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Tuesday
Jun282011

METF, ETF, SpETF, MSRTF - WTF?

Tomorrow, Wednesday, June 29th, the Austin City Council will hopefully decide if the city should sponsor the Circuit of the Americas (COTA) request for a 10-year $25M sales tax rebate from the Texas Major Events Trust Fund (METF).  Normally a sponsoring entity like a city or county would commit up front their anticipated share of the sales tax gain, estimated at approximately $4M for Austin, but in this case the F1 event organizers have even committed to put up the $4M for the next 10 years, so there is basically no risk for the city of Austin taxpayers (as frequently repeated by COTA's attorney of record, Richard Suttle).

Events by Category (Click to Enlarge)

I’m not going to debate whether or not this state fund should exist, but I do think it’s important that all Texas taxpayers, and others, be aware of what it is and why it exists.  The Texas legislature created this “series” of funds (METF, ETF, SpETF, & MSRTF) to be funded by incremental sales and use tax proceeds derived from hosting major events within Texas, and yes, many other states/municipalities have similar funds to lure major events to their area, this is nothing new.  It’s actually very similar to the tax abatements offered to companies that decide to locate or re-locate their businesses to a particular city based on the overall positive economic and employment impact on the area. Think Southwestern Bell (SWB) relocating to San Antonio from St. Louis, and then SWB buying AT&T moving to Dallas, etc.  In many cases, cities actually “invest” in the development of the hosting facility itself, for example Arlington, TX contributing $325M towards the construction of the new $1.2B Cowboys Stadium (Dallas Morning News July 11, 2010).

Events by Location (Click to Enlarge)

Despite the rumors and false statements circulating that this money takes away funds from education or other state programs, which by law is impossible, these funds are designed to be self-supporting due to the anticipated incremental revenue the state receives from additional sales taxes collected during these events.  However, I do concede that if these funds did not exist, and if the events came to Texas without the “subsidy,” then that additional revenue would be available for other public funding.  But if that was the case, how many of these large events would have decided to go somewhere else where some type public funding is available?  This the primary reason these funds exist, and if the opponents are successful in eliminating these rebates for F1, then in fairness, all METF/ETF funding should be revoked, which only the state legislature can enact at this point in time.  And before you cry about the $25M for 10 years, please understand that the only “apples to apples” comparison with other METF events is the Super Bowl, which received $31M in funding last year.  This is because it shares similar attributes with F1 as the only class of event that draws tens of thousands of visitors from outside the state of Texas, and many internationally.  Remember, the key word is “incremental” revenue to the city and state.

Funding by Category (Click To Enlarge)Therefore, the real question is why would anyone oppose this funding?  I suspect if the request involved hosting the BCS Championship Bowl series at Texas Stadium for the next 10 years, not many Austinites would even bat an eye; in fact, most would bend over backwards in support.  Or if it was NASCAR or Indy Cars or the NCAA Final Four, most of the opposition wouldn’t exist.  Formula 1 and MotoGP, for that matter, are lesser known events to many folks in the U.S., and the “trial” street F1 races in Dallas, Detroit, and Los Angeles were simply one-time races on temporary street circuits.  Yes, F1 was successful at Watkins Glen, NY for twenty consecutive years and at Indianapolis Motor Speedway from 2000-2007, despite negotiations and conflict over the effective promotion of the sport, in 2008, both F1 and Indy mutually agreed to terminate their contract; that’s just business, as Trump would say.

Funding by Location (Click to Enlarge)

In an effort to give you an appreciation for the proliferation of how these funds are used, and for what types of events, I have provided this Comptroller document that lists the actual or anticipated approved expenditures since the fund creation in FY04, through FY11 (to date).  I created summary pie charts for those who are too busy to look at the data (although I highly recommend it, after all, the devil is in the details).  Please take note of a few interesting observations derived from this list.  How many of these events are organized for the benefit of private enterprise?  How many are medical group related?  How many are horse/livestock shows? NCAA or other special interest events?  Almost all of them.  Now how many were held in Austin?  Houston, Dallas/Fort Worth, San Antonio?  Maybe Austin should take a few lessons from their neighbors to the southwest; they obviously know how to "work the system.”  Bottom line if you want to debate the effectiveness or use of these funds, you should call your State Representative or Senator, not oppose the efforts to bring these events to the Austin area which will only strengthen the local economy and provide needed jobs for many.   

Formula One is the pinnacle of motorsports worldwide and it draws the attention of 600 million television viewers each year!  This is where the money is!  Only the Olympics and World Cup Soccer draw more fans, and they only occur every 4 years.  If you would have attended the Canadian Grand Prix in Montreal, as we did a few weeks back, I guarantee you would have a much greater appreciation for the economic impact of these events.  As an alternative, read about why local Montreal businesses and residents alike petitioned the city of Montreal to re-instate the race after a two-year hiatus attributed to similar questions regarding the high cost of F1 sanction fees.  It is just business; but that’s what sustains life as we know it.

If you’re still not convinced, read Will Buxton’s letter from last week to the Austin City Council again.  Or just imagine what the INTERNATIONAL television exposure could mean to Austin businesses, especially to companies like Dell, AMD, and many others that desire to expand their business globally.

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