F1 investors to pick up city’s $4 million annual tab for Grand Prix races

Formula 1 investors told Council members on Thursday they would pick up the $4 million in estimated city costs for each of the 10 years the Grand Prix race is projected to be in Austin. The promoters had already agreed to fund the first year of city matching funds in order to access the state’s offer of $25 million per year for major events. (See In Fact Daily, June 10, 2011)

 

“The world has now changed,” said Council Member Bill Spelman. “The offer on the table now is that the first year’s deal, where the Local Organizing Committee (LOC) puts up that first $4 million, would extend years 2 through 10. That whole Major Events Trust Fund deal would be between the Local Organizing Committee (LOC) and the (state) comptroller’s office. The city would be out of it.”

 

The deal comes in response to concerns voiced by several Council members—Sheryl Cole and Spelman in particular. Spelman said the city and race organizers will still working on the wording of such an agreement.

 

Last week, Council heard a pair of presentations by race organizers and city staff about a funding structure that could see the city paying $4 million in incremental taxes generated by the event for nine years.

 

“My concern, all along, has been that $4 million number was based on the LOC’s need for $25 million,” said Spelman. “Therefore, we couldn’t be sure, no matter how ironclad the economic study is, that the city taxpayers were actually going to reap $4 million in hotel occupancy, TABC (alcoholic beverage) tax and so on because of this event.”

 

“You are never going to be able to give anybody a guarantee on the basis of an economic study that is filled with assumptions,” said Spelman.

 

The merits of the yet-to-be-produced economic impact analysis were only one of a host of questions about the complicated financing deal. Council members directed the City Manager’s office to investigate 21 separate questions about the contract just last week.

 

Cole first raised the possibility of F1 investors providing the yearly seed money for the fund during last week’s Council meeting. She said Thursday she wants to make sure that having the race in southeast Travis County costs the city nothing. “It’s easy to say there’s no city money at issue, but is that financially true? Is that economically true?” she asked. “And does the public believe it? We simply have to get to that point.”

 

In addition, she said, it is important that the City of Austin have some representation on the Local Organizing Committee because the committee would be disbursing what would have originally been city funds. F1 attorney Richard Suttle has said that the City Council could appoint one of the committee members.

 

Prior to the latest offer, Spelman said he “thought that we needed to postpone action on the item.” He said he was concerned that, just one week prior to the time that City Council was scheduled to vote on it, there was no exact deal for the public, or council, to scrutinize the contract.

 

The new deal, which “takes the city out of that calculus entirely” has him less concerned. “If that deal that’s been presented to me actually plays out… yes, I can do this on the 23rd,” said Spelman.

 

The Council is currently scheduled to vote on a resolution sponsoring the race next Thursday.

 

Asked whether the Council might be able to postpone the vote, Mayor Lee Leffingwell said, “I’m trying to nail that down right now; as I understand right now there’s no flexibility on that date, either we do it right now or we…forget about it.”

 

The Mayor pointed out that he was not averse to having a special called meeting some days later if it proved necessary.