It's Happy Hour Time! Let's Talk F1

A Friday afternoon conversation between Austin Post’s Sports Guy Eric Pickhartz and Politics Gal Jackie Stone about Formula 1, and our questions and thoughts about recent news items. Please feel free to join it in the comments below!

Jackie: The plans for the Formula 1 race track in Austin seem to be pretty well on track, with a name finalized and new investors taking interest in addition to commitments previously made by the city and state. Travis County has even talked about a tax increment financing system that would finance "infrastructure improvements" like enlarging roadways around the race track.

But yesterday, the Texas Senate Committee on Finance decided  to pull $25 million in funding away from Formula 1. That $25 million from the state, which comes from the Major Event Trust Fund, was part of an up to $250 million incentive package over 10 years to support Formula 1 if it came to Texas.

Money in the Major Events Trust Fund comes from sales tax receipts of major sporting events like NCAA championships or Formula 1 and goes to offset the costs of putting on such huge events, whether in Houston or Austin.

According to the Statesman's Capitol blog, Thursday’s decision neither adds nor saves any money in the budget. The Austin Business Journal quoted Sen. Steve Ogden, R-Bryan, calling it a "philosophical vote." It doesn't impact the bottom line, but these senators apparently felt like they couldn't support it because it just looks bad to be throwing $25 million in state money at a race track when people are worried about their jobs.

Also, since the funding was approved in the House version of the budget, it's one of those things that could easily get added back in. So is this all for show?

That's the round up of what is buzzing in news reports.

From a sports perspective, what's your immediate response, Eric?

Eric: My immediate response is to reach for the aspirin, because my head hurts from all this budget talk.

As a sports, guy, I can appreciate all the advantages a professional track could bring to the area, not least of which is some world-class racing. It seems like budgetary concerns should be taken care of after a year or two of operation at the Circuit of the Americas. The revenue generated would outweigh the costs, right?

Maybe not, when you consider what you mentioned, Jackie. Expenditures like this shouldn't be allowed before other problems are fixed. But yes, my guess is it may be all for show, since it remains in the House's budget plan even though the Senators squashed it.

One thing to remember is the "reach level," of F1, a term I just (brilliantly) coined. F1 has an international membership, fan base, and orientation, so this track stands to put Austin on the global map through a technological and competitive sport that's wildly popular (just maybe not locally). Much like the South by Southwest and Austin City Limits Festivals have done, F1 (and now MotoGP, recently added to the track's purposes) will attract throngs of Austin visitors who may not come to our town without an excuse like a major event.

Vance Facundo, a thirty-year Del Valle resident (less than 10 miles from Elroy) and manager of both the “Friends of Formula 1 Austin Texas” and “Friends of Circuit of the Americas” Facebook pages, can give us some insight from the pro-F1 perspective. I spoke with him through e-mail.

“This is truly sad news for Texans,” said Facundo of the pulled $25 million. “Especially (for) folks like myself who have been dislocated from the high tech market and (are) looking for new opportunities from projects like Formula 1. Bringing jobs to Central Texas, especially Southeast Travis County, is beneficial to the community as it promotes spending, growth and helps folks to learn new skills in a whole new industry.”

Facundo, who’d completely lap me in terms of overall Formula 1 knowledge, thinks committee members who voted against the funds need to see the forest for the trees.

“The benefits will build a positive economic impact for decades to come,” he said. “Anyone who votes against it hasn't done their homework.”

By the way, isn't Senator Dan Patrick, the culprit of the pulled $25 million, from Houston? What does he know about our local Austin situation? Sure, he's got the best interest of an entire state to worry about, but wouldn't opinion-gathering and option-weighing be appropriate?

Jackie: Well, Patrick is from Houston, and he is getting the credit over at the Austin Business Journal for pulling the money, but it was a 4-10 vote on the finance committee, so he certainly wasn’t alone.

And these guys have pretty big staffs of interns and actual paid employees up at the Capitol who research issues all day and give the nitty gritty to the senators.

But, that's a side note. Your question about revenue outweighing the cost, that’s the general idea behind the Major Events Trust Fund in the comptroller’s office. The money in the trust fund comes from tax money generated by a sporting event over 12 months that then goes to pay the costs of hosting the event.

If an annual event is expected to raise at least $15 million a year in sales and local taxes, then it is eligible to get funding from the trust fund to help bring it to Texas. Again, with the idea that the sporting event – in this case Formula 1 – will replace the money that comes out of the fund.

I talked with R.J. DeSilva, a spokesman over at the Texas Comptroller’s Office, who summed it up simply as a fund to reimburse the costs of putting on the event. So the money doesn’t go back to the pocketbooks of sporting event organizers per se, but instead goes to the communities around the event who incur costs related to the event.

But there are a lot of people who still object and say it’s all a big scam and eventually lines organizers’ pockets, because it’s a big circle of money going back and forth and around and up and over. Oy.

Alright, so that’s how it all works.

But in the case of Formula 1, there’s a pretty big caveat, which is summed up in this Statesman article from last June. During the last legislative session in ‘09, the state dropped the first $25 million into the trust fund from the general fund – not from the event taxes that normally go to into the trust fund. So even though it was always our tax money funding this, that first $25 million didn’t come from the taxpayers who attend these types of sporting events.

Nothing that can be done about it now, since that money is already in the fund. Unless you’re on the Senate finance committee and want to make a statement by pulling it back … but it’s still there in the fund.

How’s your headache doing now?

Eric: Worse, thank you.

Before anything else, let me point out that money from that same incentive fund was used to bring the NCAA Final Four Basketball Championships to Patrick’s Houston hood, as pointed out in that Austin Business Journal piece. I’m just speculating, but the former sportscaster could have something against F1 if he’s willing to spend on a particular sporting event but not another.

Jackie: Ah, but the beautiful thing about politics and spin is you can’t change money that’s already been spent. You can only say “this time, we’ll get it right.”

Eric: That is one thing I can say I know about politics: it's all about the spin.

To get a good idea of the hype built up by this race track, check out the comprehensive press conference coverage at theaustingrandprix.com.

In my mind, Formula 1 is something that is cutting-edge, alternative, and even a little exotic, all things that Austin seems to embrace quite well. Aren’t those some major qualities that make this city great? Also, strong educational connections have been made through partnerships with Texas schools, noted in this press release. Would that be enough to satisfy those worried about the frivolous cost of race cars? I don’t know, but we might find out sooner than later.

Jackie: Forgive me for asking - I know nothing about racing - but is Formula 1 cutting edge? Like soccer, Formula 1’s fanbase isn’t the US. It’s not like Austinites were clamoring for it and saying “Give me Formula 1 or give me death!”

But I guess the draw is less about local fans, and more about the event itself, like how hosting the World Cup would still be awesome for Austin, even though we don’t have the built in fanbase that countries in Europe might have.

The questions it raises for me are, is this a lot of money to spend on a racetrack that’s only going to be used for a big Formula 1 event once a year? Or, is this something that should be expected for any major sporting event that will bring the focus to a city?

Eric: Whatever you do, don’t ever approach speaking ill of soccer around me again.

Facundo said it best: “Austin is the home of innovation and technology. This is why it will work and be successful. It's not just about cars, it's about building a destination for people, business, technology and entertainment. It''s about creating jobs and investing in Texas and Texans.”

The annual Formula 1 event in Austin would be “a Superbowl every year,” according to Red McCombs, a man who knows a thing or two about spending money on sports.

And, now my head has exploded.

So...we want to know what you think about this. Tell us in the comments below.