Comptroller Certified Formula 1 Payment Schedule Without City Application

When the announcement of incentives for Formula 1 was made, opposition rose from across the political spectrum. The public was told not to worry, that no money was committed to Formula 1. “We have an agreement in principle, but we have no formal agreement”, said Robert Woods of the Comptroller’s office. Senator Kirk Watson, author of the bill that allowed Formula 1 to receive incentives, posted his clarification of how the Major Events Trust Fund works:

“The Comptroller’s office cannot project the amount of those incentives without a request from a local government or authorized non-profit, and that request cannot be made more than one year before the first event.

In other words, even if all parties intend to enter into a long-term contract, the terms of that contract – and, specifically, the amount of incentives that the event is eligible for – cannot be set more than a year before the first time the event is held.”

When asked about a $25 million dollar a year estimate, the Comptroller’s office said it was a “preliminary number." Upon viewing a letter from the Comptroller’s office to Formula 1 certifying payment by July 31, 2011, the amount of incentives appears to have been set. The letter states “With the understanding that the first Formula 1 United States Grand Prix race will be held in Texas in 2012, full funding of the entire sanction for 2012 will be paid to Formula One World Championship Limited no later than July 31, 2011.” The letter goes on to say “we will be sending $25 million dollars to FOWC by the end of July 31 of each year preceding the actual race event.”

With no date set for an actual event, the question is why is there a “Texas Direct Expenditure Estimate of a Formula 1 Race” and a letter certifying payment of the estimate? The estimate is $29 million in taxes. The law requires $6.25 from the State for every $1 the City contributes. That breaks down to $4 million from the city, and $25 million from Texas. It seems that the preliminary estimate has become the official estimate.

The entire process of granting incentives is based on “the date of the event,” according to SB 1515. Texas will not know the date of the race until sometime later this year. The City of Austin has not made a request to the Comptroller’s office, and there is no date for the event, yet we have an estimate and pay dates certified by the Comptroller.

Further complicating the issue is the $25 million appropriation sitting in wait. In 2009, $25 million was set aside for the Major Events Trust Fund, but was not tied to any specific event. This money is literally sitting there while legislators are scraping up every dime to balance the budget. The Senate Finance Committee voted to pull the funding from the next budget, but Susan Combs will not “credit” it back to the budget. In committee it was acknowledged that this was the “money for Formula 1.”

“At a time when people are stressed about their schools, stressed about their jobs, stressed about health care and nursing homes, for us to check off $25 million for race cars, I think we make people say where are their priorities,” state Senator Dan Patrick said.  “That $25 million would pay for 500 teacher salaries. How can we explain to people we’re spending that money on race cars?”

The solution to this issue is a simple one.  The Comptroller’s office should credit the money back to general revenue, as it is not tied to any event. That move will not take the funding away from Formula 1. By law, Formula 1 doesn’t have any state funding yet. When a date is set for a race, the City of Austin can apply to the major events trust fund one year before the race.  Once approved, Formula 1 will be eligible to get the estimated tax revenue the event generates. The only difference will be the money will come after the event, and not by appropriation in the midst of a state budget crisis. 

Read more about F1 Austin in the Austin Post here:

 

 

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