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Formula 1 for a Real Tea Party

Richard Viktorin of Audits in the Public Interest, is a CPA with credentials in the area of economic development.  Viktorin testified before the Texas Senate Finance Committee late yesterday, providing data and back up to the contention that the State Comptroller’s support for granting one-quarter of a billion taxpayer dollars for the Formula 1 racetrack in Austin is a “a liar’s loan in the form of an economic development incentive merely by inflating attendance and spending.”  Viktorin further testified that, “The total expenditure per person in all categories is a pie in the sky $585.00 per day, $3000 per visitor total…this does not include air travel.  The higher and higher Formula One puffs the numbers, the higher the award grows.  It is a direct algebraic relationship.”

Texas Senate Finance Committee Vice-Chair, Senator Juan “Chuy” Hinojosa of McAllen responded to Viktorin stating, “I don’t like Formula One either.”  Finance Committee Chair, Steve Ogden of Bryan, after gaveling out said, “We are going to look at it.”

According to information published by the Texas Comptroller of Public Accounts, the Formula One incentive offered from the Texas Major Events Trust Fund is estimated to be $290,000,000 over ten years.

Viktorin’s organization was retained by local Austin businessman, taxpayer watchdog, and co-founder of ChangeAustin.org, Brian Rodgers.  Rodgers said,  “Spending $290 million of taxpayer funds for a privately owned racetrack while closing our schools is madness.  It is deeply disturbing to watch our government officials pass up innovative solutions for long term unemployment in favor of a 3-day gig selling hot-dogs at a racetrack at obscene costs.”

Viktorin’s full 5-minute testimony can be watched here.

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27 Responses to Formula 1 for a Real Tea Party

  1. You are not speaking for Austin! If you were you would get your facts straight. F1 hasn’t used a dime and your blaming them for school closings! That’s like blaming me for Global Warming because of the beans I just ate. Give me a chance to pass gas before you point the finger.
    Formula 1 is bringing jobs, industry and boosting the Texas economy NOW already, but your website doesn’t mention that. Viktorin calls it a “liars loan” give us a break! Formula 1 has proven itself around the world and the US business model is by far the best yet. Not reporting all the facts is worse in my opinion. You’re trying to create fear with your bogus claims and Austinites are smart enough to see through your methane cloud.

  2. Hello Vance:

    I don’t think Mr. Viktorin is claiming that Formula 1 isn’t bringing ANY jobs to Texas. I think he’s raising the relationship between what they’re supposed to get from the state $25 million per year, and from the City of Austin $4 million per year, for ten years and what actual jobs they’re creating. Please watch the video more carefully. As for the schools, you’re technically correct — it’s not the same pot of money. But ultimately, where do you think the state of Texas gets its money? From taxpayers. We stand by our claim that at a time when schools are closing, it’s a particular travesty to do bad deals like F1. Viktorin knows his stuff. He’s backed up his claims with real data. We will have that up on the site in the next few days, so come back and check it out before you “pass gas.”

    Linda Curtis, ChangeAustin.org

  3. Hi Linda,
    Glad you have a sense of humor. Another fact for you. If F1 did not come there wouldn’t be ANY tax money coming into the state (no change). The majority of the taxes will come from visitors not Texans (change). F1 gets to share the windfall that it generates for the state. Did Mr. Viktorin throw up a road block for the Super Bowl to save Texas from an economic gain? I’m sorry to hear schools are cutting back, but F1 isn’t part of the problem and could contribute to part of the solution with new job opportunities (change). I’d like to see Mr. Viktorins data. As an avid Excel story teller myself I know data can be massaged to lean in your direction. Don’t be surprised if the same data suddenly leans the other direction. In summary F1 is not a bad deal, and as a website calling yourself CHANGE AUSTIN, this story makes it appear more like don’t change.

    Best regards,
    Vance Facundo – Elroytx.com

  4. Mr. Facundo – Vance,

    Your remark about the Superbowl is not comparable. The facility which hosted the Superbowl, Cowboy Stadium, already exists. The F1 facility does not exist. The issue is using public funds to build a private facility which does not exist.

    I am not against F1 nor the track. But why not let Mr. McCombs and Mr. Epstein and Mr. Helmund and Mr. Ecclestone pay their own way. They are wealthy enough already. They should not need to live in public housing.

    You may request my spreadsheets from Senate Finance. They were part of my written testimony.

  5. Richard’s Feb 19th comment display’s the overall lack of knowledge and shoddy research (if any was done) appearing on this site. No public funds are being used to build the facility. That’s 100% wrong, and anyone putting in even 5 minutes of research can figure that out.

    The public funding committed to the project is to pay for the F1 sanctioning fee; and it is intended to replenish itself through taxes collected from the even annually. Now, you may or may not believe that the annual collection will cover the next year’s sanctioning fee — but at least get your facts straight.

