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Why Texas and Austin Should Not Subsidize the Formula 1 Race Track

CPA and economic development expert, Richard Viktorin of Audits in the Public Interest, testifies before the Texas Senate Finance Committee on why the plan to subsidize the Formula 1 Race Track in Austin by the state of Texas is a “liar’s loan.”

15 Responses to Why Texas and Austin Should Not Subsidize the Formula 1 Race Track

  1. Mr. Viktorin, with all due respect, you are wrong and I wish someone had the cajones to call you anti-F1s out on it. The major event trust fund will only be paying for the sanctioning fees for hosting the F1 event NOT and let me repeat NOT for building the facility. The fact that you and others oppesed to this keep bring up is $250 million or as you like to put 1/4 of a BILLION doesn’t include that the taxes collected from the event each year will be paid back into the special event fund. Therefor, and please pay attention, it is not really tax money being used to fund the event. Now you can call this a “liar’s loan” all you want but it isn’t the truth.

  2. Sorry Steve, but we beg to differ.

    Though you and others 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 simpler – Seeing how this money comes straight from the Comptroller’s office, please tell me why this isn’t tax money.

  3. 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?

  4. In case you missed it…

    Texas taxpayers are “putting up the first $25 million in a deal aimed at luring Formula One racing to Austin,” according to Eric Dexheimer of the AUSTIN AMERICAN-STATESMAN. The money, to be deposited in the state’s Major Event Trust Fund, “would pay the sanctioning fee London-based Formula One Group charges for the privilege of hosting the first of 10 annual F1 races planned for Austin beginning in 2012.” The move is “contrary to earlier assertions,” as state officials last week said that money from the fund “would not go to the promoter but to local governments to reimburse them for costs incurred in hosting such large sporting events.” Texas Comptroller’s Office Dir of Local Government Assistance & Economic Development Robert Wood said that the fund “had not been used in this way before and that officials are still figuring out the details.” Dexheimer noted state officials stressed that the $25M “is an investment that will be more than returned to taxpayers in the millions of dollars that would flow back to Texas when several hundred thousand race fans flock to Austin for three days to watch the event.” The state “could end up paying more than $25 million … depending on how much extra tax money is collected.” But Texas Comptroller Susan Combs stressed that “no money would be used to pay for construction of the track, which has been estimated at” $250M (AUSTIN AMERICAN-STATESMAN, 6/2).

  5. Joe – Steve,

    Truth be told, I have nothing against Formula One. Other than the abusive incentive, and perhaps the disenfranchisement of the citizens of Del Valle, I might support the venue.

    As an analytical economist as well as a CPA, I have looked at the economics of Formula One generally. Formula One does appear to be serial poachers of the public treasury wherever they race around the world. And with the average sanctioning fee running in the neighborhood of $13MM, I am just wondering why Austin should be paying twice as much as every one else.

    The event will not pay for itself, the incentive that is. The Comptroller’s estimate of its economic activity is blown, possibly by a factor of five.

    The economics of Formula One, including its history in the US, is destined to render the F1 track nothing more than a lost orphan child, land forever wondering what it could have been, for ever looking for reuse, if only it had not been conceived in a one night stand of Comptroller crony access making love to McCombsEpstein investments leaching on the public dime.

    Even with the substantial public investment, I bet the event doesn’t last five years. And if it does, it will surely be because of the draw that is Austin, not F1.

  6. Richard,
    It will be more than just F1, plus the other business that will be drawn to the area. I live in Del Valle how will I be disenfranchised? I’m also trying to find out where the sanctioning fee goes, or what it’s applied to. Have you done that research?

    Thanks,
    Vance

  7. Richard,

    Just like all the other anti-F1 zealots, you are woefully inept in your research and conclusions. Garbage in – garbage out.

    The AVERAGE sanctioning fees paid out in 2009 was ACTUALLY $28 million according to the documents I’ve seen…over double your woeful estimate. Only 2 venues were under $20 million – Spain and Italy.

