US GP in Austin Discussion and Speculation...

I fully expected them to hire someone (or maybe several someones) from NASCAR, another series or another motorsport venue to handle support races, sponsorship, promotion, ticket sales, etc. I'm not talking about Tavo, but someone with 20+ years of solid experience (and success) under their belt. Would have been money well spent. Oh well . . .

Jean

 

Absolutely right on that, they did have at least one ex CART/ALMS consultant last year, but.. If they are thinking at all, they would look at least at a few of the road race series in Mexico to run a race or two, work with a few ex CART open wheel drivers from Mexico to race a one off there, generate some ticket sales.. I worked for CART before they went belly up and at the time we ran two CART races one in Mexico City and Monterrey,attendance in MC was a legit 225k and Monterrey was 200k in attendance, Many pay to play Mexican drivers, many Mexican sponsors in CART at the time.. The Mexican population should be a high priority for COTA for ticket sales, etc.. The whole Carlos Slim angle too, on and on.. Fascinating to watch, a great Harvard business class case study.....

 

Lots of good, informative posts in here in the last few days. Thanks all, for your insights!

BTW, I'm hearing now that some black stuff is visible out near turn 1. Don't know yet if it's another sealant application or if it's pavement. WeWillSee.

I may be able to get out there tomorrow to see for myself. If not then, it'll be Monday.

 

Re: the METF/Combs/Patterson/AG Abbott developments, here are two stories:

http://www.kxan.com/dpp/news/local/austin/patterson-combs-f1-spat-unresolved

http://www.statesman.com/news/abbott-declines-to-resolve-issue-of-combs-memo-2364112.html

 

It depends. If someone decides to sue when the metf application is made, they now have the atty gen on their side saying "the Comptroller of Public Accounts is required to follow the precise procedures described in section 5A".

If a judge decided to hear the case, it can pretty easily be shown that 5A was not followed. There was never an application to Formula 1 by a local government or local organizing committee PRIOR to selecting Austin as a site.

(a-1) An event included in Subsection (a)(4) of this section
is eligible for funding under this section only if:
....
(b) If a site selection organization selects a site for an
event [a game] in this state pursuant to an application by a local
organizing committee, endorsing municipality, or endorsing county,

What (b) is saying is that the event is only eligible IF Formula 1 (site selection organization) selected a site (COTA) after (persuant) a local (austin or CELOC) made an application to Formula 1 to hold the race.

As we know, Formula 1 selected COTA as a site persuant to an application by Full Throttle Productions an LLC private company. They did not follow 5a, so Combs by law should reject the application to the METF.

In (b) the word "application" means "to Formula 1, a site selction organization", not "to the metf". That has confused a lot of people.

The above is from a pro-bono atty, not my opinion. And yeah, its a non-issue unless someone sues, and the judge agrees to hear.

 

Great info. Thanks!

 

Just wondering, could the new contract with F1 be structured as a year-to-year deal with an eye towards a more smooth METF application? That way they can at least do a yearly process of "site selection" for the USGP, even if it is just a technicality.

I think for the first year, since they have already done the local organizing committee, endorsing municipality, documentation, etc (ended up doing it in June)... it will come down to whether the site selection and application process could be undertaken more than once and technically be fine with the law, or if the first process/initial letters (where 5A certainly does not appear to be followed) will negate any future process. I'm sure the lawsuits will fly (as they do for anything in Austin), but if it's the usual local agitators it will probably go nowhere. If Combs' political opponents like Patterson continue to pursue it, that's a different story. However, if F1 is a popular success then you can guarantee Patterson will drop it. If it's a failure, he'll play that card relentlessly through 2014.

 

And why have they yet to reapply?? I still maintain belief that they're going to apply through ETF, not METF

 

Here's the problem with year to year: Two F1 races in 2013. That makes them ineligible. Combs can argue it doesn't, but Watson, who wrote the law, said the METF is for once a year events. There will be lawsuits filed in 2013 if NJ goes ahead, bet that.