    The F1 facility is being built by private investment. It is not being built with public funds. By comparison, Cowboys stadium WAS BUILT with $325 million in public funds; far more than F1 will receive. Where were you on that project?

  6. Linda and Mr. Viktorin,
    I my honest opinion it all comes down to your point of view. The money will not be used to build the facility. Where did you get that from? Tavo is wealthy? Prove it. The facility cost is being covered by investors. The Superbowl is comparable as it took advantage of the Texas Special Events Fund, just as Formula 1 is requesting. Have you read the criteria for using the fund? I have and it’s very clear that the pool of money has very strict requirements that must be met to protect the trust fund.
    Why not let the people who are willing to risk their own money take advantage of an incentive program that will promote growth, jobs and tourism?
    I would bet a wooden nickel that you haven’t driven down Elroy Rd. I’ve lived out here for 30+ years and we still have no sewer services. Care to guess why? I’ll tell you why. No one was willing to invest in the roads and infrastructure, not even the County. Now this new project comes along and everyone pretends like it’s the end of the world and we’re going to have to cough up some money. Fact is they are trying to pass the buck to the first group of folks willing to take the lead and do something positive. Glad your not against F1 or the track.

    Best regards,
    Vance

  7. Carlos,

    You make a good point that the Cowboy’s stadium WAS build with public funds, but at least Dallas voters had a chance to vote on it! In the F1 case, though the track will be a private investment, it will wind up (if they get the subsidy) being paid for by public money. And you can forget about anyone getting to vote on it. Viktorin has backed up his claims by submitting his data to the Senate Finance Committee, which he mentioned in an earlier post today. He testified before this committee. Do you really think he would go up against the Comptroller without data to back himself up?

    We’re working to get that data posted here, so you might revisit this site, but if you are in a rush, just as the Senate Finance Committee to furnish that information for you — least you put your foot in your mouth.

  8. Ms. Curtis, private money will be paying for the track not public taxes. What part of this do you not understand? The fund will be paying for sanctioning fees and will be paid back with the taxes collected from each years event. That is, when all the people come to Austin for the event and spend money, their taxes collected will be paying back into the special event fund for next years sanctioning fee.

  9. Mr. Calvert, what part of taxpayer dollars are being used for F1 do you not understand? Think of it like a rebate or a subsidy, or do you not understand subsidies? The point is that F1 gets rebated money that would under other circumstances be paid to the City and the state, just as other businesses pay their taxes.

  10. Ms. Curtis,
    “In the F1 case, though the track will be a private investment, it will wind up (if they get the subsidy) being paid for by public money.”

    THAT statement is an outright LIE. ZERO taxpayer dollars will go into ANY infrastructure of the track. IF you had even BOTHERED to read the Special Events Fund, you’d know that.

    And as for the money they will get from the fund, it is a LOAN…paid back IN FULL (plus the excess which is going into the state coffers) every year. Without the event…there would be no additional revenue for the state to collect.

    What part of how taxpayer dollars are being used do YOU not understand?

  11. How does not having F1 benefit Texas? Remember no F1, no tax money comes into the state at all (ZERO). No boost to the local economy to the tune of $250 million spent during construction. What public funds will you protect then? I know Texas has tax money in the bank now, but how can you pretend that this event will not bring revenue to the state?
    If the World Olympics picked Austin for a week long event, would you folks object to that too? Well in case your not up your F1 research, Formula 1 events are in the same class as the Olympics as far as tourism and generating spending. This does not even include the other major events planned for the site that do not use the Texas Special Events Fund that will also boost the Texas economy.

    Sure is a Beautiful day today!
    Vance

  12. Ms. Curtis – There is a distinct difference between tax monies being used to pay for the “special event” and the “private funds” being used to build the track facility. In this case, if Formula 1 were to end the contract with the track, the state would no longer have to pay out the “special events” funding designated for that particular event at the track. To lump it all together in one big pot is a bit disengenious, because if the event didn’t happen the track would not receive any state money but the track would still be in place. As Mr. Calvert noted, the funds for that payment are funded through the taxes accrued during the special event it is associated with and if my intrepetation is correct the taxes recevied fund the next payment and if revenues are not up to the level of payment then the payment is adjusted.

  13. Mr. Viktorin and Ms. Curtis-

    I’m as much about conserving public, taxpayer funds as anyone. I’m as disgusted as anyone else about school funding being in the deplorable state that it is, but why not point THAT finger where it belongs? Perry has cut taxes again and again, and as a result, he’s had to cut funding for any number of things, including schools, roads, and mental health care and medication for the indigent, just to name a few.

