Cutting funds for USGP; ‘pumps hundreds of millions’ into Texas

The Texas Major Event Trust Fund has been the key to a USGP in Austin since 2012 and with recent news that the governor, Greg Abbott, will be cutting the amount of the fund used to pay for the sanctioning fee for Formula 1, the question of a USGP in 2016 is now in question.

It’s troubling for US fans as the conventional narrative is about the use of the fund for the race or in some cases the efficacy of the ROI the fund receives but as Forbes points out, Mr. Abbott had no concern in explaining what the impact of F1 in Texas is:

“Formula 1 and COTA have a tremendous economic impact on both the City of Austin and the State of Texas. Hundreds of thousands of people travel from all over the world to attend the United States Grand Prix in Austin, which in turn pumps hundreds of millions of dollars into our economy and supports thousands of jobs.”

It’s a bid odd that the METF is now being cut given the clear impact Mr. Abbott seems to acknowledge. Why cut an event that pumps hundreds of millions into the state?

The issue I’ve read the most is centered on the amount of tax revenue the state gains from the USGP and many suggest that the estimates shared with the public or overstated but when Mr. Abbott clearly feels the race pumps hundreds of millions into the state economy, it makes it a little more difficult to understand why cutting the METF for the event makes sense.

The residents of Texas didn’t fund the construction of the circuit and yet it still seems that many are having a hard time getting behind the event for whatever reason. It does make one wonder how building huge stadiums for football or baseball in urban areas and seeking major tax breaks and incentives is perfectly fine while seeking to use the METF for a venue that was not taxpayer subsidized is not. Clearly the risk and major investment is the infrastructure for the circuit and not the hosting fees.

Let’s get it sorted, Texas, because F1 should be in the US and the Circuit of the Americas is licensed and approved to host the world’s most advanced form of motorsport. It also happens to be one of the better circuits recently built.

It seems there is always someone who relishes the chance to take the stuffing out of a situation but I’ll admit that while I am not steeped in Texas politics, I am bereft of the personal reasons and vendettas some folks have with COTA or its owners to the point of trying to prevent the USGP from taking root in Austin and becoming a very successful venture for the state of Texas.

Hat Tip: Forbes

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Tim C.

Hundreds of million in revenue vs. a $25 million investment . . . sounds like a no brainier to me.

Paul KieferJr

Part of it is sort of “revenge politics” and part of it was something that might be seen as the “Tea Party” politics, though it’s more likely a more conservative wing that was in play. Within the USA’s political Republican Party, there’s a faction that says “the government’s money is MY money, and you can’t use it”, so they would do everything in their power to make sure that not one dime of government money is spent for anything other than what the people want it to be spent on for the most basic of government functions (fire, police, military,… Read more »

Patrick Chapman

@NC Todd, how about getting us an interview with Haas in the near future? There has been little to no news or information as to how they are progressing and I and I am sure lots of other fans would be interested to hear what their plans and expectations are. Geographically I am sure that you are best placed to pull this one off. Looking forward to it. Need input.

Geoff Fass

Remind me again why we didn’t build COTA in Vegas?

Fred Talmadge

Because I wanted it closer to me!

MIE

1981 & 1982?

Fred Talmadge

Right now all our politicians care about is abortion, imigration, guns and lowering taxes. Unfortuantly F1 and COTA are in the lowering taxes category.

Shocks&Awe

This is the moment for Paul to start drumming up funding to expand Sonoma Raceway. I look forward to participating in the support races in my 24-Hours-of-Lemons-spec ’86 BMW e30.

The International

its going to take a while, not to get the $$, but the red tape is about as long as the zeros on Bernies bank account!

bobmendon

Here we go. COTA was built by investors to reap a profit and financed by the state to reap tax revenue. What could possibly go wrong in that situation? One bad race weekend and the state is running like hell and the investors are playing dumb. Add the white haired mountain troll’s fees on top it and the entire southern part of the US doesn’t want anything to do with COTA.

Negative Camber

It is an odd one Bob. Although I will suggest that Bobby has been relatively vocal about it. Not too silent to be honest. He’s concerned as he should be.

Paul KieferJr

Welcome to Texas. The only difference between when it first started after the Texas Revolution in the 1800s and today is that we now use the legal system instead of six-guns to settle our differences. It just means that “Gunfight at the O-K Corral” becomes “Lawsuit at the US Fifth Circuit Court of Appeals”.

Angela

@@negativecamber:disqus Todd did you read the article 1 day ago on F1I.com where they state that Susan Combs committed to the FIA/CVH in writing an amount of $25 million per year for ten years to cover the hosting fee. Greg Abbot is reported as saying that the letter is not binding and therefore doesn’t mean anything. What is your take on this? Is it possible to dig up some more information maybe from Combs herself? It would also be very interesting to hear what Bernie has to say about all this as if he believes that the letter has meaning,… Read more »

Paul KieferJr

Easy there. I don’t think he can get all the details, but I can say this: Yes, Combs wrote that letter. Yes, it was for $25M per year for 10 years. When she wrote that letter, it was fully expected that we would make that amount back in sales tax revenue, and we’ve been doing exactly that. Yes, politics is in play. As I said, welcome to Texas (see my previous response). I followed this story right from the point where it was an announced plan to build the track, all the way through the year-and-a-half that it took to… Read more »

Angela

Thanks for the information Paul. So is the letter binding on the state of Texas or not? From what I have read the letter was very specific in it’s content and Combs was the comptroller at the time, and if the letter carries no weight then why write it in the first place? Texas or not, a contract is a contract and this letter appears to fulfill the requirement of a commitment on the part of the state. Do you think that this will become a lawsuit or will it be resolved through open discussion?

Paul KieferJr

Therein lies the problem. In order for this to be a valid contract, it would have to be signed by the governor. Combs doesn’t have complete authority. Right idea, but skipped a few steps. Had then Governor Rick Perry signed such a contract, we would not be talking about this. Why was it written? Combs wanted to guarantee that the METF, which is under her control, would guarantee that the fee would be paid, and the records showed that the METF would be paid back in spades from the sales tax revenue that was gained (hotel reservations, ticket sales, merchandise,… Read more »

Angela

Thanks Paul, that clears it up nicely. I didn’t know that Rick Perry hadn’t formalised the contract. An oversight on COTA’s part perhaps. Lets hope that sanity prevails and the race continues to take place for the next few years as planned.

Paul KieferJr

Sanity? In this state? MHMR has regular business around here.

Paul KieferJr

Hang on….getting word that someone discovered a letter from Combs that might have more legal teeth in it. Here’s the relevant article from Forbes magazine: http://www.forbes.com/sites/csylt/2015/12/26/state-of-texas-committed-to-paying-full-25-million-formula-one-fee/
At this point, stay tuned. If Bernie / CVC decide to sue, they’d have to do it early to make sure that the race happens on time, probably during the winter at the earliest. However, I’m sure that he’d rather have a civilized discussion with our current governor and our state attorney general first before doing anything.

the Late Idi Armin

heres a picture about why texas is rethinking its commitment to F1
http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/01/20160110_rig3_0.jpg

Joe McNair

This is about a right wing tea party state government sticking it to liberal Austin. It may bring millions into the state, but most of it is spent in Austin and Austin being successful at anything is a negative for these people. If this track were never Dallas or Houston…this would not be happening. This is what happens when the tea party takes over your state. Trust me, one of these days these bozos will get complete control of the federal government too….see you at the soup kitchen. .