Texas, which may balance its budget by firing thousands of teachers, plans to commit $25 million in state funds to Formula One auto racing each year for a decade.
Four years after motorsports' most popular series left the U.S., Texas investors including Clear Channel Communications Inc. co-founder B.J. "Red" McCombs are building a 3.4-mile (5.5-kilometer) track to bring the event to Austin. Comptroller Susan Combs has agreed to pay $25 million for races through 2022, a subsidy questioned by critics and lawmakers as the state cuts costs to close an estimated $15 billion two-year deficit.
"I don't understand why 25 people in Austin could not put up $1 million each if they thought this was a good opportunity instead of the state making a $25 million commitment," said Senator Dan Patrick, a Houston Republican. "The developers should find the money through private sources."
As many as 100,000 teachers in Texas may be fired because of spending cuts to cope with the state's budget crisis, according to Moak Casey & Associates, an Austin-based education consultant. For $25 million a year, the state could pay more than 500 teachers an average salary of $48,000.
"I have to wonder why the state of Texas is all over funding for this racetrack and not the school-funding crisis," said Ewa Siwak, 44, who teaches German in the Austin Independent School District and whose job at Bowie High School is being cut. "Tax dollars for education should be a higher priority."
No Traction
Formula One races have failed to gain traction previously in the U.S. Since the 1970s, the series has been hosted by Long Beach, California, as well as Las Vegas, Detroit, Dallas, Phoenix and, most recently, Indianapolis. The races there ended in 2007 on declining attendance.
With 20 million Texans within 250 miles of Austin and a growing Formula One fan base in Mexico, the city's annual race will be successful, Steve Sexton, president of track developer Circuit of the Americas LLC, said in a telephone interview.
By building the Circuit of the Americas track, backers aim to attract automakers such as Fiat SpA's Ferrari Group, Renault SA and Daimler AG's Mercedes that compete in Catalonia, Shanghai and Istanbul. Racing-team owners include U.K. billionaire Richard Branson and Indian liquor magnate Vijay Mallya. Races from Montreal to Sao Paulo draw thousands of fans, including those paying $1,200 apiece for a seat in Monaco's grandstands.
Each race in Austin is projected to generate enough tax revenue to recoup the $25 million from a state Event Trust Fund pool, according to Allen Spelce, a spokesman for Combs, a Republican. He said the plan calls for putting the $25 million into a revolving account for paying annual event-related costs.
$250 Million Subsidy
If the financing works as projected, the decision will use $250 million in state tax revenue for the races over 10 years.
"With places struggling, spending that much money on an essentially one-off event is tough to do," said Michael Cramer, a former president of baseball's Texas Rangers and hockey's Dallas Stars who runs the sports and media program at the University of Texas at Austin. "It's a very high cost of entry."
Texas, like other states cutting budgets for schools, nursing homes and basic services, uses economic-development spending to bring in jobs and seed growth. That often involves giving up tax revenue generated by a project to pay part of the cost. New Jersey is providing $200 million of tax-increment financing to help develop the American Dream in the Meadowlands, which will be the biggest mall in the U.S. when it opens.
"I'm not sure of the wisdom of using tax dollars to fund a racetrack," said Siwak, the Austin teacher. "They're giving so much tax dollars away I don't think they could make it up with the racetrack."
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