Circuit of the Americas Development Updates

[turn1]

Originally Posted by Novacek

" Texas taxpayers are expected to provide up to $250 million"

Absolutely false. The money comes from the increment in taxes that _would not exist_ without the event. No money comes from the taxpayers.

Well....it's Texas taxpayer money, no matter who paid it. If it weren't being spent to subsidize the GP, it would be available to spend on other things, or not spend at all (I wish!).

That said, I personally have no problem with the concept of the fund. I just want it to be run in a legitimate manner and administered correctly.

[turn1]

Originally Posted by hookem

It comes from the state funds, which are generated through sales taxes. Property taxes are local (city, county, ISD, etc) so are not involved here. Although COTA has sought every break they can from their property taxes, like most businesses. But that's not related to the METF or the $25M per year that comes from it.

BTW, I think this is about the governor's race. It's setting the stage for upcoming attacks on Greg Abbott and republicans for their crony capitalism, but first they have to get it into the public eye. The story exists to elicit responses from the politicians, hopefully snowballing in the run-up to the USGP. Then the attack ads will run.

I doubt it will work, but if it does, more power to them.

I don't think it's just politicians using this as a battleground. Sure, politicians gonna politick, but there seems to be a lot more to this than just politicking...like the affidavit, and Smith's comments. Seems like he didn't know what he was stepping in and just kept sticking his foot right back in it. Patterson brought this up some time back & asked the AG to rule on it. The AG came back and basically said he couldn't make a ruling. He didn't say they had done it right.

Still kinda blown away by all of this.

[turn1]

Originally Posted by jngreenlee

Agree that this smells mostly political.

In your comment above, it sounds like you're saying that the ~$50MM/yr comes from a general sales tax receipts fund, where it may in fact be co-mingled with all other sales tax.

In other words, it's not coming from an account of receipts solely collected at COTA?

So the vendors at COTA, including COTA, still collect and mail in sales tax, but then it sits in a special accounting code and they later do an annual draw against it?

The money comes from common funds, not anything specifically collected by COTA. The amount of funding is determined prior to the event by a formula, based on COTA's own economic impact projections which are in turn based on COTA's own attendance projections. After the event, the Comptroller is supposed to do a comprehensive analysis to determine if the amounts were justified. She has justified all the amounts funded to COTA so far despite them not having lived up to projections even one time. I don't understand why they don't just wait until the event has happened, then analyse the true impact based on actual observed attendance, and come up with an amount that way.

[electricron]

Originally Posted by turn1

She has justified all the amounts funded to COTA so far despite them not having lived up to projections even one time. I don't understand why they don't just wait until the event has happened, then analyse the true impact based on actual observed attendance, and come up with an amount that way.

Isn't the reason obvious? They need $25 million to pay the F1 sanctioning fees.

Every track in the world that can raise the sanctioning fees get a F1 race. There isn't any competition to host a race once the sanctioning fees are paid. At least not the same level of competition Dallas and Houston must fight to host a SuperBowl, a Final 4, or other special event.

Both Fort Worth and Houston have hosted Indy Car races the last few years without the need of state funding. Of course, they don't need to pay Indy Car $25 million for the privilege of hosting a race - all they need to do is find a few million dollars for a race purse.

[turn1]

Originally Posted by electricron

Isn't the reason obvious? They need $25 million to pay the F1 sanctioning fees.

Every track in the world that can raise the sanctioning fees get a F1 race. There isn't any competition to host a race once the sanctioning fees are paid. At least not the same level of competition Dallas and Houston must fight to host a SuperBowl, a Final 4, or other special event.

Both Fort Worth and Houston have hosted Indy Car races the last few years without the need of state funding. Of course, they don't need to pay Indy Car $25 million for the privilege of hosting a race - all they need to do is find a few million dollars for a race purse.

Yeah good point & I do get that. IIRC she ensured they'd get that amount long before they ever did any projections. I was speaking more in a general sense of why it hasn't been done differently all along. The fund has been around for years before F1 came.

[electricron]

How much consumer spending causes $25 million in state sales tax revenues?
The state only collects 6.25%, the city only collects 1% because CapMetro collects the last 1%. Neither the city nor CapMetro share goes towards funding this state program.

Therefore 25,000,000 / 0.0625 = 400,000,000
Assuming 100,000 fans are attracted to Austin for the week, each fan would have to spend $4,000 each. That means a large family of 4 would have to spend $16,000, a typical family of 3 spending $12,000, or a couple of friends spending $8,000 over the long race weekend.

Shucks, the city might collect more tax revenues than the state when you consider its hotel/motel taxes, taxi taxes, rent-a-car taxes, it's own sales tax share, and property taxes in which the city and county are in dispute with the track owners. That would be more likely if every visitor slept and spent all their money in Austin, but apparently many sleep and spend money, if not all, outside Austin's city limits.

