Texas Legislature Postures over $25 Million Subsidy for Formula 1 – But What Does it Mean for MotoGP?

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A tremendous commotion was started today, as a panel in the Texas Senate decided to cut the $25 million subsidy set aside to help bring Formula 1 to the city of Austin, Texas. Immediately this sent concerns through the motorcycling press as to what it could mean for MotoGP and the Texan GP scheduled to be held in 2013, as it seemed the State of Texas was pulling its support from the still un-built Circuit of the Americas.

The short answer to that question is nothing, as the $25 million was ear-marked to go directly into Formula 1’s pocket, not to MotoGP’s coffers. However, the long answer to the question is a bit more convoluted, as MotoGP’s running in Austin is intrinsically linked to Formula 1 coming to the Texan track, which this budgetary decision seemingly directly affects.

I say seemingly affects because the issue of how the budget has been constructed, and where the funds come from to subsidize Formula 1’s return to American soil is a complicated matter. At the center of the issue is the Texas’s Major Events Trust Fund. Basically a slush fund of money to bring high profile events to the Lone Star State, the Major Events Trust Fund was originally funded by state taxpayer dollars back in 2009, and was recently used to bring the NCAA Final Four Basketball Championship to Houston. The idea behind the fund is once it is established and working, it would become self-sustaining, as the fund is replenished and grown by revenue generated from these major events.

Seemingly not wanting to look like legislatures who dump money on car and motorcycle racing, Texas state senators have nixed plans to use $25 million in the Texan Major Events Trust Fund to subsidize the fees that must be paid to Bernie Eccelstone and Formula 1. The kicker to this problem though is that the non-payment of this money doesn’t actually do anything for the budget for the next term.

In the eyes of the accountants, the money added to fund in 2009 has already been spent by the State of Texas, since it has entered the Major Events Trust Fund, despite the fact it hasn’t been dispersed. Therefore spending the money, or saving it in the fund does not sway the new budget one way or another. The only way Texas legislatures could “save” money and put money back into the State’s budget is by withdrawing the money from the Major Events Trust Fund all together, an act no one seems willing to do (thank God).

With this issue going back-and-forth between the Senate Finance Committee and State Comptroller Susan Combs, the process is compounded by the fact that both the Texas Senate and House of Representatives are drafting their own versions of the state’s budget, which could just as easily see the House of Representatives add the payment back into its financial agenda. If the federal government has taught us anything, reconciling the differences between the two parts of our bicameral legislature could take some time.

The good news is that Formula 1 already has a certified letter from the State of Texas Comptroller, stating that the $25 million amount would be paid, meaning that one way or another it seems likely the state will have to cough up the Benjamins for Bernie. Realizing the concerns being levied by the Senate, one would imagine that the state senators would prefer making that payment from a fund that doesn’t impact the state budget’s bottom line, rather than from an account that does, but that might be giving politicians too much credit.

While this discussion does not involve any money that’s lining MotoGP’s pocket, the issue is worth keeping an eye on because of the impact that losing Formula 1 could have on the Circuit of the Americas venue. While unlikely, if for some reason the State of Texas fails to support the Austin track, Formula 1 could walk from the deal — a move that would cause financial havoc on the venue. Like the many tracks we’ve seen this year in financial difficulty, this could mean a no-show for MotoGP.

While the issue doesn’t seem to warrant immediate concern, we are sure there are eyes outside of Texas that are watching this political SNAFU very closely.

Source: Dallas News & Austin Post