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NickHolt

Despite $25 million State funding snafu, US Grand Prix on for 2019

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DESPITE $25 MILLION STATE FUNDING SNAFU, F1 U.S. GRAND PRIX AT COTA SAFE FOR 2019

- Texas officials say they're pulling $25.8 million in state funding after application failed to address human trafficking policy

February 28, 2019

The Circuit of the Americas in Austin, Texas, has run into trouble over its state subsidy after its application for state funding was rejected because it did not include a human trafficking prevention plan. That state funding is a potential $25.8 million lifeline for a track that hopes to keep Formula 1 coming to Austin.

What is clear is that this will not affect the 2019 race. The reimbursements are made many months after each race, so the fee paid to the Formula One Group is not dependent on COTA receiving the state funds, although the money is obviously an important component in the overall revenue of the circuit.  As recently as 2016, COTA boss Bobby Epstein told the Austin Statesman-American than even a $5.5 million hit in state funding would put the F1 race in jeopardy.

The odd thing is that even if COTA officials did make a mistake and not include the human trafficking prevention plan in the application, as the state demanded, the state of Texas still sent out a preliminary approval on Sept. 24 last year, five days after the application was made.

But how could that have happened if the human trafficking plan was not there?

One must assume that the bureaucrats also made a mistake when they issued a preliminary approval. State officials notified COTA officials about the reversal in the decision on Oct. 8, when Bryan Daniel, the executive director of Economic Development in the Office of the Governor, wrote to COTA's race organizing committee pointing out they had missed the deadline for the human trafficking paperwork, which should have been filed on Sept. 19 but was not sent in until Oct. 3.

"The submission for this event was thus not in compliance with the statutory condition for funding," Daniel wrote. "Therefore the 2018 Formula 1 United States Grand Prix is not eligible for funding under the MERP due to the failure to timely submit the required human trafficking prevention plan. For that reason, the September 24th application approval letter is hereby rescinded."

One can be forgiven for thinking that this mess -- one that involves both parties -- might better have been forgotten and not made public. On the other hand, one might argue that it did present the governor with the opportunity to save $25.8 million, which was the amount that the circuit requested for the 2018 race. The state, therefore, must believe that COTA could find the money to keep the race going for a year.

COTA co-owner Epstein says that Texas wants to continue with the current arrangements.

"The governor's office has no desire to see the race go away," he says. "They recognize it has value."

The numbers back this up. The Texas Major Event Reimbursement Program paid COTA $116.8 million between 2012 and 2016, the first five years of a contract that runs until 2021. During this time, it was calculated that the race generated tax revenues of $170 million, which means that the state profited from the race to the tune of $53.2 million in tax revenues over the five-year period -- in other words, it was worth $10.6 million a year.

According to information posted on COTA's website, the F1 race generates $423 million in direct visitor spending in the Austin area from COTA events, $306 million in annual payroll to Austin-area workers that is attributed to COTA annual activities and operations and 46,100 jobs that were supported by COTA's activities. 

Read more: https://autoweek.com/article/formula-one/despite-state-funding-snafu-f1-race-circuit-americas-safe-2019#ixzz5gwoo9I2n

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Hey Nick!!

 

I think Saward is wrong here in assuming the the State's preliminary approval was an error. IIRC that's pretty much standard operating procedure when it comes to the MERP. Seems like he's trying to help COTA find some wiggle room, but the law is pretty straightforward.

But then, have you ever told Saward he was wrong about something? Oh, the humanity...

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I'm pretty sure there's more to this than we read in Autoweek.

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14 hours ago, NickHolt said:

I'm pretty sure there's more to this than we read in Autoweek.

Indeed. I get the feeling the Gov's office may be tiring of the shenanigans and is starting to distance itself from the COTA dumpster fire.

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It really only works if everyone trusts each other's numbers.... the key word being "trust."

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I don't think they ever really believed COTA's ridiculously inflated numbers. More like they just looked the other way. But yeah, my initial reaction to all of this is that for some reason the Gov feels it's politically prudent to stop supporting the shenanigans and looked for a reason to torpedo their money for this year and then do lip service to next year. I could be wrong, but if not, this could be really, really bad for COTA. As in 'fatal'. 

Or it could all be a dog and pony show like when they briefly lowered the funding in 2015 and took the MERP into the Gov's office from the Comptroller under the guise of 'cleaning it up'. LOL.

What do you think, Nick?

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Without any direct knowledge, but I tend to agree with those who feel that that Austin politics, rather than bogus attendance figures, will be the biggest factor in the future of COTA. Of course, at any point F1 money could become the gorilla in the room.  

It's always fun to speculate, though, right?

 

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