[turn1]

Originally Posted by electricron

How much consumer spending causes $25 million in state sales tax revenues?
The state only collects 6.25%, the city only collects 1% because CapMetro collects the last 1%. Neither the city nor CapMetro share goes towards funding this state program.

Therefore 25,000,000 / 0.0625 = 400,000,000
Assuming 100,000 fans are attracted to Austin for the week, each fan would have to spend $4,000 each. That means a large family of 4 would have to spend $16,000, a typical family of 3 spending $12,000, or a couple of friends spending $8,000 over the long race weekend.

Shucks, the city might collect more tax revenues than the state when you consider its hotel/motel taxes, taxi taxes, rent-a-car taxes, it's own sales tax share, and property taxes in which the city and county are in dispute with the track owners. That would be more likely if every visitor slept and spent all their money in Austin, but apparently many sleep and spend money, if not all, outside Austin's city limits.

I think the amount COTA claimed in that original EIP was closer to $500M. To put that into perspective, the NJ race was shooting for about $100M, and Australia's EIP, done by Ernst & Young, put their impact at between $100-150M AUS iirc. Singapore, and others were in similar ballparks. Not sure how we're able to generate so much more than these other established races.

BTW, per the METF parameters, what matters is money brought into the state, not into Austin. But still, over $4000 per person...average? No way in hell.

[Novacek]

Originally Posted by turn1

Well....it's Texas taxpayer money, no matter who paid it. If it weren't being spent to subsidize the GP, it would be available to spend on other things, or not spend at all (I wish!).

That's the whole point, that's absolutely false.

If it weren't being spent to "subsidize" the GP, it _wouldn't exist_.

It's not like if Texas wasn't doing this, there'd be an extra $25M to spend (or not) in the budget each year. There'd be the same amount as there is now (or possibly less). The whole point of the METF (if it's done right) is that it's tax revenues that wouldn't exist at all without the event.

[Novacek]

Originally Posted by electricron

How much consumer spending causes $25 million in state sales tax revenues?
The state only collects 6.25%, the city only collects 1% because CapMetro collects the last 1%. Neither the city nor CapMetro share goes towards funding this state program.

Therefore 25,000,000 / 0.0625 = 400,000,000
Assuming 100,000 fans are attracted to Austin for the week, each fan would have to spend $4,000 each. That means a large family of 4 would have to spend $16,000, a typical family of 3 spending $12,000, or a couple of friends spending $8,000 over the long race weekend.

Plus alcohol taxes.
Plus state hotel occupancy taxes (adds up fast if you're dropping $300/night, or thousands /night at the Driskill).
Plus state car rental taxes.
tobacco taxes.
.
.

It's not just the 6.25% sales tax.

Plus I'm assuming whatever taxes the track itself pays for supplies and services.

Oh, and also everything spent by the non-attendee support staff.

[turn1]

The Express-News has done a 3rd story now, following up on KXAN's piece with Epstein:

http://www.expressnews.com/news/local/article/Epstein-says-F1-made-a-verbal-application-5760115.php

Epstein says F1 made a 'verbal application'

...

Bobby Epstein, chairman of the Circuit of the Americas racetrack, has told a TV station that a “verbal application” was made to Formula One to bring a yearly race to the Austin facility.

The comment Monday came the day after a San Antonio Express-News investigation raised questions about the application, which is required by law to receive state funding.


A member of the board set up to file the application swore in an affidavit that board never did so, and no written application is on file with the state or the board. Failure to make an application would make the Formula One races ineligible for state subsidies — which are expected to cost $250 million over 10 years — according to a 2012 ruling by Attorney General Greg Abbott.

Failure to file such a document would make the Formula One races ineligible for state subsidies — which were approved to the tune of $250 million over 10 years — according to a 2012 ruling by Attorney General Greg Abbott.

...

“Dominos doesn't just send a pizza to your home unless you call them to say you're interested in having one delivered — neither does a Grand Prix just show up,” Epstein told KXAN-TV.

That answer didn't satisfy two government watchdog groups, Public Citizen and Texans for Public Justice.

“An applicant for food stamps or welfare has to submit a signed application and provide all kinds of proof for eligibility,” said Tom “Smitty” Smith, director of Public Citizen's Texas office. “Yet, a slickster can walk in and say 'Oh, we did an oral application, we should get a quarter-billion dollars?' It doesn't pass the laugh test.”

Andrew Wheat, Texans for Public Justice's research director, was just as harsh.

“You wonder if they're making this up as they go along,” he said. “It doesn't sound like due diligence really.”

Epstein did not respond to questions from the Express-News about the verbal application.

...

He continued, “I do know that” the “statute doesn't distinguish between written and verbal” when it comes to applying to Formula One.

...

