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Council members raise numerous questions about Formula 1 race

Friday, June 10, 2011 by Michael Kanin

Members of the Austin City Council spent a large part of their meeting Thursday raising questions about the city’s liability for what could be a multimillion-dollar subsidy for the organizers of an Austin-area Formula 1 racing event. The first Grand Prix race in Austin is tentatively scheduled for June 17, 2012.


After the dust cleared, Assistant City Attorney Sue Edwards counted 21 items that her office would compile before Council’s vote on the action, which is currently set for June 23. These ranged from the feasibility of fees to help offset some of the city’s $4 million contribution (after the first year, which the investors will fund) to the possibility that race organizers could foot that bill for five years longer than they have already committed.


Their questions came after a long public debate on the matter, which ultimately took over the bulk of the schedule. Race fans stressed the positive economic impact of the track. Detractors suggested it would be something of a boondoggle. Richard Suttle, attorney for the track’s developers, and activist Brian Rodgers – both familiar faces in Council chambers – outlined both sides of the issue.


“We’re not asking the City of Austin to put any of its money into it,” said Suttle. “This is an event, this is a process that we want to set up and reach an agreement with the city where it pays for itself.”


“These are garbage numbers,” said Rodgers in the middle of a thrashing of economic benefit calculations. “Just think about it, 130,000 people here for the weekend is no better than a couple of games – these numbers are fiction.”


Race organizers would receive $25 million annually from a state fund set up to help attract major events to Texas. However, the City of Austin must first sign off on the idea. That action, which would come via Council vote, will trigger a yearly contribution for the event from city coffers in the amount of $4 million. The deal would last for 10 years, unless the Formula 1 race pulled up stakes or it failed to meet certain performance goals.


The sanctioning fee for the Formula 1 race is rumored to be in the neighborhood of $25 million per year.


Local Formula 1 investors will pick up the city’s tab for the first year of the event. The city would use anticipated tax revenue increases to reimburse itself for the remainder of the deal. “In years two through nine it is performance-based, the only thing that would go back into the trust fund and trigger the state match would be the incremental increases in the revenue that we derive in our city as a result of the event,” said Suttle.


This wasn’t enough for Council Member Sheryl Cole. “I think it would be a lot clearer for the public, and for my support, if it were a situation where the partnership would guarantee that $4 million in the years two through six,” she said.


Cole had a list of other concerns. She also tested the ideas of Council and city management representation on the event’s local organizing committee, an independent or city auditor looking over the shoulder of those who calculate tax increment formulas, and the potential of new taxing and fee authority over transactions associated with the track.


Council Member Laura Morrison was concerned about the exact role of the event’s local organizing committee – the organization that will act as a go-between for city, state, and Formula 1 officials. She said that she’d like to get “real clear” about “what the authority is that the (local organizing committee) has.”


“What, specifically, can they do on behalf of the city?” she asked.


At a break in the hearing, Council Member Bill Spelman told In Fact Daily that he had yet to hear an answer to the question of how race organizers can anticipate drawing such a large crowd. “I just went online to take a look at attendance figures for other Formula 1 races around the world,” he said. “Istanbul gets 36,000. Sepang (Malaysia) gets about 60,000. Silverstone (England) gets 100,000 on Sunday. So, the 300,000 that they’ve been talking over a three-day period is not impossible, but it’s a high-end expectation.


“And especially since we’re starting from scratch – nobody’s come to Austin, Texas for this event before,” Spelman continued, “I think it would be extremely imprudent to for us to rely on that kind of number.”


Spelman also wondered about the reliability of an economic study for the project. “If they made an assumption that we could get 50,000 people on race day, I bet we could get 50,000 people on race day,” he said. “If they say we’re going to have 130,000 people on race day, that seems to me to be an unreasonable assumption.”

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