COTA Chairman: 'I Think We're Screwed.'
Just weeks following the conclusion of a rain-soaked United States Grand Prix at the Circuit of the Americas in Austin, Texas, certain details are coming to light that threaten the continuation of the event — and quite possibly operation of the facility as a whole.
One of the many pieces that keeps the event in Austin is the state’s Major Events Trust Fund, which has provided $25 million a year to race promoters since COTA began hosting Formula 1 in 2012.
It was believed the annual $25 million payment was assured for at least 10 years, for a total commitment of $250 million, to be paid by the State of Texas. However, a change in government and an audit of how the fund calculates major events payments has meant race organizers received just $19.5 million for 2015, or $5.5 million less than what was expected.
According to the Austin Statesman, economic development officials in Governor Greg Abbott’s government cut the payments based on “new formulas for measuring economic impact.”
Payments from the Major Events Trust Fund are based on the ability an event has to bring in out-of-state tax revenue. A recent report issued by state auditor John Keel found that some of the taxes included when calculating reimbursement shouldn’t have been considered, and new formulas were developed to exclude the ineligible tax revenue.
That audit report was released in September.
Circuit of the Americas, as they had done in years past, applied for reimbursement through the fund several weeks before the race. The application showed a projected economic gain to the state of $25 million. Based on the new formulas, the state said they would only reimburse race organizers $19.5 million.
“It hit us cold. No one could foresee this coming,” said COTA chairman Bobby Epstein.
The Major Events Trust Fund has been used as a crutch since Day One to pay the incredibly high sanctioning fees demanded by F1 supremo Bernie Ecclestone. It’s believed the entire $25 million collected from the fund goes to pay the annual sanctioning fee. With less money coming in from the fund, and race promoters already making razor thin margins at the best of times, the future of the event is in serious doubt.
“To use a technical term,” Epstein said, “I think we’re screwed.”
If it were just a matter of one race, the subsidy cut likely wouldn’t be much cause for concern, and COTA would simply lose the race. However, COTA’s entire existence revolves around hosting Formula 1.
In 2011, governor Rick Perry and comptroller Susan Combs, who controlled the fund, sent letters to Ecclestone referencing the numbers. COTA’s promoters believe those letters represent a commitment from the state to support the event over 10 years.
“An entire facility was constructed based on that deal,” said Dave Shaw, spokesman for Circuit of the Americas, “If the calculation is changed now, that’s effectively changed the terms of the deal.”
The United States Grand Prix is far from the only race on the Formula 1 World Championship calendar to receive funding from government to operate.
Federal, provincial and municipal governments announced a funding plan in 2014 to insure the Canadian Grand Prix stayed on the calendar, and in Montreal, until 2024. The Turkish Grand Prix, last run in 2011, was removed from the calendar because local governments wouldn’t help pay the exorbitant event sanctioning fees.
[Photo credit: Circuit of the Americas]
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