Yesterday a The Austin Bulldog reported on a lawsuit filed by Taxpayers….to Stop State Comptroller From Paying Tax Funds to Formula One Promoters.
The lawsuit filed in state district court may affect the Austin City Council’s action scheduled for tomorrow to enact ordinances that would otherwise enable the comptroller to make the payments.
Race promoters have publicly stated that the comptroller’s payment must be made in July for the race to take place.
Combs jumped on the opportunity for the race before consulting with the City of Austin or Travis County. In fact, Combs issued a letter to Formula One World Championships Limited on May 10, 2010, to certify that, “With the understanding that the first Formula 1 United States Grand Prix will be held in Texas in 2012, full funding of the entire sanction (fee) for 2012 will be paid to Formula One World Championship Limited (FOWC) no later than July 31, 2011. In subsequent years, two through 10, of the race promotion contract, i.e., 2013 through 2021, we will be sending $25 million to FOWC by the end of July 31 of each year preceding the actual race event.”
As a result of the comptroller’s early commitment, and the extreme lateness in approaching the City of Austin to sign on as the sponsoring municipality, the city is under the gun to approve contracts and is scheduled to consider doing so at tomorrow’s council meeting. The economic study that projects tax revenue to be derived from the race was not delivered until late Monday.
The lawsuit further notes that the selection of Austin as the site of the race must have been preceded by a “highly competitive selection process” but no local government participated in such a process. In fact, Council Member Randi Shade was quoted in a June 3, 2011, article as saying, “The City of Austin did nothing to recruit F1 to Austin. We did not take any action, as far as I know, to encourage, facilitate, or drive those people to choose Austin as their site.”
The lawsuit contends the comptroller does not have authority to give Formula One “tax incentives” without that competitive process.
“One anticipated effect of the lawsuit is to demonstrate what an open-ended, sky-is-the-limit 10-year deal this can be for Formula One if permitted to proceed,” Aleshire said in a statement. “For example, in subsequent years, the only limitation on the amount of tax dollars that Formula One can receive from state or local taxes is how much increased revenue the comptroller is willing to estimate results from having the F1 race here.”
The lawsuit comes the day before the Austin City Council is due to vote on whether or not to “sign off” on the $25 million incentive deal. David Cay Johnston thinks the Lawsuit Applies Brakes to $250 Million Tax Giveaway, and highlights this part of the lawsuit.
The lawsuit says its purpose is to “prevent the unlawful plunder of public funds for promoters of a Formula One race at a time when the State of Texas claims it cannot afford to adequately fund essential services, such as its education system.”
Adding even more fuel to the fire is this from the editorial director Dutch Mandel of Autoweek, An Open Letter to the Austin, Texas, City Council and the citizens of that fair city.
As the editorial director of America’s largest racing magazine and a guy who has grown up around racing and racers, who has worked for a professional race team and who was weaned on horsepower and Castrol fumes, I have two words for the Austin City Council and its constituents before Thursday’s vote to bless the proposed 2012 Austin Grand Prix:
I don’t say this out of spite or malice. I want a Formula One event in the United States as much as anyone does. But Austin is already what’s right in America! It’s a city that’s, by almost all accounts, vibrant and exciting, filled with great music, people and food. It has extraordinary educational facilities and fantastic surrounding scenery and carries a thoughtful and an eclectic vibe. Austin is comfortable in its own skin, and as a resident of a city–Detroit–that has long yearned to redefine itself and its reputation, I say that if you allow Bernie Ecclestone and his F1 circus to attach themselves remora-like to you, dear Austin, it will be an enormous and very expensive lesson.
The point, gentle people of Austin, is not to be rushed into doing anything you don’t want to do. If after sufficient due diligence–surely you’ve talked with past U.S. F1 organizers and city fathers from, say, Indianapolis, Phoenix, Watkins Glen, Long Beach and Detroit and heard their collective tale of woe. If you want to offer up keys (and every other city part) to F1, that’s your choice. But think about this: If the cradle of American motorsports, the home of the Greatest Spectacle in Racing, Indianapolis Motor Speedway, failed to keep F1 in America, what makes Austin–not the promoters, who have a bunch of reasons, maybe quite true, for why they are different–think it can succeed? Again, I’m talking to the fine people of Austin, not the people directly behind the track project.
Remember: Bernie always gets his money. Always.
Again, I like F1. AutoWeek has covered Grand Prix racing for all of our 53 years. I wake early to watch qualifying live from exotic locales such as Monaco and Seoul.
I just don’t want to see you hurt. I like your city too much to have that happen.
