Meanwhile in California

Bureaucracy moves rather slower than the Formula 1 world and the plans to get the World Championship back in Long Beach, where it used to have a race between 1976 and 1983. After that the City of Long Beach refused to meet Bernie Ecclestone’s fee demands and the race switched to CART in 1984. That continued until 2008 and since 2009 the race has been held for IndyCar. The loss of Long Beach is often seen as being one of Bernie Ecclestone’s biggest failures, as it meant that Formula 1 lost a solid foothold in the US markets – and gave the rival series a big event. In recent years, however, with Indycar relatively weak, the race has not lived up to expectations with few out-of-town visitors and very little international coverage for the city, which wants to boost its tourism, and draw attention to its attractions, including the Long Beach Convention Center, the Aquarium of the Pacific, its beaches and marina, its museums and art galleries, its shopping outlets and, of course, the Queen Mary liner. This is important because tourism is Long Beach’s second-biggest industry behind manufacturing and is responsible for nearly 7,000 jobs and substantial revenues.

The City of Long Beach has been pondering a return to F1 for a while, but is fearful that a race would cost too much. In order to find out what was possible in 2016 the City asked for bids from promoters willing to take on the event. This resulted in two rival bids, one from the Grand Prix of Long Beach organisation, which is owned by Aquarium Asset Management, a company that belongs to Kevin Kalkhoven; the other from an organisation called the World Automobile Championship of California (WACC), which is run by Chris Pook, the man who created the Grand Prix, back in the 1970s. Grand Prix of Long Beach’s contract with the city runs out after the 2018 race and so a change could take place in 2019.

Last week the city agreed to sign a contract with KPMG Corporate Finance LLC, a consulting division of one of the celebrated auditing firm, to evaluate the bids made and help in the selection process for the next operator of the Grand Prix of Long Beach, having concluded that it did not have the necessary expertise to make a decision. It has allotted $150,000 to get some help. KPMG will review the bids and assess what is achievable and whether the financial plans behind them are realistic. It will also assess the risks involved for the city.

According to the paperwork, KPMG will be working with Britain’s Apex Circuit Design to help with the technical assessments relating to the race track. KPMG and Apex have worked together for a number of years, it seems, dating back to 2009 when the FIA Institute appointed Apex as a partner in its Facility Improvement Programme and Apex then teamed up with KPMG, which provided commercial modeling and financial assessment for commercial sustainability for the projects that the FIA forwarded to Apex. This included a number of tracks around the world, including Silverstone, Bahrain, Sepang and others. Thus the partners have a decent track record in developing commercial plans for racing.

It is fairly clear that Formula 1 offers a much better opportunity for the city, in terms of bringing in revenues and giving Long Beach greater international exposure. However, the City is wary of the costs involved, even if WACC seems to be proposing a deal that will cost nothing, apart from a small piece of land on Shoreline Drive, in order to build a suitable pit building. However, as we have seen in Melbourne, such constructions can be used for other purposes for the rest of the year, so the city may also gain space for other events.