News feature, November 16, 2005
San Fran Grand Prix in hot water with city
By Mark Zalewski
San Francisco city officials are calling for the suspension of the 2006 edition of the Barclays Global Investors Grand Prix after evidence to a council meeting on the race's impact revealed a claim by San Francisco police that the event still owed $89,924 in costs from 2004. City supervisors heard that a permit for the 2005 race would not have been issued if it had been known that the event still owed money from 2004.
The 2004 costs incurred by the San Francisco Police Department totaled $335,000. However, in 2005 the company that organizes the event, San Francisco Cycling, LLC, struck a deal with the city board after mayor Gavin Newsome argued the race would generate nearly $40 million in revenues for the city. A two-for-one deal was arranged that would reduce the fee by one-dollar for every two-dollars the city saw in tourism revenue. (See news report.) A study commissioned by the San Francisco Convention and Visitors Bureau and performed by Economics Research Associates (ERA) revealed the total cost to the company would be $89,924, after the waiver equation was applied.
The two parties diverge in their accounts here. The police department claims it sent a bill for the full amount and has not received any portion of it. San Francisco Cycling, in a statement issued Tuesday, claims that a final payment of $62,822 was paid on August 1, 2005 after the economic study was completed. After this, the company says it received the permit on August 11, 2005 and that no other bill adjusting the fee to $89,924 was ever received until last week, thus following the guidelines set forth by a city law requiring all owed fees to be paid before new permits are issued.
That city law was introduced a few years ago by board president Aaron Peskin, now a vocal opponent of the race who has pledged to introduce new legislation canceling the race in 2006. The Chronicle reported Peskin's remarks at Monday's hearing of the Board's Government Audit and Oversight Committee. "This is a problem, a very serious problem. I am outraged! This company, which I have given an unbelievable amount of deference to... There should not have been a 2005 race if they were in violation of the law. This is a joke. It's a sham. It's not worth the paper it's printed on. We gave them an inch. They've taken a mile. This is preposterous."
The hearing was called by City Supervisor Chris Daly, a historically vocal critic of the race, who introduced the unpaid debt at the meeting. A memo to the committee obtained by Cyclingnews showed that, "the bike races have resulted in additional costs not only to the Police Department, but also to Muni, DPT, and DPW." The total additional costs from 2001 - 2005 totaled $448,482. The memo also cited the fact that the ERA did not perform an independent study in 2005, but instead relied on the data used in 2004. "In the professional judgment of the Budget Analyst, ERA's usage of 2004 survey data... is not a fully adequate methodology."
"In the professional judgment of the Budget Analyst, given the total responses collected by ERA in 2004, a few 'outliers,' responses that fall outside the primary range of responses, inflated the overall estimate of tax revenues generated by the Grand Prix bike race, and, therefore, overstated the waiver amount of $183,749 to be granted by the City to San Francisco Cycling, LLC, to partially offset the cost of the Police services related to the 2005 Grand Prix bike race."
"I have had many reservations about the San Francisco Grand Prix, even as an avid cyclist, as a commuting cyclist," Daly said. He went on to question the validity of the economic study that was used to calculate to portion owe by San Francisco Cycling. "I just don't see how exactly we can quantify that this race did bring economic benefit to the city," he said.
Many of the opponents of the race take their anger back to 2003, when then Mayor Willie Brown forgave San Francisco Cycling nearly $350,000 in loan debt for the first edition of the race, so that a permit for the next year could be secured. During those years the company was backed by prominent investment banker Thomas Weisel and his Tailwind Sports management company, which also manages the Discovery Channel team. The basis on which the debt was forgiven was a one-page economic analysis performed by an intern in the mayor's office which projected that the nearly 200,000 claimed day spectators each spent $101.20, a claim met with skepticism.
Dave Chauner of Threshold Sports, who manages San Francisco Cycling with partner Jerry Casale after purchasing the interest formerly held by Tailwind Sports, told Cyclingnews that the city's account, "... is a completely a false and erroneous report." The statement issued by Chauner and Casale says the company received a fax on November 10, 2005 with the adjusted amount owed, followed by the city board meeting on November 14, 2005 in which the company's representative, Dan Osipow of Tailwind Sports, was met with, "unprofessional and vituperative attacks."
The statement went on to say that the criticism was unwarranted because bills are not normally due until at least ten days after receipt, though it did not indicate if the new remaining balance would be paid, only that, "We have been in contact with the Mayor's budget office through Noelle Simmons who will provide an update on the financial status of the event as it relates to City contract requirements. San Francisco Cycling has pledged that the financial audit required for the 2004 event will be completed as quickly as possible, anticipated within the next 3-4 weeks, and that the 2005 audit will be provided as soon after the year-end close as possible."
Upon reading the statement Chris Daly posted on his government web log. "Having previously criticized the Delaware-based San Francisco Cycling, LLC, and its founder, multi-millionaire Republican politico, Thomas Weisel, I called for a hearing to look at the overall impact of the Grand Prix on San Francisco. I knew that the Budget Analyst had poked significant holes in an economic analysis commissioned by the Mayor's Office. But going into the meeting I had no idea that San Francisco Cycling never made their payment to the City for police services for the 2004 race. This was a very interesting tidbit considering that SF Cycling's past late payments had caused the Board to amend the Admin Code."
"Now San Francisco Cycling is claiming that it is 'completely false' that their permit was improperly issued. Their contention is that although the City billed them $335,796.79 for the total cost of police services on March 3rd, the City never amended the bill after $245,872.79 of the fee was waived on April 5th, so they don't have to pay! Quite an argument. While receiving periodic bills from the Police Department, SF Cycling not only doesn't pay the bill but they never contact the City to ask to have the bill amended. And they felt entitled to an ISCOTT permit despite the law. I just hope that this sense of entitlement is the result [of] Republican privilege and not collusion with the Administration."