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Documents reveal that F1 has not invested in New Jersey race

NEWS STORY
25/08/2013

Over the past 24 hours media outlets all around the world have followed up the news that Bernie Ecclestone has dropped New Jersey's Grand Prix of America from the 2014 Formula One calendar. Nevertheless, there is little doubt that very few people were surprised by this development.

Pitpass' business editor Christian Sylt broke the news on the American television network CNN after doing a taped interview with Ecclestone who said that the race "is not on the cards for next year." It has since been confirmed by Sylt's former colleague Will Buxton who is now pit reporter for the NBC Sports Network which broadcasts F1 in the United States. On Saturday he Tweeted "New Jersey Grand Prix news appears to be true, sadly. My sources tell me there is still a fervent desire to hold it come 2015 however." The response to the news is telling.

In addition to his duties for Pitpass and outlets such as CNN, Sylt also produces F1's industry monitor {url=www.formulamoney.comFormula Money and links to his news reports are Tweeted on its @formulamoney Twitter page. In response to the Tweet about the CNN report, one reader said "can't say this surprises me in this slightest," another said "shocking nobody" and a third comment read "the sun rises in the east." There is good reason for these responses.

As Pitpass has already reported, the key hurdle with the New Jersey race plan seems to be the lack of state funding. Few races get revenue from F1 trackside advertising or the sport's corporate hospitality outfit the Paddock Club. It means that ticket sales are their largest source of income and this rarely covers the race hosting fee and running costs.

It explains why Vicky Chandhok, president of the Indian motorsport governing body, the Federation of Motorsports Clubs in India (FMSCI), recently told Forbes that "no Formula 1 circuit in the world will make money." Accordingly, it is understandably tough to get investment in a race promotion company.

Investors will provide funding if the business has assets which the money can be secured on. The most obvious asset is a circuit itself but of course it is hard for organisers to own the track in the case of a race held on public roads, such as the one planned for New Jersey. Government funding is usually needed to compensate for the difficulty of raising private investment and it gives the state a good return.

Permanent race venues are located outside city centres because building them requires large amounts of free land. As a result, few local landmarks are seen in the background when the race is taking place and in turn this limits the promotion it gives to the host nation. In contrast, street races are often located in the heart of the city and showcase buildings and attractions as the track weaves around them.

Governments pay handsomely to get this kind of promotion particularly if the race could not go ahead without it due to the lack of an asset to secure investment on. It is no coincidence that council funding was even granted to the humble Formula 3000 Superprix, which was held from 1986 to 1990 on the streets of Birmingham.

However, ever since the Grand Prix of America was announced, the organisers have made a point about the fact that they will not receive any public funding. Initially this may have seemed like a master stroke, as it means there are fewer regulatory hurdles to pass through, however if the race cannot go ahead without it then the organisers have scored nothing but a pyrrhic victory.

The lack of funding has already put the brakes on the race once before when Ecclestone tore up its contract after organisers missed payment deadlines. An exodus of managers followed and although Ecclestone gave the organisers a second chance, Sylt discovered that their plan to host the race in 2014 was dependent on investment bank UBS being able to raise 64.2m ($100m). Just a few weeks after that came to light, Ecclestone confidante Niki Lauda told Austrian media that the New Jersey race had been dropped from the 2014 calendar and replaced with one in his home country of Austria.

Bearing this background in mind it's easy to understand why fans were not surprised that the Grand Prix of America will not be going ahead next year. For the organisers however it was a different story.

Grand Prix of America spokesman Alex Howe told CNN "we don't comment on financial matters but we are on track for 2014 and will have a statement following the announcement of the official 2014 FIA Formula One World Championship schedule." If you think this sounds familiar then you're right.

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