Street Race Promoters Still Seeking Loan For Prep Work
By Paola Iuspa
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Less than 100 days before racecars are to rule the streets of downtown Miami, promoters are still seeking financing for road improvements and safety barriers.
Raceworks, promoter of the Grand Prix of the Americas, was hoping a loan from the city’s Sports and Exhibition Authority would help pay for the street preparations but its request was, at least temporarily, denied. In addition, some authority members and staff began questioning the legality of using county tourism taxes for a loan to aid the race.
The authority is the city’s agency in charge of underwriting sports and community events.
The board denied the $3.2 million loan because part of it, which would be funded partially by Miami-Dade County’s convention development tax – which largely comes from tourism – would be unsecured. The proposal called for one-third of the loan to Raceworks, headed by developer and architect Willy Bermello, attorney Peter Yanowitch and legendary racer Emerson Fittipaldi, to come from the convention tax.
The authority’s board members said last week they would approve the loan under a program in which the money would be guaranteed by promoters in case the event flounders. The rejected plan consisted of lending $2 million at 11%, partly to pay for about $1 million in street improvements, without a guarantee.
"I am concerned about the loan and not establishing some kind of personal guarantee," said Maritza Gutierrez, a board member. "We need accountability. We are not going to give money to a black hole. When they got the license they said they would pay for the improvements. Now they turn around and come to us. No bank in the world would give you $2 million without security."
"It is irresponsible to give them an unsecured loan," said Miami Commissioner Arthur Teele Jr., also a board member.
Another item in the same package called for lending Raceworks $1.2 million at 6% interest to pay for concrete barriers and bridges, board members said. Both loans were to be paid off in 5 years.
In return for the loan, the promoters proposed giving the sports authority 15% of the event’s net proceeds for as long the race was held in Miami.
The loan’s interest and the revenues would have brought to the authority about $7.3 million over 10 years, said an accountant with Berkowitz, Dick, Pollack accountants, hired by the Sports and Exhibition Authority.
Also known as the American Le Mans Series, Mr. Bermello has projected the event will attract more than 50,000 fans and have a $43 million impact in South Florida. The City of Miami has approved the use of part of Bayfront Park and Biscayne Boulevard for the April 5-7 race.
Miami Commissioner Tomas Regalado, the authority’s new vice chair, has asked the group’s administrators to come up with a revised loan program to be discussed Jan. 8 at a special meeting.
Mr. Bermello said he would have no problem personally guaranteeing the $2 million loan but Raceworks would no longer offer 15% of revenues, which would have meant more than $538,000 during the first year.
But opponents of the race and at least one authority member are also questioning whether it is legal to use convention development tax receipts for a loan to Raceworks. The 3% tax on hotel rooms is to be used "to acquire, construct, extend, enlarge, remodel, repair, improve or maintain one or more convention centers, stadiums, exhibition halls, arenas, coliseums, or auditoriums," according to the state statute outlining the surcharge.
The sports authority gets about $900,000 yearly in county convention development tax money to operate the Miami Arena, plus it has about $6 million in reserves. Funds from both sources were being discussed to provide the loan to Raceworks.
But "the use of the bed (convention development) tax and its interest are very limited," said Jorge Luis Lopez, an attorney with Steel, Hector & Davis and representing the City of Homestead and its publicly financed 6-year-old speedway. That city and its speedway oppose the race, alleging it would confuse race fans and hurt business in South Dade.
Homestead and Speedway Corp., running Homestead-Miami Speedway, have a pending suit against Miami in part for having granted a license to use public land to Raceworks without going through a statutory bidding process, Mr. Lopez said.
"They," he said, referring to Raceworks’ officials, "don’t want to disclose where the money is going to because they know the bed tax may not be allowed for those uses."
Mr. Bermello said the authority received a detailed budget and any decision its members make could be based on accurate information.
Mr. Lopez said his clients will challenge the authority’s decision if it approves the loan.
Meanwhile, the event’s organizers have created a host committee, chaired by Miami Mayor Manny Diaz, in charge of organizing parties to market the event. They have hired Amazing Vacations Travel Agency to offer weekend-long hotel and tour packages for visitors during the first weekend of April.
"We have three- to four-night packages that include nightlife tours ranging from $600 to $1,800," said Elsa Cristobal, the travel agency’s president.
David Whitaker, senior vice president of marketing & tourism of the Greater Miami Convention & Visitors Bureau, said the bureau is promoting the event on its website. The bureau, he said, is also printing brochures that include race information and is connecting hotel managers with Ms. Cristobal to work out accommodations for her tour packages.