Local Grand Prix hashigh-profit potential

Auto racing hits the streets of downtown Minneapolis next month, giving spectators the chance to see souped-up Pontiacs, Camaros and Mustangs traverse a 1.6-mile loop at speeds of up to 150 mph. That sounds interesting, at least, but critics of the plan worry that the Children’s Grand Prix, a race to raise money for the Cancer KIDS Fund, might be lucky to break even. Race organizers, meanwhile, project a profit of up to $1 million this year and for future races. That would be wonderful, but the attention given to the charity alone should be enough — for now.
The race was conceived by local businessman Mark Cohn, chairman of Brooklyn Park-based catalog retailer Damark International, whose 7-year-old son, Tyler, was treated for leukemia at Children’s Health Care-Minneapolis. The Cancer KIDS Fund, the race beneficiary, helps families of kids with cancer cover the incidental costs of treatment. All profits from the race will go directly to the fund.
Still, many city officials were hesitant to approve the race at first, out of concern for potential traffic, noise and pollution problems associated with the race. But the lure of $25 million in areawide economic impact — including $12 million in direct race-related spending — surely played a part in changing their minds. Moreover, the city of Minneapolis will not be responsible for any losses, as was the case when similar auto races in Des Moines and Denver incurred huge deficits.
Because of huge front-end costs, such as the installation of barriers around the course, road pavement and preparation, construction of spectator areas and post-race repairs, total expenses could reach $4 million. Current revenue projections stand at around $5 million, but the profit margin has been shrinking as race day closes in.
Cohn, who put up an amount “in the low six figures” of his own money to get the race organization off the ground, said he expects the race to benefit the cancer fund to the tune of $250,000, or twice its current annual operating budget. But even if the event struggles to the finish line and profits are meager, the race has already accomplished an important feat: bringing media and public attention to the Cancer KIDS Fund.
At some point in the near future, however, the race will have to make money. But a successful event will surely lead to increased support from spectators, broadcasters and corporate sponsors. The recently completed Detroit Grand Prix, in its 15th year, brought in an estimated economic impact of close to $40 million. As Thomas Stinson, a Minnesota state economist, told the Star Tribune, starting up a race like this is “like drilling for oil. You don’t expect to get back the cost of the well equipment in the first year.” City officials, race organizers and the Cancer KIDS Fund must be patient.
As we’ve all heard, you have to spend money to make money; that is certainly the case with the Children’s Grand Prix. If the event shows promise, organizers expect the city of Minneapolis, which holds the option to disallow future races, to welcome them back. With that in mind, we wish the race organizers a smooth — and profitable — ride, and hope for a speedy return.