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Commission expresses concerns about Formula 1

Thursday, December 9, 2010 by Kimberly Reeves

Developers of the proposed Formula 1 racetrack southeast of Austin can expect tough questions from members of the minority- and women-owned business community next week, if last night’s Minority-Owned and Women-Owned Business Enterprise & Small Business Enterprise Program Advisory Committee meeting is any indication. The committee is known around the city as MBE/WBE.


City staff had put an item on last night’s committee meeting agenda about “the Formula 1 project and potential City of Austin involvement.” At this point, the city has committed to extending water and wastewater services to the project. The possibility that the city may grant additional incentives for the project is estimated to be up for consideration four to six months down the road.


So just how much will Austin’s minority business community potentially benefit from the racetrack? It’s still uncertain. One of the ironies of the MBE/WBE meeting, and a tacit acknowledgement of the level of interest in the track from the minority business community, was the number of commissioners who chose to recuse themselves from the discussion to avoid conflicts of interest over potential future business dealings with the racetrack project.


An unprecedented four commissioners – Chair Adrian Lopez Neely, Vice Chair Ed Lowenberg, Anne Harutunian, and Andy Ramirez – recused themselves and left the dais because they, or their companies, might eventually have business with the $200 million project. Those recusals left only two committee members at the table—Barbra Boeta and Brian Walters—to question the project specifics, with Deirdre Moss absent from the meeting.


As it stands, the only required good faith minority participation in the Formula 1 project will come in the extension of water and wastewater lines to the property, a $13.5 million project that Council approved last month.


That doesn’t include any piece of the Formula 1 project itself because, as consulting attorney Lino Mendiola of Andrews Kurth told the commission, the project currently does not include city subsidies. It does, however, carry about $25 million in state subsidies for its construction. That would change if the city ultimately intends to offer its own subsidy.


At this point, construction would be no different, Mendiola explained, than if Council had chosen to extend water services to a 1,000-home privately financed subdivision in the city’s extra-territorial jurisdiction. That hypothetical project, and this real one, simply have no requirements for minority participation, voluntary or otherwise, Mendiola told the commission members.


Walters said he understood the law but was still uncomfortable with the precedent of the city doing so much for a major project that would be required to work so little with minority- and women-owned firms in the city.


“We have a precedent of an entity coming into this city, putting forward this large project, with 93.5 percent not subject to the types of regulations that we have for city projects,” Walters said. “It just rubs me the wrong way.”


Walters acknowledged he was uncertain what the city could do under such limitations. In his response, Mendiola acknowledged he both understood and shared Walters’ concerns about minority firm involvement.


The only hook to require legal compliance, however, is a third-party agreement with the developer that would involve some city money, Mendiola said. That has not happened yet, but it clearly could be on the table at some time in the near future.


Carol Hadnot of the Austin Black Contractors Association, addressing the commission, said those representing Formula 1 had indicated a general interest in supporting minority-owned business participation goals at a recent outreach meeting. There may also be a meeting next Tuesday with potential minority contractors.


At this point, however, even the flexibility of the delivery method on the Formula 1 project remains unclear, Hadnot told the commission. It could be a direct competitive bid arrangement. Minority contractors would prefer a construction manager at risk arrangement, rather than a competitive bid, to provide flexibility for working with contractors.


Boeta warned that if minority goals were proposed and not met for participation on the project, then the committee would be likely to hear about failures. Boeta also asked that the contractor charged with minority participation be invited to brief the committee.


Formula One recently hired Haynes-Eaglin-Waters, owned by Cloteal Davis Haynes, as a consultant on minority outreach. That pleased Paul Saldaña of the U.S. Hispanic Contractor’s Association, who had publicly expressed concern about minority hiring. Saldaña released a statement in which he wrote, “The commitment and actions taken by Formula One to retain an outreach consultant is a step in the right direction and we remain optimistic.”

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