Texas AG addresses F1’s eligibility for state funds

The Circuit of the Americas(COTA) released a statement today regarding a opinion posted by the Texas Attorney General, Gregg Abbott, regarding the eligibility of the Major Event Trust Fund (METF) program being used for the Formula One race in Austin in 2012. The clarification was requested by The Honorable Jerry Patterson, Commissioner Texas General Land Office, and appears to be centered on the issue of whether or not an official application was presented for the site organizers or formula One Management.

Abbott’s response to Patterson can be found in its entirety here. Also check out our good friend Dave Doolittle over at the Statesman as he is filed this story on the issue.

In short, Patterson argues that an application was not created and provided to Formula One Management prior to site selection and thus makes the event ineligible for the METF money. The METF is a taxpayer funded program that would invest in major events for a return in state tax revenue for hosting the event. As Doolittle points out in his piece, it is a political issue and a hot potato in hard economic times with minimal budgets. The statement from COTA regarding Abbott’s comments were:

“We have worked with the local organizing committee in following the process to secure and host this international event,” Circuit President Steve Sexton said.  “This event will pump hundreds of millions of dollars into the Texas economy while creating thousands of new full- and part-time jobs and will have a positive impact on our community. We look forward to the first FORMULA 1 UNITED STATES GRAND PRIX™ in Austin this November and to working with state, county and city officials to create another key economic driver for Central Texas.”

Abbott’s position delivers no judgment nor resolves the issue but merely states that the existence of an application is in dispute. COTA maintains that it’s event will “pump” hundres of millions of dollars in the community and while its an odd turn of phrase, it is most likely dead -on correct. You’ll recall that the yearly sanctioning fee for the Formula 1 race is rumored to be approximately $25M and the METF was going to be tapped for the next ten years to pay for the right to hold the race. In other areas of the world, this fee is shouldered by the nation hosting the race such as Malaysia, Korea, China, Turkey and more. The reason nations have covered the cost is to improve their legitimacy in the world as a nation capable of hosting one of the world’s premier sporting events.

That may be hard for Americans to understand since they view Formula One as a European racing series and the nation doesn’t need legitimacy via a sporting event that has a niche following in the States. How many people in America watch formula One? one million? 6 Million? 14 million? 30 million? It’s a nation of 350 million people and if you consider the fact that 42 million people watched the NFL Football draft in 2011, it’s quite a disparity. That’s just the draft, folks, not the entire season of football.

Let’s not marginalize Formula One’s impact, however, as close to 600 million people watch the series each year and that’s a lot of folks no matter how you slice it. The fact is, Texas will prosper from Formula One but like many parts of America, some Austin folks have no idea what size or impact F1 can have. The biggest challenge isn’t for Austin to prosper from 150-200,000 people in their city for race day, it’s how the circuit can make the economics work. The METF is a major part of allowing COTA to remain profitable by not being saddled with the sanctioning fee each year.

That’s important but even as wel speak, many nations are attempting to re-negotiate that fee as they can no longer continue to fund the sanctioning fee amount. The track economics isn’t working for the race organizers and the countries themselves are facing austerity programs and budget shortfalls of their own. It’s a tough call but you can hopefully see the challenge before COTA, Texas and American F1 fans. In the end, COTA will most assuredly want to use the METF as it represents a major portion of their track economics. hosting other racing series will take pressure off the circuit and Austin’s ability to embrace their new neighbors in Travis County with open minds and support will help matters. Circuits have their ups and downs but a few of them across the country are solid and good entertainment for race fans across the country. Let’s hope fans will be willing to travel to Austin to watch.

As a side note, I did find this portion of Abbott’s commentary interesting (emphasis added):

(a-1) An event included in subsection (a)(4) of this section is eligible for funding under this section only if:

(1) a site selection organization selects a site located in this state for the event after considering, through a highly competitive selection process, one or more sites that are not located in this state;

(2) a site selection organization selects a site in this state as the sole site for the event; and

(3) the event is held not more than one time in any year.

I assume this is all contextual to Texas but what do you make of the italicized portions?

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