Statesman: There was no contract between State and COTA

[AustinF1]

There was no actual contract according to COTA's spokesperson, quoted in this Austin American Statesman Editorial Board piece that came out yesterday. They make some good points. Interesting since the Statesman does business with COTA.

http://www.mystatesman.com/news/news/opinion/circuit-of-the-americas-with-no-contract-f1-is-a-r/npR66/

No contract steers Austin’s F1 off track

Updated: 6:35 p.m. Friday, Nov. 20, 2015 | Posted: 12:00 p.m. Saturday, Nov. 21, 2015

By Editorial Board



It stands to reason that there would be a formal contract governing the $250 million deal between the state’s Major Events Reimbursement Program and the Circuit of the Americas.

After all, written contracts are the standard way of doing business between parties, be they individuals, businesses or governments. Formal contracts between the city of Austin and companies such as Apple and Samsung are used in similar deals that rely on public subsidies. The documents, which are legally enforceable in court, typically spell out the obligations of each of the parties and how negative situations will be handled if they occur.

Formal contracts likely are more important in circumstances that involve multiyear deals between the private and public sectors — such as the one in question with COTA, which stages Formula One in Austin. Such contracts serve to bind city councils, legislatures or governors to the terms set by their predecessors. Without such legal binders, there are no guarantees an elected official or a council will abide by terms set by a previous one.

So it came as a surprise when Gov. Greg Abbott’s office and Bobby Epstein, chairman of the Circuit of the Americas, in response to our question to see a written contract, told us there was no formal contract. There should be. It would have avoided the controversy and confusion playing out in this high-stakes saga between billionaires and government officials that is endangering the future of Formula One in Austin.

At a meeting Thursday with the American-Statesman’s editorial board, Epstein attributed the absence of a formal contract to an oversight due to “naiveté.” In hindsight, however, he conceded that it would have been better had the parties signed a written agreement codifying terms in letters dating back to 2010, in which then-Gov. Rick Perry and then-Comptroller Susan Combs appeared to promise an annual state contribution of $25 million for 10 years, with the understanding that if the event didn’t generate enough taxes, COTA would make up the difference. Without that or an amount close to that, it is doubtful Austin’s F1 race will continue beyond 2016, Epstein said.

On Friday, Epstein’s spokesperson sent a email response regarding a contract: “There could never have been a 10-year contract with (the Major Events Reimbursement Program), as the application to create the fund, which the major event functionally does, must be submitted each year.”

There is little doubt that F1 has benefited the Central Texas economy — to the tune of $507 million for the 2013 F1 race, according to COTA figures. Nonetheless, it’s up to COTA and F1 officials to craft a business model that can withstand shifts in the economy, political world and their own industry. At this point, there are serious concerns about whether COTA’s business model is sustainable.

Abbott’s decision reflects that view. And since there is no contract to bind Abbott to prior terms set by others, he is well within his authority to adjust those terms in light of new information regarding the event’s economic impact on Central Texas. That is due diligence in managing public dollars. COTA should look to its private investors to make up the difference or to Bernie Ecclestone, Formula One’s chief executive.

The dispute between COTA and Abbott’s office centers on the amount of public dollars the state’s Major Events Trust Fund is obligated to contribute to the F1 event and how that amount is calculated.

The Statesman’s Eric Dexheimer reported this month that the state’s events fund contributed about $25 million in 2012, 2013 and 2014. During those years, Perry was governor and Combs oversaw the events trust fund. The pair have since left office.

Epstein initially said the state’s contribution should be $25 million for 2015 — the same as in prior years — and the amount pledged by Perry and Combs. He later clarified it might be lower than that, given the 5 percent drop in F1 attendance this year.

The attendance drop was not the primary reason Abbott’s office reduced the state’s contribution to $19.6 million. Instead, Abbott’s office used different formulas than the former comptroller’s office used to calculate the race’s economic impact. Combs’ office verified figures provided by COTA, using methods more generous than Abbott’s office, which now oversees the fund.

The purpose of the fund is to attract big events to Texas by offering government subsidies based on what their presence contributes to the regional economy. In the case of F1, the state’s payment is based on how much economic activity the race generates for Texas. Obviously, if the economic activity declines, the payments should, too.

That presents a problem for COTA, which took a financial hit when thunderstorms and other weather conditions eliminated nearly two days of the race weekend in October. Epstein said were it not for those factors and the state’s reduced contribution, COTA would have been in the black this year.

But trends, such as falling attendance, reduced state contributions and rising costs, portend future deficits for COTA. The for-profit organization built the $300 million track east of Austin Bergstrom International Airport to host F1 races, but also stages other sports events and concerts on the site.

Epstein said he can’t expect private investors to continue putting money into a venture that is losing money. Quite so. But if that deal is too risky for private investors, why would it be considered a sound investment for the public sector?

 

 

[HiTech]

DIFFERENT FORMULA .you think that might be on purpose .now they want our tax dollars to pay for the loss . I bet our local tracks would love a tiny bit help with their taxes for losses the have had with weather ...I do not feel sorry for this bunch of rich backwoods dipsticks who own this track .

[rebelracewriter]

So the state cut approx 6 million from the original 25 million......The attendance was down 6,000 as I recall.....So that's what.....carry the naught, carry the naught, carry the naught.....1,000/person?

 

Am I missing something else here?