The organizers of the Baltimore Grand Prix received an unprecedented $500,000 loan from the state's economic development agency late last month, just as the group was required to make a $500,000 bond payment to the state's stadium authority.
Jay Davidson, president of Baltimore Racing Development, called the timing of the loan and the bond payment a "coincidence." He said his group could have made the bond payment without help from the Maryland Economic Development Corp.
"We have millions of dollars in ticket revenue right now," Davidson said. "We did not need it to pay the stadium authority."
Cash flow has been an issue for the group organizing Baltimore's first IndyCar event for Labor Day weekend. It has yet to land a title sponsor, and it renegotiated the bond payment plan last fall after requesting an extension.
Davidson said the group sought the loan not out off necessity but to strengthen the partnership between the race and the state.
"We feel like we've put up a lot of private equity," he said. "We felt that given the dollars the state will generate from tax revenue from our event, it would be nice to have them contribute."
The executive director of the Maryland Economic Development Corp. said its board of directors agreed to lend the money — the first such direct loan the quasi-public agency has made — because the potential benefit to the local economy is "absolutely tremendous."
"The magnitude of the impact of the Baltimore Grand Prix cannot be understated," Executive Director Robert C. Brennan said.
Organizers say the three-day festival, which will feature several races around the Inner Harbor, could bring as many as 100,000 visitors to Baltimore and pump as much as $70 million into the region — nearly twice as much as the Grand Prix of Long Beach, Calif., the country's oldest street race, contributes to Southern California.
"The Indy venue coming to Baltimore could provide extraordinary economic impact," Brennan said. "What it can do to help Baltimore and its image is just tremendous."
Brennan said a clause in the loan agreement, which his agency would not release, allows the economic development group to convert $247,000 into an equity investment in the race.
"We'd love for them to be an equity partner," Davidson said.
Brennan said his agency would make that decision in September after the race. Currently, the loan is due at the end of September, he said.
"There are investment decisions anyone would make, whether it's something we want to stay in or just treat this as a loan," he said.
Brennan said Baltimore Racing Development requested the $500,000 loan for a variety of needs, and "not necessarily" to make the bond payment to the Maryland Stadium Authority.
Brennan said the loan agreement specifies only that the funds will be used for "working capital."
"We recognize [Baltimore Racing Development] as a startup-type organization, and as a new organization, they're struggling to get some things going," he said. "This is not cheap to pull together."
The money was transferred to the racing group around Dec. 30, Brennan said. The group's $500,000 bond payment arrived Dec. 30, stadium authority director Mike Frenz said.
That was the third and final installment in the payment plan negotiated by Baltimore Racing Development.
The group had been scheduled to put up $800,000 on Oct. 1 for a performance bond to guarantee a $1.9 million project to convert two parking lots by Camden Yards into a pit area for the race cars, but cash-flow problems led it to request an extension.
The group paid $900,000 into an escrow account over two months.
"As far as we're concerned, they've fulfilled the terms of the agreement thus far," Frenz said.
Organizers have yet to find a title sponsor for the race. They recently announced that they would be content with a number of smaller sponsors in lieu of the $1 million to $2 million contribution from a corporation.
But in an interview Monday, Indy Racing League CEO Randy Bernard stressed the importance of landing a title sponsor. He said he had been lobbying on behalf of Baltimore race organizers.
"I think it's important," said Bernard. " In fact, I've been to New York twice on two deals, but we haven't gotten it done yet."
City officials have set aside $7.75 million for the Baltimore Grand Prix and awarded a $4.2 million contract to prepare downtown streets along the 2-mile course.
On Monday, Mayor Stephanie Rawlings-Blake joined Grand Prix organizers and Indy Racing League officials as IndyCar driver Simona De Silvestro tested a race car near the stadium.
Baltimore Sun reporter Sandy McKee contributed to this article.