In its 2012 request for the first $25 million installment of the state money, CELOC included a letter from Formula One Management Ltd. CEO Bernie Ecclestone, stating the organizing committee had submitted the required application to Formula One, which the company had approved.

But former CELOC board member Stephanie Richmond said in a sworn affidavit that CELOC never applied to Formula One.

She was one of two CELOC board members who left the committee after it made its request in 2012 for the first $25 million installment of funding from the comptroller's office, which releases the money under the Major Events Trust Fund.

The second member, Anne Smalling, wrote in her resignation letter that she was concerned about claims the group was making in its request for state funding.

Smalling specifically said Ecclestone's letter was one of the reasons for her departure.

Additionally, CELOC board agendas and minutes, obtained under the state's open records act, show there was never a vote to submit an application to Formula One or even discussion about it.

...

[turn1]

Originally Posted by Novacek

That's the whole point, that's absolutely false.

If it weren't being spent to "subsidize" the GP, it _wouldn't exist_.

It's not like if Texas wasn't doing this, there'd be an extra $25M to spend (or not) in the budget each year. There'd be the same amount as there is now (or possibly less). The whole point of the METF (if it's done right) is that it's tax revenues that wouldn't exist at all without the event.

I'm not sure what you're on about here. It's taxpayer money that could be spent for anything but is being used for a large subsidy...which I have no problem with so long as everything is done correctly and above board.

It doesn't matter in the least who paid the taxes or whether or not the money would be here if not for the GP. The fact is the money is here, and now it's taxpayer money (ie, money belonging to the taxpayers of the state of Texas). It is not COTA's money until the State disburses it to them in the form of a subsidy.

If TMS holds a race (or anyone else holds any event) but does not ask for a subsidy, are all of those extra taxes (collected from out-of-state visitors) not taxpayer money? Of course they are. The only difference is that TMS isn't getting any subsidy from it.

[turn1]

The Express-News has done a 3rd story now, following up on KXAN's piece with Epstein:

http://www.expressnews.com/news/local/article/Epstein-says-F1-made-a-verbal-application-5760115.php

Epstein says F1 made a 'verbal application'

By Nolan Hicks

September 16, 2014 | Updated: September 16, 2014 11:27pm

SAN ANTONIO — Bobby Epstein, chairman of the Circuit of the Americas racetrack, has told a TV station that a “verbal application” was made to Formula One to bring a yearly race to the Austin facility.

The comment Monday came the day after a San Antonio Express-News investigation raised questions about the application, which is required by law to receive state funding.


A member of the board set up to file the application swore in an affidavit that board never did so, and no written application is on file with the state or the board. Failure to make an application would make the Formula One races ineligible for state subsidies — which are expected to cost $250 million over 10 years — according to a 2012 ruling by Attorney General Greg Abbott.

Failure to file such a document would make the Formula One races ineligible for state subsidies — which were approved to the tune of $250 million over 10 years — according to a 2012 ruling by Attorney General Greg Abbott.

The state has provided $50 million through the Major Events Trust Fund to the organizers for the first two races. The third Formula 1 race is in November.

“Dominos doesn't just send a pizza to your home unless you call them to say you're interested in having one delivered — neither does a Grand Prix just show up,” Epstein told KXAN-TV.

That answer didn't satisfy two government watchdog groups, Public Citizen and Texans for Public Justice.

“An applicant for food stamps or welfare has to submit a signed application and provide all kinds of proof for eligibility,” said Tom “Smitty” Smith, director of Public Citizen's Texas office. “Yet, a slickster can walk in and say 'Oh, we did an oral application, we should get a quarter-billion dollars?' It doesn't pass the laugh test.”

Andrew Wheat, Texans for Public Justice's research director, was just as harsh.

“You wonder if they're making this up as they go along,” he said. “It doesn't sound like due diligence really.”

Epstein did not respond to questions from the Express-News about the verbal application.

He did comment on the newspaper's investigation, writing: “I didn't read your story but have certainly heard it isn't something I want to read.”

He continued, “I do know that” the “statute doesn't distinguish between written and verbal” when it comes to applying to Formula One.

Under state law, the application to Formula One only could come from one of three places: the city of Austin, Travis County, or a local organizing committee selected by the local government — in this case, the Circuit Events Local Organizing Committee, Abbott ruled 2012.

Epstein's Circuit of the Americas, where the race is held, would not qualify under the statute as an entity qualified to make the application to Formula One.

In its 2012 request for the first $25 million installment of the state money, CELOC included a letter from Formula One Management Ltd. CEO Bernie Ecclestone, stating the organizing committee had submitted the required application to Formula One, which the company had approved.

But former CELOC board member Stephanie Richmond said in a sworn affidavit that CELOC never applied to Formula One.

She was one of two CELOC board members who left the committee after it made its request in 2012 for the first $25 million installment of funding from the comptroller's office, which releases the money under the Major Events Trust Fund.

