In two articles printed in Público this week* by reporter Paulo Curado, the facts behind the funding for the Algarve’s International Autodrome have become less opaque on the seventh anniversary of the launch of the project.
The reign of Portimão's former mayor Manuel da Luz was noted for its reckless overspending and use of council owned company Portimão Urbis in underhand, corrupt and expensive schemes which still are being investigated by police.
Portimão ratepayers long have suspected that they had in some way been subsidising the privately owned racetrack but until now the amounts had not been made clear.
In 2006, Portimão council approved a 99 year lease of two large tracts of land in the Mexilhoeira Grande area which it specifically acquired for Parkalgar for €1,350,000.
The deal was that for the first 12 years the developer Parkalgar did not have to make any lease payments. After this free period, annual payments of €20,000 were agreed.
The council had also purchased the land leading from the motorway to the racetrack. This cost ratepayers an additional €800,000.
Parkalgar also was exempted from paying IMT (Municipal Tax on Property Transfer) and IMI (Municipal Property Rates) for ten years at a cost to ratepayers of €2 million. As well as this outstanding largesse, the council waived other fees and costs as the then mayor, Manuel da Luz, said that the public interest outweighed all other considerations.
In 2009, as Parkalgar started to go through well-publicised financial problems, the council approved a sponsorship programme for events at the circuit for a period of ten years at €2,595,000 plus VAT per year payable through the now extinct council company Portimão Urbis.
The direct financial support by Portimão’s ratepayers of the privately owned Parkalgar is €8.2 million which, when land purchases, ticket purchases, interest and other exemptions are added, has risen to at least €11 million.
The 2008 projections by Parkalgar had been for the creation of 1,650 direct jobs and 1,000 indirect jobs that would contribute to an increase of 700,000 tourists to the Algarve region every year. These projections were sufficient to enable the project to gain Project of National Importance certification. There currently are around 40 employees at the track.
The role of the Constitutional Court must not be overlooked as its conclusion, having reviewed Portimão council’s expenditure on this privately owned project, was merely to ‘raise doubts’ about the amounts involved and the fact the obligations far outran the then current mayor’s mandate.
Current mayor Isilda Gomes says the days of throwing money at Parkalgar are over but she wants to continue to support the racetrack in other ways, including ‘attracting private investors’ and further government support.
Gomes clearly has little interest in history and even less in finance as she still claims that the racetrack was "a good investment" for Portimão.
In 2008 Parkalgar guaranteed the project was bullet-proof and never would become a white elephant.
Four years later with failed funding, failed state support for sporting events and with debts piling up, Parkalgar applied for a Special Revitalisation Process to avoid bankruptcy and later the taxpayer stepped in to make monthly payments through a cunningly arranged agreement made to look like an ‘investment’ through Portugal Capital Ventures, in fact an offshoot of the Ministry of the Economy.
This in effect was a state bail-out and remains suspicious. A statement from Portugal's 'Autoridade de Concorrência' (Competition Authority) in September 2013 read,
"Portugal Capital Ventures has acquired exclusive control over Parkalgar Serviços SA and consequently gains sole control over assets that make up a commercial establishment located in Portimão."
This statement was misleading, if not totally incorrect as it does not reflect what happened. Portugal Capital Ventures only has the right to run events at the track and does not own or control a single square metre of asphalt.
The folly of starting an underfunded project on this scale must be balanced by a sneaking admiration of the entrepreneurial spirit embodied in Parkalgar’s founder Paulo Pinheiro who has gained few if any friends on this journey but still is in business against all the odds.
The key to the track’s future may lie with Bernie Ecclestone, controller of Formula 1, who was compelled in 2012 to sue Parkalgar for monies outstanding (€3.2 million owed to his company GP2 Ltd).
If F1 racing can be attracted to the racetrack, and this is in Ecclestone’s hands, the stands will fill up and the economic benefits the local council has been waiting for may come.
The projected income this year is around €20 million, no small beer and accords with the projections agreed as part of the Special Revitalisation Process.
Pinheiro commented, "but until there is public support to bring major international events, the stands, with a capacity of 95,000 spectators, will stay empty.”
Meanwhile the hapless Portimão ratepayers continue to fund their council’s financial black hole of around €130 million.
* Two articles in Público, in Portuguese: