Wednesday, November 11, 2015

F1 Auto Racing Threatens To Leave Austin If Multi-Million Dollar Subsidies Are Cut

Texas taxpayers have been subsidizing Austin's Formula One race to the tune of $75 million over the past three years, but when European racing league's CEO learned Gov. Greg Abbott's office planned to reduce their annual Grand Prix race subsidy from $25 million to $19.5 million, he immediately threatened to pull the plug on the race. “If it’s changed, it’s going to be difficult to continue the race in Austin,” F1's Bernie Ecclestone told the Austin Statesman.

F1 began running a Grand Prix race in Austin, Texas in 2012 after former Gov. Rick Perry reached a 10-year agreement with F1 to provide funding to support an annual Grand Prix race in Austin at a $300 million purpose-built track known as Circuits of Americas. F1 previously ran its only Grand Prix race in the United States at the Indianapolis Motor Speedway from 2000 to 2007. Former Hulman & Co. CEO Tony George was forced out of his job after family members became distressed at the amount of money he blew on the F1 venture, which never proved popular. Some rumored that George blew as much as $200 million on the race before F1 racing came to an end at the IMS.

Ecclestone teased the public with rumors of a return to the U.S. at a new destination, including an announcement of a New York City event in 2010 which later failed to pan out before inking a deal with Texas officials. Local racing promoters in Texas complain that Gov. Abbott's administration is reneging on a deal to provide $250 million in subsidies over a 10-year period to F1 to put on the annual race. "An entire facility was constructed based on that deal," said David Shaw, a spokesman for Circuit of Americas. "I think we're screwed," said Bobby Epstein, Chairman of Circuit of Americas. “It’s like you go to a restaurant and order a dinner, and then after you’ve eaten the meal they change the price," Epstein added.

Texas officials have been funding the F1 subsidies through a grant program known as Major Events Trust Fund, which is used to attract major sporting events like a Super Bowl or NCAA basketball tournaments. The trust fund derives its funding from a portion of taxes generated from sales, hotel, car rentals and alcohol taxes. Most of the funds spent are used to entice one-off events to bring business to Texas that might otherwise go to other states. Critics have complained that annual subsidies to the Grand Prix race violate the intent of the law establishing the trust fund.

Officials of Gov. Abbott's office have questioned whether the annual racing event provides the return on investment race promoters claim. Abbott's administration re-calculated the annual subsidy based on an economic model it believes is closer to the actual economic impact of the racing event. I suspect the actual impact is much smaller than the $19.5 million figure Texas officials agreed upon. Some critics have complained that the launching of a new F1 race in Mexico City this year will negatively impact the Austin race.


Sir Hailstone said...

Anyone who follows the career of Bernie Ecclestone knows this is old news. He's accustomed to having kings and tinpot dictators bestow riches upon him to bring his traveling road show and his camera crews to their far flung countries like the UAE and Azerbaijan. I knew as soon as Austin was put on the calendar it would be a few years then Bernie will take his roadshow elsewhere. This is why long time standards like Nurburgring, Hockenheim, and possibly Monza are coming off the calendar for these other countries willing to pillage their treasuries to please Bernie.

LamLawIndy said...

Good for Gov. Abbott! If I was a Texas resident, my only complaint would be that $19.5M is still > $0.

Anonymous said...

The side note is that Republicans in Texas and in Indiana share a stupidity gene when it comes to subsidy of sports.

Anonymous said...

Anon 8:09 Perry was a Democrat first and foremost. He supported taking private property to build the Trans Texas Corridor. He supported violating parental rights by requiring Texas teens to be shot up with Gardasil. Doesn't sound very Republican to me. In fact, most Texas conservatives consider Perry to be about as conservative as you are. Sounds like you have your own share of "the stupidity gene" Hoss.

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