Here's the problem with ETF: You only get a window of 30 days to assess economic impact. Only direct taxes are counted ($5 million-ish). The METF allows for a 12 month impact, starting 2 months before and ending 10 months after the race. It counts direct, induced (business that starts up due to event), and indirect (Bubba takes the $$ earned on the F1 weekend and builds a new 5 star burger joint).

They can do the ETF, but they will get pennies compared to METF.

If you have a 10 year contract with F1, its kind of hard to say that you applied to F1 year to year to hold the race. They could have used your method if they only have a one-off race. I think we've been told by COTA they did secure a 10 year.

 

There area actually going to be 20 f1 races held in 2013, not just two. A race held in Jersey is no different than a race held in Monaco, as for as the effect on state revenue generation. They don't compete.

Not true. You can only count whats directly attributable to the event of:

General Sales and Use (Tax Code, Ch.151)
Motor Vehicle Rental (Tax Code, Ch.152)
Hotel Tax (Tax Code, Ch.156)
Mixed Beverage (Tax Code, Ch.183)
Title 5 Alcoholic Bev. Code

Still ~$15MM either way.

They had a 10 year deal. Not anymore

 

I know what you are saying, but I think some grey area remains for the reason Ben mentioned. The USGP can be one of 20 F1 races that is an "annual event" and only one site can be picked each year. There can be other F1 races in the USA, just not the USGP.

Similarly, you could have the Super Bowl only held in one place per year, yet there is also a NFL game like the Pro Bowl which does not negate the exclusivity of the Super Bowl.

But I can definitely see people arguing both sides. The only thing certain IMO is that politics will be the ultimate decision maker, not the actual law. No politician in Texas would come out against the Super Bowl. If F1 is a success here, the major political enemies will disappear. If not, then they will have a seriously tough time getting the money.

 

Patterson is one of those politicians that needs to be removed from office - barely elected to the Land office he is eyeing Lieutenant Governor office and positioning himself instead of doing the job was elected for. The primary reason he is going after Combs - potential candiate - was a 5% name recognition in the last poll for LG, third after the Railroad commissioner. So he picks this high profile issue to increase visibility - hope it blows up in his face! Those that are connected in the local politics will understand, outsiders will spin it into something else... seriously, it's a red herring, there wil be a race (as I have said before - see my prior posts) and the funds will be released. Plenty of other (stupid) events getting funded by MEFT (San Antonio taps into it all the time for any convention)...and COTA are developing projects with A&M etc... locals will understand the meaning of that connection (hint current Gov'nor), but what do I know

 

Wow Ben someone's reading the details. While I agree with you that the statute says "directly attributable", the comptroller's office disagrees. If you can't find it, I'll find it for you, but Don Hoyte's impact study submitted to the comptroller included direct, indirect, and induced taxes. Together they made up the $300 million impact that would get the $25 million pay out. In fact, that was part of Aleshire's lawsuit, arguing that only direct taxes were eligible.

As for the one event per year, its very unfortunate the way the law was written. It doesn't say USGP or GPOA, it says "formula 1 automobile race". So the event "a formula 1 automobile race" can only be supported by the METF if it is exclusive to Austin. There is the letter of the law and the intent of the law. If the letter of the law cannot be determined, it defers to the intent of the law. Kirk Waston, the author of the law, has already publicly said, "yes, we were supposed to get THE DEAL". But it really won't matter unless someone sues again, but if they do... we still get a race!

 

Loving this METF discussion. Good stuff. Keep it coming, guys.

BTW, got out to the Austin Auto Show today with the boys. Got a couple of photos, including the COTA display and the Ferrari display with Schumi's gorgeous Ferrari F2001. Ferrari's display won "Best in Show".

 

I also took about 30 photos today out at the site.

