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Ask Rick Perry about failed Formula 1 racing investment in U.S.

perryRick091611_optBY EVAN WEINER

There is a question that "news presenters" who somehow get the plum assignment of moderating a GOP Presidential nomination debate should ask Governor Rick Perry of Texas. But given the absolute lack of imagination and scant information that the presenters and their researchers have or the lack of diligence in fact finding, it is unlikely that Governor Perry will be asked the following.

"Governor Perry, why are you, with your state having colossal financial problems (an estimated $27 billion hole), investing $250 million into a Formula-1 car racetrack in Austin, Texas in an effort to help Billy Joe "Red" McCombs re-introduce the car race to American audiences when F-1 racing is a proven failure in the U.S.?"

It is hard to believe that Brian Williams, Wolf Blitzer, Bret Baier or any other presenter would actually ask a narrow policy question in a national debate (These presenters take their jobs somewhat seriously. In 1992 ABC presenter Carole Simpson complained about the debate format in the Bush-Clinton-Perot gabfest which allowed normal citizens to ask questions troubled her as the electorate is filled with unqualified people. Ironically the electorate depends on Simpson and others to inform them. Simpson’s complaint did not reflect well on her and her colleagues’ professional acumen).

But there should be at least a mention of the quarter of a billion dollar subsidy and an inspection of the Texas-F1 contract as to how much money will Bernie Ecclestone and F1 keep from a television contract, how much of the ticket sales will go to Bernie Ecclestone and F1 and how much goes back to Texas as well as concession and how much rent Texas taxpayers can expect to see in the deal. Will there be a corporate sponsor slapping a name on the racetrack marquee and will investors/taxpayers get any of that money?

Will the Perry/Texas investment yield a dividend for Texas taxpayers or just put money in McCombs and F1's pocket?

Allegedly private money is going to pay the estimated $180 million required to build a permanent 120,000 seat F1 facility for Full Throttle Productions, McCombs company and Ecclestone, the commercial rights holder of F1. If the facility is being funded by private funds, why has Perry green lighted an annual $25 million payment to help out F1 and Full Throttle? Do the math; the state will spend a quarter of a billion dollars for 40 full time jobs. The race organizers contend the track will be a winner for Austin with the creation of 1,500 construction jobs, and 1,200 people will work the race on a per diem basis annually for maybe four or five days.

The race backers claim the track will be used 250 days a year. The key word in all of this is "claim".

The race people contend the race will have $300 million worth of economic impact but offer no proof behind the rationale of their claim. Sports organizers offer make large boasts of large economic impact, but New York State Comptroller Thomas DiNapoli said last year no one has ever really done a study to show the real economic impact of sports events in a community.

Austin taxpayers are kicking in $13 million for infrastructure and could be on the hook for an additional $4 million annually in subsidies for ten years. In this day and age, private money to build sports venues is rare and there are examples of private money sports arena failures in Minneapolis in 1994 and Columbus, Ohio in 2011.

Government support is an absolute necessity for sports in the United States. No project can be successful without cash handouts or tax incentives like PILOTS and TIFS. Will Ecclestone/McCombs pay property taxes to Austin? Is there a hidden taxbreak?

National Basketball Association and National Hockey League teams pay zero property taxes across the United States.

If Formula One is such a good investment, why is government dollars needed? Perry who is the hero of those who want sharp government cuts has created a government F1 racing program.

There seems to be something hypocritical about Perry’s stance that is at odds with his dogma. Perry’s recent political ideological book seems to be at odds with his political stances.

When completed, the Austin track will give F1 the circuit's first a permanent track in the United States in decades. Long Beach, California, Las Vegas, Detroit, Dallas and Phoenix have had street races which were fails. The F1 series inside the Indianapolis held eight races at the Brickyard.

F-1 racing has never been held in the New York area although there was a plan to hold a race in the early 1980s was never materialized. Now the mayors of Weehawken and West New York want to stage an F-1 race on the streets of those New Jersey municipalities in 2013. F-1 racing has been a financial disaster in the United States and the racing loop has not held an event in America since 2007. Formula One races were held at the Indianapolis Motor Speedway between 2000 and 2007.

F1 does well globally but the United States has been a challenge.

