reed and Ken Yeager voted against the contract.
The vote occurred shortly before the city council unanimously stripped Mayor Ron Gonzales of much of his authority as punishment for making what was characterized by the Santa Clara County grand jury as a ``back room deal'' on a city garbage contract.
``I believe San Jose as a big city needs to be not risk-averse,'' said Vice Mayor Cindy Chavez, who made the motion to approve the race subsidy. She joined the council majority in arguing that the cost was worth the return the city expects to reap in economic activity and recognition from racing fans worldwide.
Grand Prix operators declined to reveal how much money they lost on the first race, held last July, which they said attracted 154,000 race fans. But they argued the subsidy was critical to keeping the event alive.
``We're not looking for a handout,'' said Dale Jantzen, president of the race, part of the Champ Car World Series that attracts multimillionaire race car owners like actor Paul Newman. ``We're trying to bring the event to the city.''
But a handout is exactly what the city's action looked like to a number of residents.
``I consider this a bait-and-switch operation,'' said downtown resident Ann Webb, who noted that the council gave final approval to the race last year when it was presented as requiring virtually no subsidy.
The new subsidy, to be paid over two years, includes $1.5 million directly to the race operator, a for-profit corporation called San Jose Open Wheel Racing LLC and run by former Cisco Systems executive Don Listwin. Other funds will pay to construct a bus bridge for the light rail system, which needs to be shut down for three days, and to cover the cost of providing city services such as code inspectors, designers for street improvements and traffic management.
San Jose officials said the 2005 race cost about $600,000 in services that were not reimbursed by the race operator, and estimated the city received about $165,000 in direct tax and parking revenue.
In addition to the $4 million cost in the first two years, the deal the council approved Tuesday calls for the city to provide about $600,000 in free services annually through the remainder of a nine-year contract. If future councils decline to provide the money, the race operators can cancel the event.
Although city administrators had told Chavez and Gonzales last month of the need for the additional money, the subsidy request came as a surprise to other members of the council and the public. A report on the new deal first surfaced at City Hall late Friday, but wasn't posted with other agenda material on the city's Web site until mid-Monday.
Gonzales rejected a request to defer action on the new contract for two weeks, saying nothing in it would change during that time because ``the deal is the deal.''
That comment drew an angry retort from Cortese, who like Chavez and Reed, is running for mayor this year.
``I don't know how to get through any more that this is the public's business,'' Cortese said. ``This isn't a private-sector company where done deals are done in a back room by a couple of people and brought forward.
``This is a public entity that requires a public process, especially on a $4 million transaction that's going to raid our general fund for a couple of million dollars,'' he said.
City administrators who negotiated the deal said they had no idea how the subsidy they were proposing compared to the public cost of similar races in other cities. A Mercury News review in 2004 found no other city that invested significant public dollars for a Champ Car race.
City officials estimate the total economic impact from the 2005 race at $41.6 million. However, that figure is not based on an actual survey of activity associated with the race, but largely on an extrapolation of spending patterns for other events held in the city.
The 2006 race is scheduled for July 30 and will be broadcast live on NBC, according to race organizers.
One sidelight to the debate over the race was the revelation of an ongoing dispute between San Jose beer manufacturer Gordon Biersch Brewery and the race organizers. The organizers signed an exclusive sponsorship contract last year with South African Breweries, makers of the Miller brand. Mike Fox Sr., whose beer distributorship handles Gordon Biersch, complained to the council that Gordon Biersch was frozen out of race sales. Council members said they would try to do something to address local business needs but made no guarantees before approving the city contract for the race.