24 May 2011
Austin splits opinion as F1 return continues
The use of public money to support the latest bid to return F1 to the USA has found support and opposition in equal measure.
F1 has always had a powerful divisive effect, and the prospect of the sport returning to the United States at an all-new facility close to the Texan capital Austin is no exception to the rule, with differing views on the money being spent on the project.
While economist Angelos Angelou claimed, via the American-Statesman, that the local area would reap the rewards of investing in the bid to bring F1 back to the USA, local contributor Bill Aleshire took the opposite standpoint, insisting that the state has other financial priorities, and should not be stumping up $25m of public funding to get the event up and running ahead of a proposed 2012 calendar spot.
Angelou believes that the region needs to 'speculate to accumulate', insisting that the initial investment in the Circuit of the Americas could lead to $500m income for the Austin area. The $25m grant given to the USGP project comes from Texas' Major Events Trust Fund, money put aside to attract important sporting and cultural occasions to the state, and has previously been used to bring the Super Bowl to Dallas, as well as major basketball and baseball events.
The decision to help fund the return of F1 to the US, however, comes at a time when the country is still attempting to recover from economic downturn and, locally, when teachers are being laid off in the Austin area. Angelou, however, believes that the two cannot be balanced against each other.
"The comparison presents a false choice and is economically irrational," he wrote, "Let's begin by understanding that the Major Events Trust Fund is a fiscally neutral mechanism. The fund was created by the Texas Legislature in 2003 to help attract large, well-attended events such as the Super Bowl, the NCAA Final Four basketball championships, the NBA All-Star Game and now F1 racing.
"Under the legislation, the Major Events Trust Fund can provide $25 million toward hosting the F1 event. None of these funds are used to build the venue itself, and the entire amount is reimbursed to the state once additional taxes generated from auto rentals, hotel stays, restaurant sales, alcoholic beverage sales and the sale of a variety of support services are realised. By my own firm's conservative estimates, more than $30m in additional sales tax will be generated by the F1 event alone.
"Overall, the comptroller's preliminary economic impact study completed in 2010 suggests accrued benefits to the Texas economy of just under $300m from the F1 race event. My own calculations peg the actual economic impact at well over $500m when one considers benefits derived from the construction of the facilities and additional revenue generated from other events to be hosted year-round at this venue."
Angelou goes on to support his argument by pointing to a Financial Times article from 2008, which reported that $275m invested in F1 races by governments around the world brought in $1.52bn - a 533 per cent rate of return per race.
The development of Circuit of the Americas facility is being funded by around $300m of private investment, without any government incentives being offered to the developers, and has provided employment for more than 1300 people as construction gets underway. Angelou also points out that 'several hundred permanent positions will be created at the venue once it is fully operational', with 'several thousand more' being employed over major race weekends.
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