The Austin November 18, 2012 date seems odd in that the University Texas football season is still in swing and Austin is the home of the University of Texas. Football is king in Texas and McCombs is a huge financial supporter of University of Texas sports but he has apparently agreed that F-1 and football can co-exist for one week in November. The race will also have competition from the National Football League, specifically the Dallas Cowboys and the Houston Texans.

But Governor Perry has cushioned the blow of possible financial losses by making sure the state taxpayers are subsidizing the racing event if things don’t work out for McCombs.

McCombs has partnered with Tavo Hellmund to bring F-1 racing to Austin with Perry's blessing. Hellmund has a long history of being a race participant and racing promoter.

F-1 racing is different from NASCAR and Indy Car Racing according to the racing association's website.

"Formula One, also known as Formula 1 or F1, and currently officially referred to as the FIA Formula One World Championship, is the highest class of single-seater auto racing sanctioned by the Fédération Internationale de l'Automobile (FIA). The 'formula' in the name refers to a set of rules to which all participants' cars must comply.

"The F1 season consists of a series of races, known as Grand Prix, held on purpose-built circuits, and public roads. The results of each race are combined to determine two annual World Championships, one for the drivers and one for the constructors, with racing drivers, constructor teams, track officials, organizers and circuits required to be holders of valid Super Licenses, the highest class racing license issued by the FIA.

“Formula One cars race at high speeds, up to 360 km/hour (220 mph) with engines revving up to a formula imposed limit of 18,000 rpm. The cars are capable of pulling in excess of 5 g on some corners. The performance of the cars is highly dependent on electronics (although traction control and driving aids have been banned since 2008), aerodynamics, suspension, and tires. The formula has seen many evolutions and changes through the history of the sport."

Perry has signed off on the quarter of a billion dollar package to subsidize an annual race starting in 2012 and ending in 2021. McCombs, who was a co-founder of the now bankrupt Clear Channel Communications empire (and right wing talk radio shows with a liberal show sprinkled in for balance), led the charge to get the race and racetrack built in the Texas state capital. McCombs has a long sports history including a onetime stake in the NBA's San Antonio Spurs and the NFL's Minnesota Vikings.

McCombs failed to get a new stadium built in the Twin-Cities and sold the Vikings to New Jersey resident Zygi Wilf for a reported $600 million in 2005. Wilf is battling with Minnesota lawmakers in his effort to get a new football facility built in the Twin-Cities.

During the spring when Texas and Formula 1 deal was concluded, Perry trumpeted the deal and his words are still etched into the F-1 website.

Texas Governor Rick Perry conveyed his enthusiasm for the project, explaining Texas' relatively strong economy continues to draw both national and international attention and I commend Comptroller Combs for her work in bringing this exciting event to the Lone Star State.

The presenters should ask Perry about the commitment in what is a documented money losing venture, after all if F-1 racing in the U.S. was a good deal, there would be elected officials jumping through hoops to build a permanent facility for the event.

Comments (21)
21 Wednesday, 21 September 2011 10:53
f1 fan in Chicago
With the advancements in technology, F1 fans in the US have grown in the past few years. DVR, Tivo, and On-Demand make it easier for people in the US to watch the Euro-centric schedule of F1 without missing a beat. I believe that Austin got in at the right time and will thrive on this new deal to bring $ into Texas and fans into the sport.
20 Wednesday, 21 September 2011 08:48
F1 fan in TX
Wow what a small wiener err... I mean small mind you have Weiner. You and your cousin Anthony need to keep your Wieners off the internet!

As others have stated you need to do the fact checking!

Is it that fact that Texas got this facility and New Jersey didn't that's got you all in a bind? I guess having mob controlled casinos and Jersey Shores is what make New Jersey such an attractive proposition?

Besides F1 the track has confirmed V8 Supercars and MotoGP so this is not just and F1 track.
19 Tuesday, 20 September 2011 16:18
I just attended my third F1 race in Montreal and I am from Atlanta, GA (second home of Nascar). I was in Italy last year and in Indy in 2002. I will be in Austin for the first race and I am bringing lots of friends. The amount of people and money that they spend will benefit the economy for years to come. It is a great move to have the race in Austin to Nov (minus the heat). F1 can back it claims to helping local economies. do well. That is why Bernie wants his cut. I plan on doing two F1 races next year for my 50th birthday (one Austin, One Europe).
18 Tuesday, 20 September 2011 15:56
Jimmy B.
Most others have covered it well already, but there is much to be desired in the fact-checking and real meat of this article.

