By on November 12, 2015

2015 United States Grand Prix

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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35 Comments on “COTA Chairman: ‘I Think We’re Screwed.’...”


  • avatar
    CoreyDL

    Wet jeans by shoes makes me very upset.

  • avatar
    JMII

    Is anyone shocked by this news? The FIA and FIFA are pretty much the same when it comes to corruption. Bernie is putting F1 out of business with the licensing fees he charges to “host” these events. These people need to stop paying the Bernie tax and see what happens. At this rate only Monza (due to Ferrari) and Monaco will remain on the schedule.

  • avatar
    dwford

    If the race isn’t viable without a giant government subsidy, then it just shouldn’t be held. I mean, really, what’s the point if the whole thing is a money losing operation. Why waste the time and energy?

    • 0 avatar
      CoreyDL

      While I lament the loss of a motorsport event for people to see and enjoy, I’m in this camp as well. There doesn’t seem to be a point to throwing MILLIONS of dollars at an event each year. That money could be spent on educational programs, roads, public parks, etc. Things which provide year round enjoyment/benefit the public, and not three days enjoyment for people interested in motorsport.

      Shrink the event and find a corporate sponsor who can write it off their tax bill.

      • 0 avatar
        TheAnswerIsPolara

        Agreed. Why should my money used to pay for — literally — a rich man’s plaything? Ditto for sports stadiums and the like. Now, if I can get tax dollars for hosting MY car collection, then I’d be all for this.

        If that happens, I’d be glad to sell you a day-pass to my garage for only $1,500.

      • 0 avatar
        Ol Shel

        Texas conservatives are big on “free markets”. They love competition and to compete on ‘level playing fields’.

        Especially when shifting taxpayers’ money to their cronies.

    • 0 avatar
      FormerFF

      It is rather ridiculous for the state to be subsidizing this, and any other sporting event. I’m a huge motorsports fan but there’s no need for taxpayers to support my hobby.

      • 0 avatar
        TW5

        Why is it ridiculous? The event has positive externalities for local businesses and governments. Rather than negotiate some absurdly complicated payment contract with all businesses in the metropolitan area of Austin or the State of Texas, just impose a special hospitality tax and then use the funds to cover the race fee.

        The problem is not the payment, it’s the haphazard, lazy and corrupt way that public officials pick events and then misrepresent the economic benefit.

    • 0 avatar
      Urlik

      If the event brings in more additional taxes than the amount of the subsidy, is it really a subsidy?

      • 0 avatar
        CJinSD

        The argument for the $25 million subsidy was that there would be an economic gain to the state of $25 million. One for one? Some people made a fortune off of this event on the backs of the taxpayers, chief among them being Bernie Ecclestone; who needed it to go with his hundred other fortunes far more than the people that pay taxes in Texas needed it.

    • 0 avatar
      SomeGuy

      Why should we bother with college football then? Seems that is another $10mm the state could pick up. How about those CMA awards?

      https://twitter.com/virtualstatman/status/664478700537290752/photo/1

      The government funds more things than you think. F1 is absolutely expensive and that is a failure of the system on F1’s side. If the state chooses not to fund it, that is their choice.

      And a “rich man’s playground…” stop it. Please. $400 will get two people in for GA including parking for 3 days of racing. Good luck finder Super Bowl tickets that cheap for 11 minutes of action (and I’m an NFL fan btw, just keeping it real).

    • 0 avatar
      TW5

      The economic theory behind government sponsorship or subsidization of major events is sound. The implementation of sporting subsidies and surety is the problem. Public officials aren’t interested in using the funds to full affect. To be honest, their constituents aren’t either. Everyone says they want public subsidization of sports to stop, until the football team moves away.

    • 0 avatar
      Jimal

      I agree. I have no problem with a government providing some seed money to get an event like this up and running, as it should stimulate the local economy. At some point, if the event can’t sustain itself, then it shouldn’t survive. For most countries “investing” in Formula One, their Grand Prix is one of – if not the – largest sporting events in that country. Here in the U.S., any NFL game, the Sprint Cup race and any number of other events that weekend probably drew bigger numbers and picked up stronger TV ratings, all without large annual government subsidies.

  • avatar
    CliffG

    Well, I was there this year, flying down from Seattle. I brought some rain gear, but no one was prepared for the non stop downpours form Friday afternoon through Saturday. COTA did nothing for anyone, other than the literally few dozen who lived through the non events of Saturday and got invited over to meet the drivers after suffering for 8 hours in the rain. We got smart this year, stayed well south of Austin and their massively overpriced hotel rooms. So f**k Austin too.

    COTA is screwed, taxpayers enthusiasm for subsidizing billionaires’ toy things has waned. F1 would rather host an event for some third world potentate that features absolutely no fans as long as the check clears. I love F1, have since the Henry N. Manney III days of R&T back in the ’60s, but I wonder how long the current manifestation can go on. Their only long term cure might be cigarette advertising and good luck on bringing that back.

    I notice that COTA hasn’t offered anything that might make up for the fubar of this year. So, maybe I’ll just go to Spa or Montreal next year. And the tragedy is: no one cares if COTA is back next year or not. That is how much F1 cares about their hoi polloi fans……

    • 0 avatar
      plateofshrimp

      That sounds expensive and bad. I’m hoping Lucky Dog’s race in Rosarito, Baja California happens. I’d probably have more fun spectating that than I’d have at an F1 race.