The Statesman article on the lawsuit adds a little more context, Lawsuit filed against state Formula One subsidy. With a response from the Comptroller’s office and a little more on how the lawsuit may effect the timing of the incentive deal.
Their lawsuit “strikes at the heart of the issue of whether Formula One even qualifies under the requirements of Texas law for such public funding,” Aleshire said in a written statement.
A spokesman for Combs defended the agency’s role.
“All applicable state rules and regulations were followed,” Allen Spelce said in an email. “By bringing F1 to Austin we create jobs and spur economic development.”
It is unclear how the lawsuit might affect plans to stage the international race in Austin; Jeff Hahn, a spokesman for United States Grand Prix, could not be reached. Local organizers have said they are depending on the public assistance to help cover costs of the race on the German-designed track being built southeast of Austin.
Hopefully this will give the city council pause, and decide to take a closer look at this give away of millions in taxpayer money to a billionaire. The deadline for the city to make a decision is July 31, 2011. There’s still time and this doesn’t have to be approved tomorrow.
[UPDATE]: Many questions and concerns remain on how an F1 race would go in Austin, as far as costs, lodging and traffic. Again from Autoweek, Austin Grand Prix still faces many questions as city vote is set for Thursday.
Lots of other questions remain, such as how much will all of the support services supplied by the city–police, fire, EMS, sanitation, etc.–cost, and who will pay for them? What about the road conditions and capacties out near the track, and transportation in general?
From an on-the-scene scene perspective: In the middle of last week, with no official, notable or major tourist events on the Austin area’s calendar, the W Hotel in downtown Austin was at full capacity. Simultaneously, most–and at times all–of the rental cars and parking places at the airport were spoken for. The F1 promoters plan to add 120,000 people to this mix next year, in 100-degree daily temperatures. On Tuesday, a morning news program described major traffic congestion on Interstate 35, which rolls through downtown Austin, as “America’s Parking Lot.” So it’s not hard to see why concerns remain at the local level.
While Austin is home to sold-out seasons of University of Texas football, along with the annual SXSW Music, Film and Interactive festivals for 10 days each March and the increasingly popular annual Austin City Limits Festival, all of these gatherings occur right in downtown, walking distance from many hotels, restaurants and shops.
The Circuit of the Americas track is located southeast of Austin in the same Travis County, but just barely. As of now, there is no public transportation to the track and only one decent two-lane road (FM 812), which will be restriped to accommodate race-day traffic by, (according to the latest plan submitted by F1 Circuit of the Americas), contra-flowing an additional lane, yielding three lanes outbound after the race. Estimates vary as to the length of traffic delays following the race. The promoters cite times “just under three hours,” while a county study said it could take more than 12 hours for traffic to clear.
There are the unresolved legal issues, which meeting to meeting have remained unresolved. City of Austin legal staff tried to explain to several skeptical council members the various points of agreement still to be negotiated. But rather than clearing the points up, the explanations led to more confusion.
Council member Sheryl Cole asked whether the city had considered outside legal counsel to help with understanding and preparing for everything involved in hosting an F1 event in Austin, since the city had never attempted an event of this magnitude before.
Council member Chris Riley asked about the track’s carbon footprint, whether the race facility will honor “green” initiatives important to the city, and where a plan stands to include bicyclists’ access to the event. Another council member even suggested a proposal for a community garden.
Council member Randi Shade was not present at Tuesday’s session. Shade is believed to be in favor of F1, though she has not committed one way or the other publicly. Still, her defeat in the regular election held in May triggered a $500,000 runoff election held last weekend in which she was defeated again. Many in Austin believe Shade’s defeat was related largely to city development and F1 in particular, since she was backed heavily by development and pro-business money, according to election filings.
Nonetheless, at a brief media question-and-answer period following Tuesday’s session, Suttle expressed confidence again. He said he believes that Thursday’s city council vote will be in favor of F1, citing the event’s positive projected economic impact and his own “natural optimism.”
Even if the support measure passes, previously recognized, practical issues remain. On the hotel front alone, several calls and visits on Tuesday to Austin-area hotels and hotel Web sites yielded responses of either “no availability” or “unable to book at this time” for the F1 dates in June next year.
While various estimates of available hotels in the area yield different results depending on who you talk to, the Austin Convention and Visitors Bureau states that there are 5,500 hotel rooms in downtown Austin and an additional 20,500 rooms inside the city limits.
With 120,000 fans potentially attending the inaugural F1 race on June 17, 2012, it’s not too early to try and book a room. Hopefully, it’s not already too late.