I am a Perry hater, through and through, unlike allegations from some other commenters. In fact, his "Coyote Kill" story when jogging with a pistol in Barton Creek is amongst the most vile lies I think I've ever heard constructed for media attention.

But he has nothing to do with these funds being distributed, as mentioned. And as another commenter mentioned, the main proponent of pulling funds for the event is a Republican posturing for more visibility to eventually run for President (Dan Patrick). Noteworthy is that he has not opposed other sporting event funds from the METF. Notably the 2011 Super Bowl.

The uninformed (of which Weiner is clearly one) will continue to fail to understand the magnitude of the audience Austin will be dealing with here. I thought it was simply oversight locally, but apparently it is misunderstood (or ignored) elsewhere, also.

The USGP is like having the Super Bowl in your city...EVERY YEAR. The television audience is SIX TIMES that size, and there will be numerous other high-profile events that will collectively account for at least another 200,000 spectators throughout the year. Probably more at first.

Arguing that the USGP won't have any measurable effect on the local economy is a head-in-the-sand approach. Speaking locally, it's tantamount to claiming that SXSW and Austin City Limits festival are boondoggles, bad for Austin, and should be shut down due to inconvenience to locals, snarled traffic, increased pollution (for air traffic and car), and infrastructure costs and strain. It just doesn't make sense to argue that.

Folks will always be afraid of what they don't understand. However, wise folks, once presented with a reality, then admit their misguidance or ignorance and then try and build something positive out of their experience.

Let's hope that Mr. Weiner, et al, will be big enough to do just that after the numbers roll in from the first Gran Prix.
17 Tuesday, 20 September 2011 11:18
I'm not sure where to begin with this...

F1 in Indy was decently successful until the 2005 tire debacle (which sadly was my 1st GP). At that point, the Indy crowds were still near the top of list attendance-wise (Italy is about the only country to consistenly see crowds above 200,000 on the calendar, most countries dream of over 100,000). This, in addition to Tony George not willing to be taken advantage of by Bernie, is why it left the Brickyard. As mentioned above, Watkins Glen had a 20 year run for the GP, and is still in use today. Long Beach had an 8 year run as the US GP West, and then transitioned into a popular race on the Indycar/Champcar circuit that is still in use today.

The US is not the only one who have lost a GP due mainly to negotiations with Bernie. France no longer has one after they weren't willing to pay in 2009. Canada lost their's for a year in 2009 after failed negotiations in 2008.

Keep in mind that you bring in tourists from everywhere. The F1 race at Indy brought in more the local economy than either the 500 or the Brickyard 400. Austin's local economy will get a boost from the F1 race, and more if additional events are added at the circuit.

Maybe a bit of research would be helpful. Wikipedia is better than this...
16 Tuesday, 20 September 2011 11:01
Evan, if you are actually paid by the New Jersey Newsroom you should return part of your paycheck and have them distribute it to some of the commenters on here. Your article needed serious revisiting before being published. I would encourage to spend more time watching certain media outlets on how to spin a subject matter to meet your agenda before trying this again.
15 Tuesday, 20 September 2011 07:18
nigel jones
Anyone ever check Ecclestone's record for corruption? There is a race to the top between him, the FIFA head and the IOC head. Good luck explaining away why Texans have to feather Bernie's pockets. All of you sound like ill-informed political operatives who are on Perry's payroll or RNC operatives or Red McCombs employees. But you do swear by Ecclestone's trustworthiness.
14 Tuesday, 20 September 2011 07:06
First off, you're flat out wrong in stating that Formula1 was not a success at Indianapolis. It was the most attended race of the year on the entire circuit. The only reason it was pulled in 2007 was because Tony George and Bernie Ecclestone could not agree. Ecclestone is a greedy stain for the sport, by the way.

