City of Austin to drop support of F1 race

UPDATE A lawsuit filed by three Austin citizens who oppose the use of state funding could disrupt preparations for the US GP. One of the plaintiffs is a teacher, Ewa Siwak, who lost her job in a recent round of spending cutbacks.

A key element of the financial plans for the race is that the sanctioning fee owed to Bernie Ecclestone is due to be taken care of by a $25m grant of public money from the Texas state’s Major Event Trust Fund.

The suit claims that it seeks 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 public education system."

The $25m annual payment was guaranteed to Bernie Ecclestone by Texas State Comptroller Susan Combs in a letter of May 10 last year.

06/20/11 [Editor's Note: Could this deep-six the Circuit of the Americas track? Quite possibly.] City of Austin officials say they are nearing completion of a contract with organizers of the Formula One race scheduled to begin in Austin next summer that would eliminate nearly all local taxpayer support for the event.

The city's new arrangement would not affect the estimated $25 million annual subsidy state officials have committed to providing to support the internationally popular race. But it could deflate concerns of local critics who objected to using city taxpayer money to support the race.

Final details of the arrangement were pending Thursday, City Council Member Bill Spelman said.

The proposed deal could play a role in the outcome of Saturday's runoff election between Council Member Randi Shade and challenger Kathie Tovo. A centerpiece of Tovo's campaign has been her criticism of possible city subsidies for the race event and campaign donations Shade has received from employees of Armbrust & Brown, a law and lobbying firm representing Formula One.

But if approved, the new agreement would have Formula One promoters place an estimated $4 million into a state trust fund account every year for the 10-year duration of the contract.

The local payment is necessary for Formula One promoters, led by Austin's Tavo Hellmund and supported by auto magnate Red McCombs, to leverage a $25 million state subsidy through the Major Events Trust Fund, an economic development program administered by the comptroller's office.

Previously, the race promoters had agreed to pay the upfront money only for the first year's race, with the city expected to ante up the sum the remaining nine years. According to trust fund laws, the city's contribution was to come from "extra" sales, alcohol, car rental and hotel taxes generated by the previous year's race.

Preliminary estimates have said Austin stands to gain about $4 million from those taxes paid by Formula One fans over the race weekend. Doubters have called the projections wildly optimistic and questioned whether it is possible to accurately measure the gain attributable to the event.

While the rules call for much of the $4 million local contribution to the trust fund to flow back to the city to cover its costs for hosting Formula One, critics said that amounts to a public subsidy because it limits the city's use of that money to supporting the event.

By comparison, the new agreement would effectively allow the city to use all tax revenue gained from the race for whatever it wanted.

"The city taxpayer is not on the hook for any money," Spelman said. The Statesman

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