F1: USGP threatened by cut in Texas state funding

The drivers line up on the grid for the start of the United States Formula One Grand Prix at Circuit of The Americas on Oct. 25, 2015 in Austin, Texas.

Mark Thompson/Getty Images

The future of the USGP has been thrown into doubt by the news that the Texas state government has dramatically reduced the subsidy it pays to the Circuit of The Americas, and which in effect goes some way to covering F1’s sanction fee.

Originally the state had made a $250M commitment over 10 years, and the race received $25M per year in 2012, 2013, and 2014, but this has been cut to $19.5M for this year. The circuit was made aware of this number before the race weekend, although the news has only just emerged.

It comes on top of the losses caused by the bad weather at this year’s event, which led to reduced sales of concessions and also had an impact on the event’s viability.

“To use a technical term, I think we’re screwed,” circuit chairman Bobby Epstein told the American-Statesman. “It hit us cold. No one could foresee this coming. But the big question now is, ‘Is the race coming back?’”

Meanwhile Bernie Ecclestone told the paper: “If it’s changed, it’s going to be difficult to continue the race in Austin.”

The whole COTA project was built around the idea that the race qualified for a subsidy that is paid to major events to reflect the income that they generate for the cities that host them. This is in effect based on how much tax revenue out-of-state visitors generate during their stay.

The Texas Major Events Trust Fund was approved by previous state governor Rick Perry and administered by the office of Comptroller Susan Combs, who worked closely with event founder Tavo Hellmund, and Ecclestone when CoTA was first planned.

However, on Sept. 1 responsibility was transferred to the office of current Governor Greg Abbott, who took over from Perry in January this year.

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Following an audit by Texas State Auditor John Keel, Abbott’s staff have used a different formula and concluded that the event is worth around 20 percent less to the state than previous figures suggested.

In his report Keel noted: “Although the Comptroller’s Office prepares post-event studies after a major event, those studies cannot accurately determine whether the estimated incremental tax receipt increases were actually collected.

“Specifically, those studies state that determining the measurable change in tax receipts due to a major event is difficult due to the size and population of the state. In addition, taxes are remitted to the State based on receipts from 30-day to 90-day periods, which makes it difficult to isolate the economic effect of a particular major event.”

He also made it clear that in the past some tax types had incorrectly been included in the calculations: “The Comptroller’s Office inappropriately implemented that methodology by including certain information in its calculations that is not permissible. Specifically, when the Comptroller’s Office used economic modeling software to estimate the incremental tax receipt increases associated with major events, its estimates included tax impacts for tax types that statute does not permit to be considered.

“Based on output from a demonstration that the Comptroller’s Office’s staff performed using the estimated direct spending amounts for an actual major event, auditors determined that 22 percent of the total funding that would have been approved for that major event was caused by the inclusion of tax types that were not permissible.”

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