Secondly, look at the big picture for the economy. The 4-5 day stimulus to the local economy should help justify the situation. This is a world event and puts Austin, Texas on the map. There will be a huge influx of Sourthern American fans into Austin, just as there was into Indy. 200k+ each year need a place to stay, places to eat, plane tickets, etc.

They could land MotoGP, Indy, etc. It will also be used for other events - small races, race clubs, drivers schools, concerts.

While the big ticket race weekend (F1) will be successful and endow well for the local economy and airport, it should be done in one of the best complexes in the country.
13 Tuesday, 20 September 2011 01:49
I don't know much about F1 racing but I'm glad to see comments from those who do.

As it happens, I was living in Dallas when F1 came to Fair Park. I must admit I found the scheduling curious (middle of the summer in 100+ degree weather?) but like I said, I don't know much about how F1 is organized or how events are scheduled. But I'm glad to see Texas make another run at hosting a F1 event and showing its seriousness by building a permanent facility.

As to the Perry bashing: coming from the Left Coast media it doesn't surprise me at all. I mean, why let some pesky facts get in the way of a good rant?
12 Monday, 19 September 2011 23:14
I'm certainly no fan of Rick Perry but trying to connect him to the F1 project, much less "blaming" him for it borders on "tin foil hat" territory. Wow!

For the record, the Long Beach F1 race was anything but a failure. They quit running Formula One cars because Ecclestone priced himself out of the game. The fiscally responsible city and race organizers tossed them out in favor of Champ Car in 1984 and the race is still going strong 27 years later.

Also, learn to edit. That twisted diatribe is so redudant it's painful. Wow! Yet again.

11 Monday, 19 September 2011 20:33
Pretty much every sentence in this article contains something that is wrong. That really is hard to do but you did it. Please stop writing. Anything.
10 Monday, 19 September 2011 18:29
Dale aka ATXDrummer
There is no 250 million dollar subsidy. It is 25 million for the first year paid for by the taxes that the event generates. That is what the METF is for. The track itself is paid for by private investors, not state money. 25 million is for the sanctioning fee that all F1 races are charged (the only exception being Monaco). For a full explaination of why governments pay sanctioning fees to have the PRIVILAGE to host a race (hint...Texas is going to make a ton of money), see this article...
9 Monday, 19 September 2011 18:27
the reason F1 failed at indy was that it was not financially feasible or sustainable...the owners paid the 25 mil per year, not the taxpayer...

they couldn't give tickets away, I went every year, and the tickets are the cheapest in the world...good seats for $100, in Montreal they are >$300...

even if they get 150,000 at $150/each that is F1 but this is a losing proposition (unless the government foots the bill)
8 Monday, 19 September 2011 18:19
if it is such a good investment why not 'invest' private money with a good return rate...say offer 4%, with the current low interest rates it should be easy to sell bonds at that rate...between mcombs and the backing from the richest man in mexico (world) 25 mil/year is chump change...

I'll be surpised if a race is held in 2012, and doubt it will last more than 3 seasons...

as far as cash into the local economy, those numbers are always overstaed by a factor of 2 or 3...

the only people making money off this are ecclestone and maybe the promotoers since they got the taxpayer to foot the bill
7 Monday, 19 September 2011 18:16
Tim Wood
"Will Ecclestone/McCombs pay property taxes to Austin? Is there a hidden taxbreak?" Yes, and no. The City of Austin is currently preparing to annex the track property. They see the value even if you do not. The investors will be paying property taxes to the City of Austin and the Del Valle Independent School District (a relatively disadvantaged district which will benefit tremendously from the track in the form of money and specialized educational programs formed by F1 and Cambridge University). There is a tax break, not uncommon for large projects, but it is by no means hidden. The property will receive a break on only a portion of the property due to the restoration of previous Blackland Prairie areas.

As to the supposed football conflict, the University of Texas Longhorn Football team will be out of town playing at Kansas State on the weekend of the event. McCombs is an avid supporter of the University of Texas. You may have heard of the McCombs Business School. Yes, that avid. Hellmund is a native Austinite and vocal support of University of Texas Athletics. He is very tuned in to the importance of Texas Football to the city and the state and is very well aware of the potential hotel and traffic issues, among others, that a conflict with a Longhorn home game would likely create.