The second member, Anne Smalling, wrote in her resignation letter that she was concerned about claims the group was making in its request for state funding.

Smalling specifically said Ecclestone's letter was one of the reasons for her departure.

Additionally, CELOC board agendas and minutes, obtained under the state's open records act, show there was never a vote to submit an application to Formula One or even discussion about it.

[email protected]

Twitter: @ndhapple.

[_Matt]

So if, for whatever reason, the economic impact is less, and less than $25MM is collected in tax revenue, does the track still get the full $25MM?

[Novacek]

Originally Posted by turn1

I'm not sure what you're on about here. It's taxpayer money that could be spent for anything but is being used for a large subsidy...which I have no problem with so long as everything is done correctly and above board.

How could it be spent for anything if it wouldn't exist a priori without the agreement to use it for F1?

[Novacek]

Originally Posted by _Matt

So if, for whatever reason, the economic impact is less, and less than $25MM is collected in tax revenue, does the track still get the full $25MM?

No (again, _if_ the state audit is done correctly).

[_Matt]

Originally Posted by Novacek

No (again, _if_ the state audit is done correctly).

Alright. Thanks for all of the info--you seem to be pretty knowledgeable. Is your background in this area casual or are you involved professionally?

[Novacek]

Originally Posted by turn1

The Express-News has done a 3rd story now, following up on KXAN's piece with Epstein:

http://www.expressnews.com/news/local/article/Epstein-says-F1-made-a-verbal-application-5760115.php

Epstein says F1 made a 'verbal application'

>>“An applicant for food stamps or welfare has to submit a signed application and provide all kinds of proof for eligibility,” said Tom “Smitty” Smith, director of Public Citizen's Texas office. “Yet, a slickster can walk in and say 'Oh, we did an oral application, we should get a quarter-billion dollars?' It doesn't pass the laugh test.”

Smith doesn't get it. It's not the application to the state, it's the application to _Ecclestone_, and whatever requirements _he_ puts on it. He could require the application to be written in Farsi, he could require it to be made in sign language, he could require it to be made by telepathy. It doesn't matter, he's the only arbiter of if and when an application is made.

[Novacek]

Originally Posted by _Matt

Alright. Thanks for all of the info--you seem to be pretty knowledgeable. Is your background in this area casual or are you involved professionally?

Just casual, and the multitude of articles written about it (many posted here over the years). This is basically a settled conversation from 3 years ago, seems like just some trying to make political hay out of it due to the election year.

[turn1]

Originally Posted by Novacek

>>“An applicant for food stamps or welfare has to submit a signed application and provide all kinds of proof for eligibility,” said Tom “Smitty” Smith, director of Public Citizen's Texas office. “Yet, a slickster can walk in and say 'Oh, we did an oral application, we should get a quarter-billion dollars?' It doesn't pass the laugh test.”

Smith doesn't get it. It's not the application to the state, it's the application to _Ecclestone_, and whatever requirements _he_ puts on it. He could require the application to be written in Farsi, he could require it to be made in sign language, he could require it to be made by telepathy. It doesn't matter, he's the only arbiter of if and when an application is made.

In Smith's quote, it looks to me like 'Oh, we did an oral application' refers to COTA saying they made a verbal app to FOM in the absence of documentation of a written one in their initial METF app to the Comptroller.

[turn1]

Originally Posted by _Matt

So if, for whatever reason, the economic impact is less, and less than $25MM is collected in tax revenue, does the track still get the full $25MM?

The impression we were under back when (at their direct request) we helped COTA rally grass-roots support to help them get the subsidy ... was that underperformance relative to projections would result in COTA having to return money to the state. We read and we were told that, upon the post-event analysis, underperformance would result in money being returned to the fund in some manner, and that was a large part of what made us comfortable in pitching this to others to gain support for the measure.

The amount of funding is determined prior to the event through the use of an algorithm and based on COTA's own economic impact projections which are in turn based on COTA's own attendance projections. Within 10 months after the event, the event must be reviewed/analysed to see if the actual numbers justify the amount of subsidy that has already been awarded . The time limit was previously 18 months, but within the last year or so iirc, it was reduced by the legislature to 10. The comptroller has ok'd all the amounts funded to COTA so far for various races, despite them not having lived up to projections even one time. I don't know about other events, but for the 2012 USGP, the attendance figure she quoted was sourced directly from COTA's PR spokesperson at the time (there have been so many), Julie Loignon. These subsidies have been awarded quickly after the events, but the analyses are slow to arrive for some reason. The analysis of the 2012 race was posted in September 2013, almost a year after the payment was made. The analysis of the 2013 race still isn't complete as far as I know, despite the new 10-month deadline.

No event has had to return money in the history of the fund, even events that have come under public scrutiny for underperformance or potentially unscrupulous behavior. If anyone knows of one that has, I'd like to hear about it.