A tent city has sprung up in downtown Montreal this week, but it has nothing to do with the fact that the city has the highest concentration of low-income neighbourhoods in urban Canada.
These high-end white tops are meant to shield the champagne-and-caviar set from the elements during the Montreal Grand Prix, which kicks off Friday with star-studded parties and ends, after Sunday's Formula 1 race on Île Notre-Dame, with yet more star-studded parties.
This is Montreal's yearly turn on the global jet-set calendar. Local little people will swarm behind hotel barricades to catch a glimpse (a selfie would be too much to ask) of the stars brought in to add even more glamour to the parties inside. Jennifer Lawrence and Tom Brady are among those expected to attend.
And it's all coming thanks to the kind generosity of the Canadian taxpayer.
Under a 10-year deal struck in 2014 with British F1 magnate Bernie Ecclestone, governments here will pay $187-million to Mr. Ecclestone's management company for the privilege of holding an F1 race in Montreal until 2024. Montreal also agreed to pay for upgrades to the Circuit Gilles-Villeneuve race track demanded by Mr. Ecclestone and estimated in 2014 to cost $32-million.
At the time, Canadian politicians of all stripes fell over themselves to laud the deal, largely negotiated on their behalf by former federal Conservative cabinet minister Michael Fortier, a major mover and shaker in Montreal business circles. They insisted on referring to the $62.4-million promised by the federal government, the $49.9-million put up by Quebec and the $12.4-million forked out by the city (in addition to covering the cost of site upgrades) as an "investment" in what then Tory infrastructure minister Denis Lebel called "one most important touristic events in all of Canada."
It turns out their enthusiasm was based on a major false assumption. Ottawa estimated the annual "economic spinoffs" from the Montreal Grand Prix at $70-million, but offered little in the way of data to back up that number. The Quebec government was even more bullish, estimating the economic impact at $90-million a year, without so much as a credible cost-benefit analysis to prove it.
But a new economic impact study commissioned by the governments and the event's promoter, Octane Racing Group, pegs the event's contribution to Canada's gross domestic product at $42.4-million, about half the previous estimates, raising serious questions about whether cash-strapped governments should be subsidizing the leisure activities of the 1 per cent at all.
The study, conducted by Montreal research firm Ad Hoc and based on data collected during the 2015 Grand Prix, the previous estimates erred in failing to account for double counting in gross revenues and spending on imported goods and services. The result is that the $17-million governments pumped into the Grand Prix in 2015 – a sum that is to be indexed at a rate of 2 per cent a year over 10 years – generated just $8.1-million in tax revenues for Ottawa and Quebec.
In addition, under the deal, a minimum of $3.9-million in royalties from ticket sales is supposed to accrue annually to the Canadian partners, but most of it is slated to go to Tourisme Montréal. The non-profit agency, which promotes Montreal and is financed by a 3-per-cent tax on hotel stays in the city, is responsible for paying $62.4-million of the $187-million to Mr. Ecclestone's company.
Even with more credible but sobering data in hand, it's unlikely that governments would have thought much harder about meeting Mr. Ecclestone's conditions. The Grand Prix has taken on such iconic status in Montreal that the mere threat of losing it gives politicians anxiety attacks.
Still, that the new economic impact study was released last Friday afternoon suggests that the partners were none too eager to share its findings with the public or the news media. The Tourisme Montréal press release accompanying the study was titled "F1 Grand Prix du Canada: A Major Economic Boon to Quebec," as if to throw journalists off the scent.
Proponents of public financing for the glitzy race insist that the event is worth the admission price for governments, since it generates so much free advertising for Montreal and Canada. But the implicit value of a worldwide television audience is not what it once was. Even Mr. Ecclestone has bemoaned F1's declining popularity as a green shift imposed on the sport by engine makers favouring hybrid models that undermines the sport's excitement and leaves him with "a crap product to sell."
It turns out that everything that makes F1 safer and greener also saps its spectator appeal. Luckily, the parties have maintained their cachet. It's just not clear why you and I should pay for them when we're not even invited.