Sure, there are always legitimate concerns when faced with a project of this scope, some not so legitimate. Practically every objection you have raised here is born of fallacy or intentionally propagated myth. A bit of research into the facts of the matter would truly be advised for your next piece.
6 Monday, 19 September 2011 18:11
Tim Wood
Regarding the supposed failure of F1 in the United States, you might note that each of the races you listed as failures was held on a temporary street course. That is not insignificant, as while the initial cost of putting on the race (versus holding one at a permanent facility) is lower, the long-term cost of setting up and tearing down fencing, bleachers, pit areas, etc make the event much, much harder to sustain.

You did not place a value judgment on the Indianapolis races, and I see why. From an attendance standpoint those races were all very successful. Despite multiple major problems at the venue, F1 raced there for 8 years, and usually enjoyed the largest crowds on the F1 season, including the biggest ever F1 crowd. The 2000 USGP crowd of 220,000+ people was by all accounts I can find the largest crowd in F1 history. The 2001 USGP was held about 3 weeks after 9/11. It was the first major sporting event post-9/11, so this affected attendance, as you can well imagine. It was still the largest crowd in F1 that year at 175,000. Indy had some things besides 9/11 working against it, too. The F1 crowd likes to party and spend money. In that regard, no offense to Indianapolis, but it isn't exactly Vegas...or Austin. There was also the half road-course, half oval (roval) Indy track, which allowed few passing opportunities and made for slow, tedious road racing compared to most tracks. But worst of all, in 2005 there was the Michelin Tire mess, when cars using those tires were kept from racing due to safety concerns when Tony George had portions of the track diamond-cut *after* the tire suppliers had tested and formulated tire compounds & construction for the previous, smoother surface. The big drop in attendance came after this incident. Yet the USGP in Indy never drew less than 100,000 and was on the upswing the last couple of years.

There have been 49 F1 GPs held in the U.S. in 53 years. There have been many years when the U.S. hosted 2 GPs, and the U.S. is the only country to have ever hosted 3 GPs in a single season ('82 & '83). In different cities, there have been a 20-year run (Watkins Glen, which I notice you left out for some reason), two 8-year runs, and a 5-year run.

After single years at Sebring and Riverside, F1 raced at Watkins Glen for 20 years before leaving when the technology of the cars outgrew the outdated safety features of the track. 20 years is a failure? What, then, would qualify as a success? The only city which hosted the USGP and drew poor crowds was Phoenix, despite all of these cities minus Watkins Glen and Austin, being saddled with very bad street circuits or Indy's terribly laid out course.

In 2010 and 2011, the Canadian GP at Montreal (not in the U.S., but only about 40 miles away) has easily drawn 300,000+ over 3 days with a capacity race-day crowd of over 140,000. Long Beach ('76-'83), Las Vegas ('81-'82), Dallas ('84), and Detroit ('82-'86) weren't USGPs. They were additional American F1 GPs in the years they ran. Long Beach enjoyed a great run with F1 and immediately sought to continue their GP after losing F1. They have done so brilliantly with the IndyCar Series, and have now held GPs for 37 consecutive years ('75-'11).

Dallas. Okay, they created a temporary street course in Fair Park in mid-July that disintegrated in the 100+ degree heat. It's still considered the bumpiest course ever raced in F1 history. The track had torn apart in practice and qualifying the days before so badly that emergency repairs had to be undertaken, leading to rumors of cancellation. Still, despite the rumors and despite the heat and poor racing conditions, 100,000 fans paid and showed up to see the race. At the end of the race, some drivers had to be helped from their cars due to heat exhaustion.

The mistakes made in Dallas won't be repeated here. This will be a permanent facility and the F1 race will be held no later than early June or in the Fall. F1 never returned to Texas, but it wasn't because Dallas didn't want them back and it wasn't because F1 didn't like Dallas. The drivers and FOM love Texas. It was more because there really was no way to get good racing there in that venue that was safe for the drivers while putting on a good show for the fans. We won't have the problems and continued expenses that come with hosting races on a temporary road course.