    All of that said, this track and the special events fund needs to be looked at a little differently. Economists and even small business owners will tell you that you have to spend a little money to create the opportunity to make a lot more money. Few businesses open without seed money of some sort, and businesses come to Texas not for the lovely weather (see August. Ugh) or the great people here but because Texas and smaller municipalities are generous with tax breaks and other incentives to get them to come here. If you need a case in point, research why both Dell and Ikea ended up in Williamson Co versus Travis: WilCo offered them more. The special events money will go to ONLY Formula 1 sanctioning fees. That will NOT go to all of the other events and businesses that the track, which will be PRIVATELY funded, will also bring (MotoGP, American LeMans Series, as well as tire companies and auto manufacturers who will do testing here, hotels, restaurants, and many other support businesses that come along with all of this). If you’ve never been to an F1 race, you have no idea the kind of influx of cash and influence that brings, and that’s not even scratching the surface of all of the other things this track will bring with it.

    This is, initially, a subsidy to bring essentially one event per year here, but the facility itself and the caliber to which it is being built will lead to other events, and, I suspect based on the same situation in other locations, an entire new industry coming to Austin. If we do want an increased budget for our schools, we need either a new governor or an increased tax base to achieve that. Since Texas taxpayers seem reluctant to put effective leadership in the gubernatorial office that would actually understand simple math, we’re left to find other avenues to achieve our goals.

    Last but not least, it’s about time SE Travis County had their day in the sun. For many years, the people of SE Trav Co have been overlooked and underfunded: their schools need help, their roads are in abysmal condition (have you driven Elroy Rd personally?), and their getting OFF of septic systems and onto city sewers might still have been decades in the making had this facility not been placed where it is. When you ask yourself if Westlake residents would tolerate those conditions for even a minute and your answer is no, why should Elroy and surrounding residents be forced to when both areas pay into the same fund? This is THEIR day, their opportunity for change. I am not surprised that Vance and others in the area are as vocally supportive of this as they are. Like most areas that don’t house the most affluent Texans, they’ve been overlooked and passed over for things that more urban residents consider a given for years.

  14. Here’s how I’ve explained the special events fund and the F1 track to others.

    Yes, $25 million dollars a year for ten years is a lot of money. However, it has to be applied for every year, and there’s no guarantee that Full Throttle Productions will get it even the first year. If at any time we feel we are not getting good value for our money, we can opt to no longer give it and they will have to pay their own way. Honestly, we’re arguing about money that hasn’t even been allocated yet.

    But let’s look at it another way. Let’s pretend that we’re all part of a family. We have a budget that comes in every year, and this year, there’s a lot that needs to be done to the house. We have enough money to tackle only a few projects. We know that the roof should probably be replaced in the next two years, and the landscaping should be done, and Linda got her driver’s license last year and now needs a car to get to school, and Steve has pointed out that the foundation is settling and we need to get busy leveling it. Meanwhile, Carlos has pointed out that we don’t have as much money as last year, and something needs to go.

    Vance points out that our neighbor across the street, who happens to live in the nicest house on the block and drives a Mercedes-Benz, needs some investment into his new business. He’s debating about moving it elsewhere because he doesn’t have the funds here to do what he wants to do and he really doesn’t want to sell his Mercedes at a loss to finance it. Vance wants to take some of our money and invest it with our neighbor. This means that we won’t get the new roof this year, and we may not even get to level the house.

    It’s pointed out that we really don’t like our neighbor’s business, he makes a lot of stuff we’d never buy and we don’t understand why anyone would even like his products, let alone buy them. Why should we give Richie Rich so much of our hard earned money when we need it so badly?

    Because it’s an investment. Looking at it any other way is simply short sighted.

    If we invest in our neighbor’s business, and it does well, we’ll earn back all the money we put in and then some. While we didn’t get to make many home improvements this year, by investing wisely, next year there might be enough money to do all the improvements, plus put a pool in the backyard and buy an expensive new car of our own. One of our family members might have a new job at the expanded factory that didn’t exist before. Sometimes, you have to spend money to make money.

    Now, granted, there’s some risk. We could just break even or we could lose money. In our real life case, we only risk losing money one year at a time. We’ll know pretty quickly if our investment is paying off long before we spend 250 million dollars.

  15. Though some of the people chiming in might be technically right – the tax money is not DIRECTLY spent on building the track. It gets laundered first by calling it a “sanctioning fee”. The $250 million goes into F1’s left pocket as a “sanctioning fee” over 10 years and the $250 million track infrastructure is built out of F1’s right pocket. What’s the difference?

    Perhaps this makes it even more clear – seeing how this money comes straight from the Comptroller’s office, please tell us why this isn’t tax money.

