Austin track, F1 race, in jeopardy of losing funding?

Could F1 race at COTA be in jeopardy?

When local organizers applied for the first installment of $250 million in state funding to bring Formula One car racing to Texas, a letter from race CEO Bernie Ecclestone was their first exhibit.

Ecclestone's London-based company, Formula One Management Ltd., had evaluated Circuit Events Local Organizing Committee's bid and selected Austin to host a race for the next 10 years, he wrote in a letter dated July 10, 2012.

The language was required by law. A state statute says that unless such a bid, or application, is filed with a "site selection committee" – in this case Formula One – the event is ineligible for taxpayer money from the Major Events Trust Fund, according to an opinion issued by Attorney General Greg Abbott in August 2012.

Despite Ecclestone's statement, the organizing committee never formally asked Formula One to select Texas, former board member Stephanie Richmond testified in a sworn affidavit obtained by the San Antonio Express-News.

She was one of two board members to resign, stepping down in September 2012, after CELOC applied for state funding to support Formula One.

The second, Anne Smalling, cited statements in Ecclestone's letter as one of the reasons for her resignation a month earlier.

CELOC was unable to produce a copy of its bid to Formula One in response to an Express-News records request.

The affidavit's statements are the latest controversy to beset the METF, which was established by the Legislature to help Texas compete with other states to attract major sporting events. No recipient of state support has been more controversial than the Formula One project.

Critics have said the state had no business subsidizing the European-style auto races after the Legislature slashed funding for schools and social services to balance the budget.

Proponents – including much of the state's Republican leadership – defended the incentives, saying the races and track would give the state a seat on the global stage. Gov. Rick Perry described attracting Formula One as "an opportunity to change Texas forever" at its kickoff luncheon in 2012.

The annual Formula One race, now entering its third year, brings a signature event to the Circuit of the Americas track, which is owned by some of the most prominent businessmen in the state, including San Antonio billionaire B.J "Red" McCombs and Austin investor Bobby Epstein, who was listed as its chairman as recently as December.

The 2013 race weekend brought more than 250,000 people to the track, which was valued at more than $296 million in its most recent property tax appraisal. The track has challenged its two most recent tax bills.

The next race is set for Nov. 2, and the track also has hosted the X Games and concerts.

McCombs, who hasn't disclosed how much he has invested, did not respond to requests to comment. Epstein has not responded to written questions that he requested from the Express-News.

Ecclestone's 2012 letter was the second he sent to pave the way for state funding for the Formula One races, which are expected to last through 2021.

A year earlier, he submitted a similar letter dated May 11, 2011, stating Formula One had received and accepted an application to bring a yearly race to Texas. He didn't identify who submitted that bid.

CELOC included that letter in its 2011 application to the comptroller's office for state money, which it later withdrew after it became clear the race was going to be delayed.

The letter resurfaced when the comptroller's office provided it to Abbott's office as evidence of an application, after Land Commissioner Jerry Patterson challenged Formula One's eligibility for state funding.

The 2011 letter predates the eligibility of any entity to apply to Formula One, records show.

The law mandates the application to an event sponsor such as Formula One originate from one of three entities: an endorsing municipality, an endorsing county, or a local organizing committee selected by the city or county, such as CELOC.

But according to records and interviews:

The Austin City Council would not vote to become the endorsing municipality and select CELOC as its agent until June 29, 2011. The City Council did not receive its first briefing about Formula One until June 7, records and archived video show.

CELOC was not established until May 31, 2011 – more than two weeks after Ecclestone's letter – records from the secretary of state show.

Travis County Judge Sam Biscoe said that Travis County never filed an application with Formula One.

"The process was botched from the beginning … it was clear then and it's even clearer now, the statute was not complied with." said Patterson, a Republican and a longtime statewide officeholder.

The lawmaker who carried the bill that made Formula One eligible for the funding also was critical.

"This is meant to be something that helps local governments with economic development," said state Sen. Kirk Watson, D-Austin. He said the state comptroller "attempted to take control of this … instead of allowing the statute to work the way it's intended to work."

CELOC board secretary Wayne Hollingsworth did not respond to written questions on the matter that he asked the Express-News to submit.

Ecclestone and Formula One officials did not provide comment or respond to written questions submitted by the newspaper.

Response to affidavit

After Richmond submitted her affidavit, an assistant attorney general argued in a letter the comptroller's office had little obligation to investigate Richmond's allegations or even verify the claim that CELOC made the application to Ecclestone.

Meanwhile, the state has provided about $50 million for the 2012 and 2013 races. Most of the money goes to pay Formula One's sanctioning fee to hold the competitions, records show.

In statements sent to the newspaper, the comptroller's office said it followed the law when considering CELOC's application for the funding and declined to comment on the affidavit.

The attorney general's office said it simply was representing the comptroller in litigation related to the Formula One race track.

"The comptroller's office received the required documentation that indicated the city of Austin and its authorized local organizing committee, CELOC, applied for and received approval to hold the United States Grand Prix in Austin from Formula One Management Ltd," comptroller's office spokesman Chris Bryan said in a written statement.

"It is important to note that the law does not establish a role for the comptroller's office in the application process between an endorsing municipality or its authorized local organizing committee and the site selection organization for the event."

He referred additional questions about the application to CELOC.

Watson criticized the apparent lack of an investigation into the allegations.

"The process should be followed because it's in the following of the process that the public gets protected," he said. "And, if the process isn't followed, it raises questions about whether the public is being protected when you're analyzing the use of this kind of money."

Watson said the state comptroller should be the taxpayers' first line of defense: "That's where you would expect things to stop if the process meant to protect the public is not being followed." More at San Antonio Express News