    • 0 avatar
      Urlik

      Hotel prices were only about $50/day over the norm this year. They dropped about $100/day. As for the rain screwing with things, I realize I saw the best F1 race in years because that rain came. Worth every miserable, wet moment.

    • 0 avatar
      SomeGuy

      Yep… Did absolutely nothing, but give the passionate fans, who by the way were more than a few dozen, a chance to experience what some paid THOUSANDS to see by getting down on the pit land and up close to the cars.

      COTA staff were kind, and making the best out of the situation with constant updates over Twitter and email. They even got new parking for those who paid for offsite parking (me).

      I drove 1,000+ miles from Kentucky to the track, and it was the best race I have ever seen in person. I will go again to COTA and hope it stays in business.

      Any city would increase the prices of their hotel rooms on a giant event. It is called supply and demand. Louisville jacks up hotel prices during the Derby, so f*ck that town and those people renting their houses too right? How dare the residents try to profit on opportunities presented to them.

      In other words, I totally disagree and I was there all three days on a GA pass.

  • avatar
    Big Al from Oz

    Maybe the government can subsidise your next BBQ or kids birthday party. The States could have a BBQ and Birthday Fund.

    This is as bad as subsidising the Arts.

    Obviously the event isn’t popular enough to hold it’s own.

    Let it sink. Stop wasting good money.

  • avatar
    George B

    I had no idea the F1 sanctioning fees were that high. The state should have told Bernie Ecclestone to go pound sand. Hard enough for COTA to survive on the limited interest in F1 even without the sanctioning fee.

  • avatar
    CJinSD

    I really couldn’t be any happier to hear of this flop. All of Austin raped fans the first year. It’s no wonder they lose 30,000 fans a year. I laugh at the lamentations of the hotels that once had minimum stay durations. The COTA people thought they had a permanent government entitlement. I hope their disappointed is shared by GE, accredited universities, and the solar industry soon.

  • avatar
    SomeGuy

    This once again shows a problem with the F1 model. The organizers have to make ALL their money during the race weekend. They get no money from the TV rights, so when people wonder why their beer, burger, and tickets are so expensive, think for a second before saying COTA sucks.

    The SYSTEM sucks for hosting races in F1. This is not COTA’s fault for needing such a heavy subsidy.

    It will be a shame if we lose this track on the calendar. I hope it doesn’t happen.

    • 0 avatar
      TW5

      I don’t see a problem with the F1 model. The government forks over the sanctioning fee. The track incurs modest costs relative to the sanctioning fee.

      The exorbitant prices happen because the tracks have to make all of their money from the F1 even because motorsport is dead as a doornail, and most tracks don’t have ancillary facilities for generating revenue (concert venue, convention center, etc.).

      Bernie is an awful little troll, and he’s wrecked quite a few series, DTM and Group C WEC to name a few, but he’s not responsible for the downfall of all road-circuit racing, particularly not here in the US.

      • 0 avatar
        TonyJZX

        I’m kinda of the opinion that the FIA is of the same ilk as the IOC and FIFA.

        You can see it how there wont be a German F1 as the two designated tracks dont seem to want to pony up the money for it.

        This is GERMANY btw. One of the spiritual fathers of F1… the home of Mercedes. The Germans probably have the 2nd greatest contribution to Formula 1 and obviously is a rich nation and yet they cant seem to be get behind hosting a race.

        See then how F1 has moved to the Middle East and Russia? Just like the other two infamous sporting govering bodies.

        I want to like F1, I want to watch it, but Bernie’s greed is making it impossible to enjoy. This thing where they split the TV rights to BBC and Sky… how can you watch half a season and then get highlights of the races you dont have access to?

        I have access to all the F1 races for free and even I cant be bothered.

  • avatar
    indi500fan

    I’ve been a race fan since the 50s, but by any reasonable evaluation, US professional racing is in what the investment folks call a “secular bear market”. I wonder if COTA is this millenium’s version of Ontario (Cal) Motor Speedway?

    Most of these economic development tax “expenditures” are based on extremely inflated estimates. Sounds like the new governor and crew in TX had a sharper pencil.

  • avatar
    wmba

    Ecclestone flogged off a lot of Formula One a decade ago to CVC partners. He just runs it for a management fee, and narrowly missed going to jail in Germany a couple of years ago.

    It’s amusing to me that the millionaires who get bamboozled by Bernie to fork over ridiculous fees to hold a F1 race show no sign of the nouse they had making their own millions.

    http://www.theguardian.com/sport/2015/oct/06/bernie-ecclestone-parties-interested-buying-formula-one

    “It was reported over the summer that CVC Capital Partners, the private equity firm which has owned F1 for the last 10 years, was in talks with a US-Qatari bid to sell its 35.5% controlling stake, while Ecclestone confirmed he would sell his 5% stake as part of any deal.”

  • avatar
    danio3834

    I went to Austin last year for the COTA F1 race and it was a great event and top notch facility. It’s too bad they can’t make it work without having to rely on welfare. C’est la vie, maybe I’ll put a bid on the place.

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