Las Vegas? Seriously? It was run in Ceasar's parking lot, and it was called the Las Vegas Grand Prix. It was one of 3 U.S. Grands Prix in 1981 & 1982. Detroit was a horribly bumpy street course that the local promoters actually routed over a railroad crossing. It still enjoyed good attendance.
5 Monday, 19 September 2011 18:04
Tim Wood
Speaking of the METF, you don't seem to have even a basic grasp of how the state funding of this project actually works. Here are some basic features of the Major Events Trust Fund, from whence the $25million originates:

The funding comes from the Texas Major Events Trust Fund, a fund created by legislation for exactly this type of project. The METF is a program administered by the Comptroller's Office that enriches the state’s tax coffers and pays for itself via tax moneys generated by the very events in question. It is designed to encourage the influx of money into the state from the outside to be spent and spent again, thus generating MORE money for state programs. NO other project will do this as well as Circuit of The Americas. People will not travel here from Europe, Mexico, or South America for just a day or two. They're going to make a trip of it and see Austin and Central Texas.

You wrote: "...why has Perry green lighted an annual $25 million payment to help out F1 and Full Throttle?" Governor Perry does not sign off on METF funding and doesn't need to. That's why he so strongly commended Texas Comptroller Susan Combs.

Access to the fund must be applied for annually. It has NOT been committed for 10 years. Ergo, $250M has not been committed. There is no "quarter of a billion dollar subsidy" and money from the METF is paid back to the METF from tax funds generated by the event. The $25M does not come from state general revenue. It comes only from sales taxes attributable to the event in question. If you don't attend the race, you aren't paying into the $25M. No play, no pay. In the first year, the amount of sales tax attributable to the event in question is estimated. In this case we're talking about the first United States Grand Prix. IF access to the fund is granted for any subsequent year, then an amount is granted to the host city based on actual sales taxes attributable to the previous year's event. The way the Major Events Fund is set up Texas isn't paying anything. It's agreeing to forgo the EXTRA tax from one flagship event in order to secure a revenue stream from the rest of the activity at the track.

Attempts to cut off funding for projects like these is short-sighted, ill-conceived, and is nothing more than political grandstanding to the detriment of the taxpayer in the long term. The argument that we’re taking from Nursing Homes, Emergency Services, or Teachers to pay for race cars doesn’t fly, at least if you want to take a factual (not emotional or agenda-serving) look at the matter. Mind you, I’m a Firefighter married to an Elementary Educator, so in this house we do look at these issues with a critical eye. Nobody is being denied a single thing if this project is funded by the METF. If Austin isn't reimbursed for this project, the money will simply sit in the METF until some other city comes along and applies successfully for it ( ).
4 Monday, 19 September 2011 17:59
Ward Merrell
Can you please tell me, where can I get a job that you need no credibility, facts never matter,and I can just make up crap to collect a paycheck?
Oops, never mind. I just read your article. I can see that position has been filled.
3 Monday, 19 September 2011 17:58
Tim Wood
For starters, McCombs sold Clear Channel in 2006 for almost $19billion. It went bankrupt under the new ownership.

The funding to build the track is not "allegedly" private. It IS private. Neither the METF nor the state are funding even a portion of the construction of Circuit of the Americas. The Major Event Trust Fund is reimbursing the City of Austin for expenses related to hosting the event. The City of Austin is not on the hook for the $4million fees, either. Those are being paid by the Circuit Events Local Organizing Committee (CELOC).

As for the $13million the city is investing for infrastructure (water lines), this is common practice. It's what the city wants and is executed by choice. It's the city's desire to own the lines and to have much larger lines installed than required by the relatively smaller needs of the facility so that they may serve the surrounding area, not just the facility, for decades to come. Otherwise, the city would have to come in and rip up smaller lines to replace them with larger ones years later at much greater cost and trouble. This policy, used on large projects all over the city, saves a great deal of money for the city in the long run.

Will the investment yield returns for the state? Well, investment in these types of events, controlled by the Texas Major Events Trust Fund, has resulted in more than a 450% return to date.
2 Monday, 19 September 2011 17:28
Pablo Diablo
You stated, "F-1 racing has never been held in the New York area although there was a plan to hold a race in the early 1980s was never materialized.", which is false.
1 Monday, 19 September 2011 17:19
Weiner, you don't know much about Formula 1's success in the US, so I'm going to invite a few folks over here to school you.

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