Viewing entries tagged
Formula One Management

Circuit of The Americas Ready to Deliver $25 Million

Special Delivery for Mr. EcclestoneCircuit of The Americas has issued a bold statement on this Thanksgiving holiday: we have the cash to pay Formula One Management's 2012 race sanctioning fee and we've met the contractual requirements to proceed with our race. Now, it appears that the ball is in Bernie's court to countersign the contract. Here is the release:

Circuit of The Americas Ready to Pay Sanctioning Fee and Offering More
Proposal Satisfies 2012 Request, Accelerates Payments for Subsequent Years

AUSTIN, Texas - November 24, 2011 - Circuit of The Americas has responded to Formula One Management's contract requirements by agreeing to an immediate cash payment of the sanctioning fee for the 2012 United States Grand Prix (USGP). In addition, Circuit of The Americas has offered to establish an advance payment schedule for USGP races beyond 2012. The offer comes after several weeks of talks, and once accepted, will secure the USGP on the Formula 1 race calendar.

 "We have been ready to send Mr. Ecclestone a sanctioning fee check for some time now," said Bobby Epstein, founding partner of Circuit of The Americas. "He hasn't received it yet because the new contract presented to us two weeks ago contained unrealistic and unfeasible demands. We have signed and returned a contract similar to what we anticipated receiving. This race should be a reality, but if we are going to make the 2012 race date, we must receive a countersignature in the coming few days. We believe the teams, fans, sponsors and local business share our enthusiasm and hope that their voices will be heard."

We have been anticipating Bernie to make an announcement about our Austin Grand Prix this weekend, during the last race of the 2011 season from the Brazilian Grand Prix.

What is most interesting to us is that COTA has confirmed the viability to pay the 2012 race sanctioning fee immediately with $25 million in cash. You will recall, that the Comptroller of the State of Texas, Susan Combs, recently retracted her offer to pay Formula One Management its $25 million sanctioning fee in advance of the race. She explains the change of events in an interview with local Austin news channel KVUE; you can watch the unedited version of the video by clicking here.

How will Bernie respond? What role is Tavo playing going forward? With the recent halt in construction, is it feasible for us to finish the track in time for our slated November 18, 2012 race date? These are still real questions that will be answered in due time, but we feel reassured that our investors have answered Bernie's recent demands by committing the payment and contract.

As Will Buxton told us all back in June, we all want the 2012 race to happen, so let's MAKE IT HAPPEN!

Don't forget, we have our last downtown watch party of the 2011 season back at Six Lounge this Sunday. We'll kick things off at 1:30 PM with food from Pluckers Wing Bar and drink specials from Red Bull and Pepe Z Tequila. Come ready to race because Robert DeGroff will have his ever popular iRacing simulator on hand for guests to take for a spin.

Sunday, November 27, 1:30 PM
Six Lounge, 117 W. 4th Street, Austin
Free and open to adults over the age of 21
Facebook Event Invitation here

Hope to see you all this Sunday, and Happy Thanksgiving to our American friends!

Tavo Hellmund Speaks About Future of F1 in Austin

 /// Audio Recording of Tavo Hellmund Press Conference

/// Overview of Press Conference

Just a few hours ago, Tavo Hellmund called a press conference to address the growing concern about the future of the Formula 1 United States Grand Prix to take place at Circuit of The Americas in Austin, Texas next November.  In this conference, he explained the complicated situation that has lead to increased scrutiny by Formula 1 head Bernie Ecclestone and spoke more about his own relationship with Circuit of The Americas.

In a tiny room packed to capacity in downtown Austin, Tavo and his attorney, Casey Dobson, began by calming the waters which have lead to a full scale media assault on the future of Formula 1 in Austin. Tavo was confident in his belief that this will be sorted out, but conveyed a sense of frustration with his partners in order to get FOM (Formula One Managment) their sanctioning fee for the upcoming race.

Unlike the speculation by many media outlets that Tavo has been solely to blame and responsible for the events leading up to this situation, Tavo enlightened us on the past several months leading up to this day.  Most notably that the race was always supposed to be post-Montreal (in June), and due to concerns about circuit completion schedule, Bernie was helpful in accomodating the move to November on the calendar.

However, this schedule change did not effect the initial $25million payment to Bernie which was still due in late July, and though Bernie was very patient, the investors have been unable to provide these funds even several months afterward.  Thus, the contract Tavo had with Bernie is now considered breached and Bernie has still not been paid.

At this point in the press conference, Tavo expressed several times that the money just isn't there, and the Circuit of The Americas has put him in a difficult situation.  He conveyed several times that he is not a money man, and though his expertise in motorsports and promotions are very, very valuable to the success of Formula 1 in the US, he has been sidelined by his own partners due to a "difference in vision for the project."  Tavo did not elaborate on what this difference is, or what portion of the project has caused this conflict, but it's clear that Tavo is confident he has gone above and beyond his duties to his partners and is the primary man pushing for this work work out.

Many of the other reporters asked Tavo questions about his status with the team and whether he had been 'pushed out' of the project.  Tavo did respond with a simple statement that he had been offered a buyout but he did not disclose any details.

/// Conjecture

Today Tavo spoke more about the internal conflicts involving a "difference in vision for the project" which fall in line with Bernie's claims a few weeks ago.  Whether the nature of these conflicts have made solidifying the funding for the project difficult has not yet been proven but it's likely that the other partners are looking to solidify their race contracts before investing any more money into the project.  What remains to be seen is if COTA is willing and ready to work with Tavo to make it happen, assuming of course that they aren't trying to get their own race contract on their own.

All statements from COTA the past week have indicated they are ready to do so.

Of course all anyone really cares about is if this race is going to happen, and at this point there are still some things that we need to see before we know for sure.  The first would be the funding for the race contract to be secured and sent to Bernie ASAP, this would solidify the race on the calendar and cast the doubt aside.  The second is for the Circuit and Tavo to iron out the details of their relationship to ensure a positive outcome for all parties.

As Tavo said in the conference, no one has put more blood, sweat and tears into this project than him, and his background combined with his connections within the industry make him THE person to ensure the Grand Prix is a success.  When I first met Tavo in July 2010, following inital F1USGP Press Conference, I immediately felt confident that he was the man with the vision and determination to see this project through and it would be a severe tragedy to see Tavo left behind on this project for problems that can be worked out.

You can read our live tweets from the press conference by clicking here.

Given the gravity of today's press conference, we expect more developments from all parties involved and will continue to bring them to you for the latest updates.



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.