Officials say last month’s Modesto Grand Prix – which drew thousands of spectators downtown to watch roughly 260 superkarts zip along city streets – contributed $1.26 million in direct spending to the local economy, according to a preliminary analysis.
But a lot of that impact came from the city. Modesto spent $452,564 on the race, though roughly half of what it spent came from donations.
Overall, the city estimates the grand prix’s total impact at $1.7 million. That’s based on the direct spending and about $500,000 in secondary spending as the money spent on the grand prix circulated throughout the area.
However, a University of the Pacific economist who reviewed the information provided by the city at The Modesto Bee’s request conservatively estimated the economic impact at about $500,000 for the first-time event.
Modesto asked the Stanislaus Business Alliance to analyze the grand prix’s economic impact based on information provided by the city. The review looked at such factors as money spent on lodging and food, tickets and what the city spent putting on the race.
The Alliance used what is called an IMPLAN model to gauge the impact. This is not unusual and typically is used by an event’s boosters, said Jeff Michael, director of the Business Forecasting Center at UOP. He added that this is not necessarily an incorrect approach and that the report prepared by the Alliance was better than many.
But Michael said the model has shortcomings:
• It accounts for an event’s benefits but not its costs. For instance, the analysis estimates nearly $500,000 was spent on food and $128,700 on hotel rooms. But there is no accounting for the losses sustained by businesses harmed by the grand prix. The city closed and fenced off part of downtown for the race. That made getting downtown difficult, and some businesses closed rather than have their customers face the hassle. Some restaurants geared up for the race based on expectations created by the race promoter but experienced poor and disappointing sales.
• The model does not account for redirected local spending. That involves Modestans who would have spent money on the weekend of the grand prix even if there were no race. So rather than watching superkarts, they would have gone to dinner, a movie or a concert.
• The model includes the city’s spending. What the city spent subsidizing the grand prix is money that could have been spent elsewhere, such as on parks or public safety.
Michael said he favors a more conservative approach in determining the economic impact. He pegged that at $500,000 based on the spending of the superkart drivers, their crew members and other out-of-town visitors. He said the focus should be on new spending, which happens only if the event is held. Still, he said, a half-million dollars is a good return on the city’s investment.
About a year ago, when Modesto officials announced they would be holding the race, they estimated its economic benefit at about $1 million. That did not include what the city would spend on the race. Acting Parks, Recreation and Neighborhoods Director Andy Johnson said this week that including the city’s expenditures is a more accurate assessment.
Alliance CEO David White said his organization provided the report based on what Modesto asked and the information it provided. He added that his staff took a conservative approach to determine the impact. He said an analysis that addressed the concerns raised by Michael would have required significantly more effort.
In releasing the economic impact report this week, Johnson and Deputy City Manager Dee Williams-Ridley also stressed the intangible benefits of the grand prix. They said the race portrayed Modesto and its downtown in a positive light and provided thousands of spectators with a family-friendly event.
“Even if the event required a city subsidy, I’m not saying it’s not worth doing,” he said. “It did generate outside spending. And there is the value of the intangibles. People enjoyed themselves, and it created a good impression of the city.”
Modesto teamed with Southern California-based SuperKarts USA on the grand prix. No decisions have been made on whether the city and the promoter will hold a second race. Modesto officials expect to brief the City Council about the race within a month.