  16. The big difference is that the people and business (FTP) building the track aren’t receiving the money in any way. That money is going straight to the sanctioning body that will bring the F1 race to Austin. The people and business building the track are bringing F1, ALMS, MotoGP, and any number of other race series to the Austin area, as well as all of the accompanying businesses WITHOUT the benefit of receiving any money from the state. In fact, in exchange for ANOTHER business entity getting that money, FTP gets the “reward” of the responsibility of developing infrastructure which, if the land had been developed as a subdivision, would have fallen to the County.

    Please get your facts straight and present them coherently. If you expect to pack any punch with your argument, solid, unspun facts will be absolutely necessary. Stefan Wray and his friends’ scare tactics and spun “truths” didn’t get them anywhere either.

  17. OK Linda, it looks if though you might be learning something here and that’s good. The sanctioning fee is just that – a fee. It is to be paid to Formula One for allowing us to hold the race. It doesn’t go to building the track it goes in Bernie’s pocket. Yes it’s alot of money but the impact of having it here will bring untold of taxes and revenue to our community AND some really neat highly Engineered very fast cars.

    It isn’t tax money because it will be replenished each year from the following years proceeds. Therefor, when people come here to watch the race and spend their hard earned monies, the taxes that they generate will be collected and put back into the fund for next years race.

  18. Since this is a LOAN, to be paid back by tax proceeds from everyone who attends the event and SPENDS MONEY in our town…it isn’t tax money. They (FTP) get a $25 million dollar loan, and in return the city, county & state will get about $300 million spent in our stores, restaurants, night clubs, hotels, airport and car rental agencies. In case you can’t add, that’s >10x return on investment…pretty sweet odds.

    It isn’t something given away without a (significant) return AND it is something that the Major Events Trust Fund has done for years…AND is still solvent without needing any further cash injections from the general fund.

    Sounds to me like it works as advertised.

    Funny how you guys can’t seem to wrap your head around the concept, and have ONLY raised objection when a race organizer has the opportunity to tap into it. No objections when Dallas tapped the fund for $35 million for the Super Bowl this year…not even a squeak. And no objections when any of the other sporting events did so.

    And you guys also conveniently leave out the part about FTP has to apply for the fund every year, and if revenue was not up to par with their projections they won’t get the $25 million the following year.

    I wonder why that is so?

  19. Dear Vance,

    Your February 21 comment, “How does not having F1 benefit Texas? Remember no F1, no tax money comes into the state at all (ZERO)” displays a fundamental lack of knowledge about Austin’s tourism and hospitality economy.

    We are already running at 60-70% capacity all year long.

    This is the first and most fundamental problem with the incentive. It awards to F1, via a sanctioning fee, tax revenues, 60-70% of which were already flowing to the state treasury.

    The sanctioning fee, via the incentive, is a rip off of the people of Texas.

    In closing, and returning to the economic fundamentals, do you think for one second the race would be happening without public funds?

    If Formula One was a big boy, it should be able to run its economic race on its own. It shouldn’t need public housing.

  20. So Richard, what you’re trying to say here is that you don’t want the extra tax revenue coming in to Austin and surrounding communities because you believe that we’re already at or near capacity? You must work for a living. Who in their right mind would turn down extra capacity especially in this economy? Please go in front of a bunch of local businesses and tell then that you’re against this because we’re already at 60-70% capacity – you’d get asked to leave. Many millions of dollars will be brought to Austin each and every year because of F1 and FTP plans on having more than just F1 here as well.

    The sanctioning fee is a privilege for us to hold the race. Many other cities around the globe would fall all over themselve to have this race, we’re lucky to have Tavo here and wanting the race. The fee will come from a fund that was built up with taxes collected from another event not taxes collected via paycheck or general shopping. Then a portion of the taxes collected from the first F1 race will be put back in to that same fund for next years fee.

  21. Good Morning Richard,
    Are you saying Texas is at 60 to 70 percent hospitality capacity? Just talking about the annual F1 event how much additional capacity are you estimating?

  22. Vance,

    He’s another one of those transplants that wants Austin to stay the way it was the DAY he arrived here.

    Hey, let’s NOT have growth. Let’s NOT have the hospitality capacity expanded. Let’s NOT expand the hotels and convention facilities. Let’s have the average taxes for each Austinite go up because we want to bury our heads in the sand…and drive the technology jobs to another city or state.

    Yep…sounds like a really great idea there Richard.

    Are you SURE you’re a CPA?

  23. Joe,
    If anyone just looks at 1 event per year as the benchmark then of course you have to wonder about the remainder of the year. However this facility will support much more than F1.
    I don’t agree with the lets not do nothing approach. If we took that road we’ll have to wait another 30 years before I can take a dump in a pipe, instead of my backyard.
    As far as hospitality capacity goes, hotels are coming and it’s going to be grand! Trust me.

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