Austin’s F1 race is in jeopardy, no USGP again?

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The recent history of the Circuit of the Americas (COTA) is one of achievement, investment, political infighting and state-funded race sanctioning. The cauldron was a dicey mix but in the end, COTA managed to create a purpose-built circuit with FIA grade level A in order to host Formula 1 or any form of motorsport sanctioned by the FIA.

Camps were divided with pro-COTA and pro-Tavo Hellmund groups as the entities parted ways. One dreamed a dream, brought the F1 race to Texas and the others financed the entire operation. In the end, Hellmund left to focus on his next project which was bringing the Mexican Grand Prix back and bring it he did with over 335,000 people in attendance throughout the weekend.

The sniping and back-biting left me cold as people seemed to consistently be heaping scorn on the owners of COTA and while there may be several reasons they felt the owners deserved it, I still maintain that castigating the circuit and owners is only hurting our ability to host the USGP. I have no knife in the politics of COTA or Hellmund but I am a F1 fan and do not wish to see the race leave Austin or the US for that matter. Unfortunately the State of Texas may be the final determining factor as the Statesman reports:

“Economic development officials in Gov. Greg Abbott’s office are dramatically cutting the state’s annual contribution to Austin’s Formula One race, a move race and track officials said imperils the event’s future.

Officials with the governor’s office and Circuit of the Americas confirmed that the state’s payment to support the 2015 race would drop by more than 20 percent from previous years. The state had contributed about $25 million in 2012, 2013 and 2014; this year the amount will be closer to $19.5 million.”

It doesn’t look good with F1 boss Bernie Ecclestone saying that if the yearly amount has changed, it’s going to be difficult to continue in Austin. Circuit chief Bobby Epstein said, “I think we’re screwed”.

What a sad narrative for such a great track and the fact that the state is now reducing the amount which can only lead to litigation over what was promised back in 2011. There has been a continual assault on the Major Events Trust Fund being used for the F1 race each year and auditors have continually questioned the reports showing how much economic impact the race has for Austin. In short, continually pulling at the threads.

The change is due to a new formula the state is using to determine how much they are willing to distribute to COTA for the race. It was announced just prior to the 2015 race and Epstein said it was too late to cancel the race but given the water-logged disaster the weekend turned out to be, perhaps he wishes he had.

Can COTA still field a race with a shortfall of $5.5 million? Is there a way to regain the loss in state funding? Some believe that ultimately the only way COTA can survive now is to be sold at a loss and hope the new owners can find an answer to the track economics issue.

As a fan, I am disheartened by all the negativity that was a continuous narrative against COTA and in many ways, those voices are in combination with other mistakes made, should F1 not return in 2016. I have one goal, to see F1 race in America and it pains to say that with so many new races coming on the horizon, COTA may be losing the USGP which will once again make a departure from Formula 1. Sad.

Hat Tip: The Statesman

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otto

This was inevitable. The State of Texas was a reluctant supporter to begin with, but the “positive economic impact” to the State that was so convincingly and vividly painted by Tavo Hellmund and company, was grossly overstated and the race track has lost money every year of it’s existence. Sad to say that F1 and COTA have failed pretty badly at getting fans in the gate. The WEC races have been poorly attended which is doubly sad since the WEC races have been a superior product to the F1 races there. Most likely a fire sale of COTA is already… Read more »

Paul KieferJr

The positive economic impact was there. All you have to do is look at the hotel receipts, food receipts and so on.
Half of this is on the shoulders of some people, but the other half is on the shoulders of our corrupt and greedy people inside and outside our state government.

Lee Ferrell

“all you have to do is look at the hotel receipts, food receipts and so on”

well, exactly where are you getting those figures to “look” at them? Please share them if you have access to them.

It seems to me that if that were all that mattered in the equation… then it would be a local problem. The fact of the matter is that the track fees requested by bernie & cvc are so exorbitant that you see this happen to almost every newer track that signs up.

Paul KieferJr

I’ll start you off with a PDF of a report in 2013: https://austintexas.gov/sites/default/files/files/AustinGrandPrix/ATX_Grand_Prix_in_Review__5-08-13_.pdf Scroll to pages 15-16.

