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Elizabeth Pagano is the editor of the Austin Monitor.
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Lawsuit seeks to scuttle F1 plans for $25 million state subsidy
Thursday, June 23, 2011 by Elizabeth Pagano
On the eve of a City Council vote that would allow the backers of a planned Formula One race to participate in the state’s Major Events Trust Fund and free up millions of dollars in state tax dollars for organizers, three Travis County residents have filed a lawsuit against State Comptroller Susan Combs.
The lawsuit seeks to “prevent the unlawful plunder of public funds for promoters of a Formula One race at a time when the State of Texas claims it cannot afford to adequately fund essential services, such as its public education system,” and argues that Combs, in authorizing the expenditure of $25 million, took unauthorized action.
A spokesperson for Combs has maintained that all applicable state rules and regulations were followed.
The plaintiffs are asking for a judicial declaration that Combs does not have the authority to spend the $25 million in state funds that have been appropriated for the event.
The lawsuit alleges that, to qualify for state funds, Austin was required to take part in a “highly competitive selection process,” and that Austin, in fact, did no such thing.
“I think that is the most serious thing, that there was no offer upfront, before F1 decided to come here and started construction, to offer them tax incentives,” said the attorney representing the plaintiffs, Bill Aleshire, of Riggs, Aleshire and Ray. “If we are going to start paying companies money, after they’ve decided for other reasons to be here, we’re going to bankrupt our county and city pretty quickly.”
“A private, for-profit business can legally be given a tax incentive offer as part of the process when they are deciding whether to come here or not,” said Aleshire in a conversation with In Fact Daily. “In the lawsuit, we’re pointing out the difference between a legal tax incentive offer is that it must be done prior to the time a business makes its decision to locate here. Because, once they have decided to be here, and have located, if you give them tax money at that point, that’s an illegal gift, not a tax incentive.”
The plaintiffs also point to a letter, written by Combs in May 2010, that promised $25 million in state general funds no later than July 31, 2011, something that would be permitted by statute only if the race start date was less than one year away.
Race organizers have given a start date of June 17, 2012.
“Personally, we consider that press release saying that the race date would be June 17 to be a head fake just to get the $25 million dollars. If it was a real date, they would have had it formally approved.”
The lawsuit was filed by three plaintiffs: Richard Viktorin, a local CPA who operates Audits in the Public Interest; AISD teacher Ewa Siwak, whose contract was canceled as a result of budget cuts in education; and Richard Franklin III, a member of the Del Valle ISD School Board. Dell Valle ISD currently stands to profit from the considerable property taxes on the facility.
Franklin has issued a statement, saying, “I have heard nothing from Formula One that would indicate that they really would have a positive effect on our schools or our environment. We teach our students to obey the rules; well, so should our powerful officials and rich businesses.”
As to whether or not the lawsuit would affect today’s vote, Aleshire declined prediction.
“Our lawsuit stands on its own. If the City of Austin decided not to sign a contract with Formula One and not to contribute money to the fund for the next 10 years, than certainly the comptroller has no authority to move that money out of the general fund. City Council has a pocket veto, if you will, over that appropriation,” said Aleshire.
“It’s surprising that the City of Austin would be so willing to make sure they (F1) get the $25 million dollars. But that’s up to the Council.”
Asked whether the suit would make a difference in today’s vote, Mayor Lee Leffingwell said, “Of course, I don’t know much about it. The city’s not a party to it. As far as I’m concerned it wouldn’t make any difference.” Council Member Sheryl Cole also said she did not think the suit would keep the Council from moving forward on the F1 vote.
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