    And since you have no clue about racing…let me explain something about tracks. When Class 1 racing facilities are built…they get used – A LOT. Since 1950, of the F1 tracks built (worldwide) >95% of them are still in use today. Hard to believe, but true. They might not still host Formula 1, but they do get used by other racing series…just like the ones FTP are working to come here. ALMS, MotoGP, SCCA Pro, Indy, NASCAR, NASA, SCCA Club racing…and then let’s talk about the driving schools…you STILL think it won’t get used and become “nothing more than a lost orphan child, land forever wondering what it could have been, for ever looking for reuse, if only it had not been conceived in a one night stand of Comptroller crony access making love to McCombsEpstein investments leaching on the public dime.”

    You left-wing Sierra Club politics are showing…

    The AVERAGE attendance for F1 is 180,000. Indy saw the highest single-day record for F1 of 285,000 – but you people still say that nobody will come to watch? I really would like some of what you’re smokin’, cause it is obviously good stuff.

    Maybe you should take a lesson from Stefan Wray…admit you are wrong and go away. There is no “hidden agenda” here, just a private enterprise working hard and spending $250+ million of THEIR money building a facility to benefit the Austin economy in a place that was destined for thousands of mobile homes. The payback will be MANY times that…and even IF it wasn’t is open to re-negotiation each year. The $25 million isn’t guaranteed if revenues to the state fall below that figure.

    Instead, we’ll have a shining jewel to show the world in Texas we can build green (LEEDs Certified), sustainable (solar and rainwater collection from the roof structures), and cutting edge (GEOmat structures under GRASS parking lots).

  8. Hmmm…it appears the cat has Mr. Viktorin’s tongue.

    Faced with facts, he runs away and hides. Fairly typical…

  9. Again, let me make this clear. The $25mm for the sanctioning fee each year is not money going to FTP of Red McCombs. It is money going to Formula 1 and Bernie. That money from taxes collected at special events will not be used by anyone here to build the track SO the title of this article/video :Why Texas and Austin Should Not Subsidize the Formula 1 Race Track” is completely incorrect and mis-leading.

    Please get your facts straight…

  10. It would appear that when Richard and Linda are shown facts about this project they shut up – which is a good thing when you stop and think about it. I think that Vance, Joe and myself put out one simple fact and you two can’t dal with it or spin it in a way that makes you look creditable. This one simple fact about the sanctioning fee, which Linda believes will be “laundered” somehow into paying for the track, a fee that is just for hosting a race and will come froma special event fund designed to bring big global events to Texas has brought you two to your knees. Thanks at least for listening to the facts and I hope the both of you come to the race.

  11. There should be no fund to “lure” businesses to Austin. The money is stolen from taxpayers already; how dare companies and other individuals feel entitled to it.

  12. This is just wrong. We have a budget shortfall in the billions and laying off teachers. Enough to make me vote for a Democrat.

  13. Marissa: No “stealing” going on here…

    The funds into AND out of the Major Events Trust Fund are paid BY ATTENDEES of those events. Sales taxes FROM THESE EVENTS replenish the fund. Everything the state makes ABOVE that “loan” is deposited into the General Fund. The LOAN is paid back IN FULL and everything left is put into state coffers. Understand?

    And Joe Laster: NONE of the money in the METF could be used for teachers. It’s pure political posturing of epic proportions to say so. In REALITY, this money spent has a 5:1 return for the state…to help pay for public education and public safety. Sorry to burst your bubble…

  14. Can someone please explain to me why a loan is necessary. Why does the city of Austin have to put up $25mm? If this track will be as lucrative as the proponents say it will be, I would imagine there are many private investors who would be more than willing to get a 5x or 10x return on their money. Can someone break it down to me like I’ma three year old? Why the need for a $25mm loan?

  15. Your question contains the answer. Watch the Mayor ram it through Council tomorrow anyway. PS Please make sure to sign up to get our emails. There’s a fight-back brewing.

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