In an odd sequence of events, the council approved a report on Jan. 24 about the impact of giving a $4 million city subsidy to the Grand Prix race, after approving the subsidy itself on Jan. 10.

Vice Mayor Cindy Chavez said she was concerned there was speculation of a back-room deal when the council approved the subsidy because the item was not added to the agenda until 24 hours prior to the vote. The council voted 8-3 in favor of the $4 million on the condition that a follow-up report with more information on the economic impact of the race be given at the Jan. 24 meeting.

"I'm fearful that the speculation about the vote will taint the council and taint the race," said Chavez, a mayoral candidate who voted to approve the $4 million, as well as the report. "I think the city staff needs to do a better job of working with us."

The follow-up report, presented by deputy city manager Ed Shikada, looked at races in other cities, an analysis of the city's investment compared to anticipated ticket and tax revenues, an analysis of how to trace the city's investment back to the general fund and local business participation in the event.

The report concluded that the city will break even by the sixth year of the race and receive approximately $240 million in direct and indirect economic benefit. The break-even cost, however, only took into account the city's $1.5 million direct investment from the general fund. It did not look at the additional $2.3 million general fund money or the remaining $1.7 million from the redevelopment agency and construction excise tax earmarked for the race.

According to Shikada, the report reflected the council members' concern with the direct investment they were making from the general fund. They wanted to be able to trace how that money was going to come back into the general fund, he said.

The rest of the $2.3 million from the general fund is not a direct investment, but will be used to pay city staff who will be putting in time to plan the race. The rest of the $4 million from the redevelopment agency and construction excise tax will be used to pay Valley Transportation Authority costs, city public works staff and city staff involved with the planning of the event.

According to Tom Manheim of the city manager's office, the $1.5 million direct investment is going to cover operational costs of the Grand Prix--such as marketing and printing tickets. The Grand Prix is absorbing the construction costs of widening the track and relocating the 16 palm trees on Park Avenue, Manheim said.

Councilman Ken Yeager, who voted against the $4 million subsidy at the Jan. 10 meeting, voted to accept the follow-up report.

"I remain very much against the $4 million subsidy," Yeager said. "The vote was merely a procedural vote to accept the report, with no comment on whether the report was good or not. I was a little surprised that we even needed to take a vote," he said, referring to the fact that the vote would not affect the subsidy.

Councilwoman Nancy Pyle, who voted for the subsidy at the Jan. 10 meeting and voted to accept the report, said she supports the Grand Prix because of the council's position to support economic development activities. Pyle said the Grand Prix presents an opportunity to generate transient occupancy taxes and sales tax revenue and to enhance the identity of San Jose.

Councilmen Dave Cortese and Chuck Reed, who are both mayoral candidates, voted against the Jan. 10 decision and voted against accepting the report.

"The report doesn't satisfy me anymore than it did two weeks ago," said Cortese.

"I don't intend to flog a dead horse," Reed said, "but I would like to invite all of you who came today to come back and watch as we are forced to cut services to parks and libraries."