Paul KieferJr

Here’s a report from a local TV station for 2014: http://kxan.com/2014/10/28/cota-set-to-announce-economic-impact-on-austin/

Johnpierre Rivera

I Just don’t know what to make of this aside from very very disappointed…More to come. :-(

Mike S

I’ve been at 3 of the 4 races there and I can say that the economic impact to Tx is massive…the food, the transportation, hotels, its massive. This is insane because the market development in the USA is UNTAPPED for F1, with the global brand-recognition of Mercedes and with Haas F1 starting up, there is no reason that this can’t work other than lopsided revenue realities. If race revenue issues do not get sorted in F1, along with team-engine-development cost caps/options, I can see F1 sliding away from ALL historical roots and becoming a sole oil-rich country national sport. I… Read more »

Johnpierre Rivera

good points…

Ward Merrell

I am in the Tavo corner. As someone who was a part of Cota, I saw things from a much different perspective than many, who have written and commented on it. There are a few undeniable fact, that I see, that should favor Tavo. He dreamed up Cota. He found the people and money to put it together. The first year, went off really well. Since his departure, it has slid backwards every year. Most of the original people are now gone. Make no mistake, every president and CEO, have had very little input into Cota, and have actually been… Read more »

Johnpierre Rivera

interesting and insightful comments…

BasCB

Its all nice and fine Ward. From your comment I get a feeling of “ah, good on you Epstein”, but does it really matter who is the “good guy” or not? But if this great race/lovely track that Tavo undoubtedly did a huge amount of work to get over to Austin will lie empty in a few years, it will be a huge loss to motorsport and F1 fans, and to the US especially. Instead of feeling gleefull that the current owners are going to end up in a hole, shouldn’t we feel incredibly sad about this track disappearing from… Read more »

Ward Merrell

Bernies”fees, will hardly be a factor in Cota’s demise. They were stated, and agreed upon, up front.
There was a pretty simple philosophy going into this. Build a world class facility. Make sure people want to come back. And all should go well.
That was thrown out, by one person, for,
milk all you can, from all you can.
It would seem, that was not a great strategy.
Whether anyone, feels, sad or “gleeful”
really doesn’t make a difference .

BasCB

sorry Ward, but what would you want to milk when you have a (now only partly) covered fee of 25 million per year you have to pay up front, and you have to pay interest off loans for taking on a debt somewhere north of 200 (or even 400?) million? Now, I do not know whether the idea that they could milk something was behind some of the in-fighting. Its quite possible. But isn’t that all pretty much irrelevant when there is just not enough money to pay off the dept and make the property at least break even? A… Read more »

Flat foot

First off, the escalated $25 million per year (the payment grows every year of the contract) is higher at the inset than the original contract that Tavo signed. After he was out, the contract was renegotiated and started at a higher amount. To say that Tavo found people, not one of them had any motorsports experience. That a critical component I feel. They needed a Ralph Sanchez type to set a path to success. The road to hell is paved with good intentions. Bobby and Red can still have a successful racetrack, but they’ll have to find a way to… Read more »

228929292AABBB

“As far as the reduction in the major events trust fund money, that has
been reduced because you can’t keep claiming false attendance numbers and
think you will not be called on it. To claim 224011 people for the three
days, smacks of nothing less than corruption.”

Agreed

Shaolin

Welcome to American politics. The politicians won’t finance anything based on how good it is for the city, the only thing that matters is does it make their party’s donors rich. As the Texas governor is a Republican, I guess there is no republican donor getting rich from the USGP

charlie white

I was wondering if or when the tires would fall off the USGP/COTA cart. I saw the Statesman article late yesterday and sent it to every F1 internet friend I had(including Negative Camber). I’m not ready to bury COTA or USGP yet but these are not good signs. I can only hope the teams and associated sponsors can twist Bernie & FOM’s arm in keeping the race on the calendar, much like they did when the race was at Indy.

Daniel Johnson

All this talk of positive impact and I don’t disagree that dropping 100,000 extra people in Austin for a weekend is very good for the economy, but is it worth it? I have problems with most public funding for sporting events, from football stadiums to whatever else. It seems like F1 is basically a mini Olympics in that there are so many cities falling over themselves to give the FIA a big check with no real way to make it back. To put it another way, look at how much it costs to get the USGP to Austin, and realize… Read more »

The Captain

Sigh. I can’t speak too much into whether or not the Race is a big a financial boom to Austin as it claims to be or not. Other than noting that a lot of studies of NFL stadium owners claims, and many major events (such as the Supper Bowl, Olympics, et) about their economic benefits appear to be widely exaggerated, so I’m a bit skeptical. But it doesn’t surprise me in the least bit that Texas is lowering support since you know… Small Gubment… Free Market… That sounds European and socialist so I’m against it Texas. But snark aside, isn’t… Read more »

Greg Barker

The “middle of nowhere” stuff is nonsense. Texas has a population 27 MILLION people. Houston alone has a population of 6.2 MILLION people, and it’s 2.5 hours away. COTA is a favorite track of the drivers, and this year’s race was the best of the season. The blame lies squarely with the racing management organization, and Bernie Ecclestone.

