F1 Race Over, but Debate on Tax Subsidies Continues

Awards stand of the Formula One Grand Prix in Austin, left to right, Comptroller Susan Combs, Nick Craw of FIA, Governor Rick Perry and Lt. Governor David Dewhurst.
Awards stand of the Formula One Grand Prix in Austin, left to right, Comptroller Susan Combs, Nick Craw of FIA, Governor Rick Perry and Lt. Governor David Dewhurst.

The Formula One drivers have come and gone, and the helicopters that ferried well-heeled businessmen to Austin's new race track have fallen silent.

But the debate over providing as much as $250 million in tax subsidies to the race promoters is far from the finish line.

This past weekend's F1 race, the first held in the United States since 2007, drew more than 117,000 fans to the $400 million Circuit of the Americas track. And state officials have projected the event will pump more than $200 million into the Texas economy. 

But unlike Rangers Ballpark in Arlington or Cowboys Stadium in Arlington, the race track facility was built without major up-front incentives or financing from local or state taxpayers.

Texas Comptroller Susan Combs had pledged two years ago that the state would provide $250 million over 10 years to defray the costs of bringing F1 racing to Austin, but she did it before the city of Austin had either requested or signed off on the deal as required under Texas law. So the plan to provide tax incentives on the front end fell apart. 

Now that Austin has gotten behind F1, state officials expect the race will meet the requirements to collect a tax subsidy payment for the 2012 race of approximately $25 million from the Major Events Trust Fund — on the back end. 

The amount of the subsidy is determined by how much sales tax money experts project the event generates from out-of-town visitors. Combs, who was tapped by race prompters to hand out the second-place trophy at the inaugural race Sunday, oversees the trust fund and has the discretion to say whether an event meets the criteria to access the tax money in it.

But critics — Tea Party activists in particular — want to eliminate tax subsidies altogether for the private sector when the Legislature reconvenes in January. Activist Jo Ann Fleming, who chairs the Legislature's Tea Party Caucus advisory committee, said the government should not award tax dollars to private entities at a time when vital programs are being cut.

“The state should not be acting as an investment banker or venture capitalist. This is the same kind of stuff that Washington does that conservatives stomp their feet and shake their fists about,” she said. “It’s not the core function of government. We’ve got plenty of big-ticket items to pay for.”

State Rep. Charles Perry, R-Lubbock, who rode the Tea Party wave in 2010 and was re-elected in November, said he hopes the Legislature will phase out the tax subsidies next year.

“I have a really hard time putting $25 million into a Formula One event when we’re cutting education by $4 billion,” Perry said. “I’m not anti-economic development, but we provide a great environment for business.”

If the past is any guide, it will be a difficult battle. Though the Legislature enacted deep spending cuts in the 2011 session, lawmakers preserved Gov. Rick Perry’s Texas Enterprise Fund and Emerging Technology Fund, even as Tea Party conservatives criticized them as “corporate welfare.”

Perry, speaking to reporters at the race track Sunday, said those tools, along with the Major Events Trust Fund, have helped the state attract big events and economic development projects. 

“The fact is they do bring results,” Perry said. “We wouldn’t have gotten this track if we hadn’t earned the reputation of being a very pro-business, economic development-driven environment.”

“There’s always going to be naysayers,” Perry added. “I appreciate that and recognize it, God bless 'em.”

The governor, who awarded the top F1 trophy to race winner Lewis Hamilton on Sunday afternoon, noted that 500 million people around the globe were expected to watch the broadcast of the race, potentially a huge publicity boon for the region and the state. He said the calculations of the sales tax revenue generated from the event’s out-of-state visitors — the pool of money that will be available to the race promoters — would soon be made public.

“I will let the numbers do the talking,” Perry said.

Bobby Epstein, co-founder of the Circuit of the Americas track, said in an interview a few weeks before the race that the investors would “lose a lot of money” if the state doesn’t come through with the subsidy payments from the Major Events Trust Fund.

“We wouldn’t have gone forward without the state as a partner, because economically it doesn’t make sense for us,” Epstein said.

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