SHARE

If you think the technology involved in Formula 1 is confusing, let me introduce you to the financing mechanisms and machinations involved in getting a grand prix together.

According to the Austin Chronicle, the USGP has moved onto firmer financial ground after the event organizers and builders of the Circuit of the Americas, Full Throttle Productions, agreed to pay $4 million per year into the state’s Major Events Trust Fund — from which the race would get its $25 million per year state contribution — for the life of the race’s 10-year contract with Formula 1.

At least I think. I’ll gently chide the folks at the Chronicle — one of the city’s alternative weeklies, from the looks of things (I’m not expert on the city’s media market) — for not doing a better job of clarifying things. But I’ll give them a break given the intricacies of the issue. It’s not one that’s easy to clarify.

Here’s my attempt:

The city of Austin, which needs to sign on for this effort* to receive the state funding, was balking at doing so. So Full Throttle stepped up and promised to put in $4 million the first year. But that wasn’t enough, so Full Throttle came back and said, “Fine, we’ll put up the money for the whole time.”

That means that the city won’t have to foot any part of the bill. And so it looks like the city will sign on to whatever agreement is needed to get the whole state funding process in motion.*

There’s a City Council meeting Thursday where more answers should come via the city agreeing to this deal and officially getting the funding ball rolling.

Footnotes:

* Point one that’s not clear: Why does it have to be the city when the track is being built out in a different county?
* Point two that’s no clear: Whether the state — facing more significant budget problems than everyone realized not too long ago — will agree to this funding. There are still education vs. Formula 1 politics playing out in Austin, which also happens to be the state’s capital. (Side note: Probably having the race in Austin, which can be easily accessible for the elected leaders, will help get this deal done. It makes the negotiating easier.)

SHARE
  • I can try to clear up some of your footnotes.

    Point 1: A local entity has to endorse an event for it to be eligible for the Major Events Trust Fund. It doesn’t matter if it’s a city, county or a nonprofit set up by a city or county. In this case, Austin makes the most sense because it stands to benefit most from the race. Austin and Circuit of the Americas are both in Travis County.

    Point 2: The state already agreed in principle to this funding in 2009, when $25 million was earmarked from the state’s general fund to pay F1’s first year in the trust fund. Subsequent years will be paid by “extra” tax revenue from the previous year’s race. So in theory the $25 mil from the first year will be paid back at the end of the contract.

    The City Council still has to agree to this new deal, which addresses criticism that local taxpayers would foot part of the bill for F1. The comptroller also has to agree to the deal, even if it’s approved by the Council.

    More info can be found here: http://www.statesman.com/news/local/new-deal-for-austins-formula-one-calls-for-1544880.html

    Hope that helps.

  • antioch

    Why is the city involved? First, the track is in the city’s extra-territorial jurisdiction (ETJ) which gives the city some authority over the development – recall the city council’s approval of variances to construction standards last year. The site is not in a different county – it’s all Travis County, which has a bit more say in the construction permitting, and improvement of the local road system. But the city will provide the traffic control and security during major events, and the name recognition surely was a factor in FTP’s request to the city for “host” status under the Major Events Trust Fund process. That does seem too complex for the public to follow, but seems to mean that FTP would get back the $4 million each year as part of the state’s support for the event. Will the city get some of that to cover it’s hosting costs? I assume they will, because the $4 million would be channeled through the city as required for the METF. Tomorrow’s council meeting could be crucial, because the $25 million sanctioning fee was to be paid by the State when a F1 race schedule was announced. The 2012 F! schedule is provisional, but the payment may be due soon. I speculate that some delay might be acceptable, but we can watch the proceedings via webcast tomorrow – the q & a session will clarify this. The proposed resolution authorizing a contract with FTP is sure to be a major item of discussion, and FTP representatives will be there to answer questions.

    On this page, click on “Channel 6 Video” tomorrow.

    http://www.ci.austin.tx.us/cityclerk/edims/council_meeting_info_center.htm