The backside of the site was very busy, with lots of dirt work going on. The front side was completely idle.

https://www.facebook.com/media/set/edit/a.462930823721468.119311.157330087614878/

As usual, here are a few samples:















New sealant application to Turn 1:


The end of Kellam Road:


Turn 11 Berm:

 

Did Hoyte's study include count any revenues @ COTA throughought the year (i.e. other races / concert promotions...)? because allowing for induced tax revenue would easily allow them to say 'if it wasn't for f1, this facility wouldn't have been built' thus allowing them to be counted under 'Hoyte's standard'

Only Direct taxes are eligible. They'll generated ~$15MM from this each year. Any other amount was just trying to pad the number for publicity reasons.

Again, I've said, they only advantage from the METF is advance payout. Now that is out of the window, ETF is better (no ambiguities at all about if it'd qualify)

 

I don't think that's sealant, I think its just an asphalt layer. I could be wrong. Did you actually see them applying sealant?

 

No. I didn't see it go down, but that's how it looked when they applied sealant there previously. They covered it over a few days later. Do you see the shiny streaks and the areas where it looks very thin, with the dirt sort of showing through? It doesn't look that way with asphalt paving, even if it's new.

 

Never considered that; they wouldn't be able to count anything until September 18, 2012 (2 months before the race) so they can't include track construction. After Sept. 18 they can claim any improvement "necessary or desirable to conduct the event". And the case could be made as you said that all the other events were induced. However, our points are mute because the contract with CELOC and the commitment from the state are capped at $25 million.

Since there is no local contribution, and COTA has to put up $4 million, all they can net per year is $21 million.

Your point about the direct taxes shows how crappy the law was written... it says only the taxes directly are attributable, but then gives a 12 month window to assess. Since no one will be spending money on F1 for months after the race, that forced the comptrollers office to interpret the 12 month window as indirect and induced taxes.

http://firat.academia.edu/SebahattinDevecioglu/Papers/833437/Major_Event_Trust_Fund_Gain_from_U.S._Formula_One_Grand_Prix

Excerpts:
"Based on the relevant state sales tax rate,state hotel tax rate, state rental car tax rate and state alcoholic beverage taxes, it is estimated that this level of direct event spending will generate $11.6 million in tax revenues from the gain to the state under the applicable taxes allowed to be deposited into the Major Event Trust Fund in support of this event."

Direct taxes didn't hit the $15 mill mark

Page 13:
State Tax Gain under Major Event Trust Fund for Formula One Race

Direct Trust $16,180,542
Fund Tax
Gain

Gain from $8,832,385
Indirect
Economic Gain

Trust Fund Gain $1,595,619
from Induced
Economic Gain

Total Trust $26,608,546
Fund Gain


But again, its capped at $25 mill

 

What? Ferrari have a display at the Austin Auto Show but they've snubbed the LA Auto Show for the last 3 years? That does it. I'm cheering for Mclaren from now on!

Thanks for the track pics. Looking good. Can't wait to see F1 cars blasting around it.

 

Think that was a ferrari of austin display and that is Risi's F1 car.

 

Fun read. Thanks.

They do, project direct tax gain: $16,180,542

So, they're trying to say, that all of the construction is going to employ people who go out and spend their wages in the economy (indirect) This increase in economic activity is going to spur more hiring in related industries (induced).

I don't buy it. Not as much BS as Amazon saying they're going to hire 6,000 people for a distribution center, but its up their. What's the saying? You can sheer a sheep many times, but can only skin him once?

COTA needs to ask for less money from the State.

 

Would be stretching it for them to be allowed to include the sales tax related to construction of the facility, as the METF covers events. Whether the event is at a new or existing venue doesn't matter. (Well, I suppose it matters to the investors bankrolling CoTA.)

Tax on sales of goods and services purchased by persons employed in conjunction with the event for which METF monies are sought? Maybe, but still a bit of a stretch given that public funds are involved.

Jean

 

That's the local dealer and Coursa Clienti cars, it's not an FNA presentation.....

 

Some asphalt has been laid on turn 1.

No pics yet. Sorry. Mama had the camera & all I had was my phone, which is great up close, but no good for distant detail.

I should be able to get some shots of it on Friday morning on the way home from work.

ETA: