Texas reduces its subsidy by 5.5 million dollars
The bad news is piling up for the Circuit of the Americas: the State of Texas has reduced its subsidy from 25 to 19.5 million dollars. This could challenge the economic equation of the event and thus threaten its future.
Since the inception of the project, the subsidy granted by Texas from its major events fund has been a topic of much debate. In 2011, the State Senate initially refused to honor the first payment of 25 million dollars, despite it being promised by Governor Rick Perry. He had, in fact, committed to providing 250 million dollars over ten years to ensure the arrival of Formula 1 in the state capital.
If an agreement had then been reached, the controversy quickly resurfaced just before local elections since the different parties used it as a political argument to undermine the opposing camp.
Today, the debate is no longer about the subsidy itself but its amount and, more precisely, its method of calculation. Texas created this fund to attract major sporting events, such as the Super Bowl or the college basketball championship, which can bring in numerous tourists from outside the state. The logic is that these people would not have come to the state without this event and that the state benefits since it generates additional taxes. The subsidy is therefore based on this fiscal surplus from which public finances benefit.
Nevertheless, last January, Rick Perry did not wish to seek re-election for his position and was replaced by another Republican, Greg Abbott. He took over the management of the special fund directly and conducted a thorough audit. This audit concluded that a number of taxes considered in the calculation of the fiscal surplus should not have been included, thus reducing the financial impact for the state. Consequently, he implemented a 22% reduction in the funds allocated to the organizers of the COTA, resulting in a decrease of $5.5 million.
The spokesman for the circuit, Dave Shaw, could only express his regret to the local newspaper Austin American-Statesman about this change in the calculation formula: « A complete infrastructure was built based on this agreement. If the calculation is now modified, it changes everything in the agreement. »
While the circuit has already lost a lot this year due to the torrential rains that hit the event, such news could jeopardize the future of the event, especially if Mexico confirms its excellent return this year. In these circumstances, the departure of Jason Dial, the CEO of the circuit, is more understandable, especially since the organizers had been warned of this decline a few weeks before the event took place…
With the participation of www.racingbusiness.fr