The Captain

Oh I also mostly blame Bernie, I’m with you on that. And the track is great, looks really fun to drive. Yes Texas has a large population… but Texas is fracking huge! So how much support does COTA get for smaller events like club racing and track days where it is? Sure Huston has 6.2 million but like you note its 2.5 hours away. So just as an example I live in a city with a metro population of around 2.7 million, sure smaller than Huston BUT there is a metro era of 6 million just 40 minutes south and… Read more »

Zzyzxx

Yes, and building the same track on 700+ acres anywhere near LA would have doubled the cost.

Paul KieferJr

“Middle of nowhere”? Bull. We’re just over a million strong in our five-county area. San Antonio is not but an hour and a half on the road south, and that’s certainly more than a million, if not 2 million. Don’t tell me we’re in the middle of “nowhere”. Don’t go denigrating my home until you’ve been there and lived in it. Las Vegas is more “in the middle of nowhere” than us and they’re still thriving. Phoenix and Tuscon is more in the ‘middle of nowhere” than us and they’re doing as good as we are.

The Captain

My Texas comments where mostly tongue in cheek. So I can’t tell if you’re being jocular or not. So hard to tell with Texans (I kid I kid). Assuming you are, how do you know I never lived in Austin? Unless you assume most people haven’t since it’s such a small town :) But check out the post I made to Greg Barker, those are the types of numbers I was just thinking of that could have helped keep the track afloat with other events throughout the year, that’s all. Oh and Vegas could be on the moon and everyone… Read more »

228929292AABBB

“But snark aside, isn’t this really just highlighting the giant elephant
in the F1 room that a F1 race really isn’t profitable for anyone but
Bernie and CVC?”

amen

Ward Merrell

The middle of nowhere ?
Really. I’m not sure I could that I agree that.
But to answer the question why, you can’t put 1500 acre facilities, in downtown Los Angeles.

Mike S

I’ve been thinking about this..i believe the general consensus is that F1 can’t afford to shrink its market and the cost machine must shift. Here are a few thoughts, to see what you think? – Once upon a time, there were personal fortunes financing GOOD drivers…Peter Revson and Revlon come to mind. The parallel track of great skill and a paying drive have evaporated. (i refrained from saying anything about Pastor) – The tobacco money is gone, so why can’t we look at free market rather than a single check written from a State or County again? -So what would… Read more »

Jason Smith

On your train of thought; we have Bernie pushing all F1 viewing to premium cable packages which limits viewership and casual fan exposure (more on this later), this in turn limits the return on investment for potential sponsors which in turn limits the amount of funding in the sport. With the limitation of exposure, F1 has very limited means with which to grow (or even maintain) its fan base leading to fewer people willing to be spectators at races and races disappearing. I can’t see how this is anything less than a short-sighted, unsustainable business model… The first logical step… Read more »

Mike S

Great points Jason, totally agree. This unsustainable/elitist business model of viewership needs to end. NFL/MLB/NBA all are on easy-access broadcasting for people to take part and follow the sports. How in the freakin world can F1 bring NEW fans into F1 if you have to PAY to seek out something you don’t even know you like yet? Broadcasting will attract sponsorship, like you said…expanding access is critical.

Mike S

This may have been posted some eons ago, but i found it in light of F1 economic discussions and, although it hurt my head in reading, its super interesting..thought i would share..
https://f1metrics.wordpress.com/2015/05/01/how-money-predicts-success-in-formula-1/

Fred Talmadge

Economic benefits of sporting events is always in question, by our conservative legislatures. Even the Superbowl, and you know Texans love football. Auto racing with a bunch of “foreigners” I’m sure our legislature wouldn’t know what it’s about. The sad part is that a mere $5m is enough to waylay this great event. Are margins that slim?

Paul KieferJr

That’s usually how it works: You pay an arm, a leg and your first-born child to get this thing.

BasCB

Well, at least the mayor of Austin mentions he thinks the event is a great boon to the City and is open to seeing what they can do to help – http://www.mystatesman.com/news/news/amid-doubts-over-f1s-austin-future-steve-adler-say/npLd3/?icmp=statesman_internallink_referralbox_free-to-premium-referral&ecmp=statesman_social_twitter_2014_grandprix_sfp

228929292AABBB

“It doesn’t look good with F1 boss Bernie Ecclestone saying that if the
yearly amount has changed, it’s going to be difficult to continue in
Austin.” (translation “I’m sure as hell not going to help, I will get my hundred zillion dollars and it can rot and die while I give interviews about how others are to blame for the problems in F1” – B Ecclestone

Andrea_Rae

I think it is a sign of the times, F1 seems to have developed into a big money grab. With all of the new circuits and abandoning the traditional bastions of F1 you know it all comes down to the money, with ever increasing entrance fees it’s no surprise F1 has become a hot potato.

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