Texas choice: A rich London guy or teachers

By Cate Long
May 11, 2011

Really, Texas.

Subsidizing a rich man’s sport while laying off teachers?

Is this in the public’s interest?

Bloomberg reports:

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.

Basically the $25 million fee is paid by the state of Texas to Bernie Ecclestone, the impresario of Formula One, who lives in London.

Wikipedia gives the revenue and profit numbers for Ecclestone’s Formula One.

Formula One Administration Ltd. or FOA holds the commercial rights to Formula One. These rights are granted to FOA by the FIA under the terms of the Concorde Agreement and are managed by Formula One Management.

In its annual accounts filed with Companies House, FOA reported turnover of $750 million and pre-tax profits of $447 million (up from $215m in 2003 and $127m in 2002).

 

I attended the first Asian Formula One race held in Kuala Lumpur in 1999. I worked for a British investment bank and we chartered several 747′s to fly in fund managers and other clients from all over Asia to attend the race. These are rich people events which happen once a year and provide venues for corporate largess to clients.

The Austin F1 promoters have projected 120,000 race attendees will spend $2,000 each for local revenues of $240,000,000. Maybe.

But the $25 million payment to Ecclestone is not predicted on any metric. It’s a payment without any strings.

Texas, really.

Your $15 billion budget deficit is not going to be plugged by sending $25 million checks to rich men in London every year.

More on the story:

American Statesman: Texas comptroller had big role in plan to bring F1

Austin Post: Comptroller Certified Formula 1 Payment Schedule Without City Application

7 comments

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Absolutely outrageous.

The children refuse to grow up.

The inability to face fuel and economic realities won’t benefit anyone as Formula 1 is not a going concern post- peak oil. It is too dependent on chartered 747s and millions of fans with discretionary income along with finance for bridge loans, until the endeavor ‘gets on its feet’.

The ability to buy cars and the gas to burn in them cannot be taken for granted from about five years ago into the future. The fact of teacher- firefighter layoffs not just in Texas but everywhere in the US … speaks for itself.

Since the growth industry of the USA is poverty and food stamps the effort is facially defective. Better for Texas to subsidize crack cocaine and meth labs instead.

Posted by econundertow | Report as abusive

[...] another deal like the Formula One deal in Texas that I wrote about yesterday where big corporations have worked every angle to increase [...]

There are 3.5 million of us in Texas that Susan Combs’ exposed our private credit data, including social security numbers, to the world to see on her unprotected computers. We know she’s NUT’S. Can anybody tell us how to get her out of the Comptroller’s Office?

Posted by Compatriot | Report as abusive

Once again business trumps education and Texas is one of the leaders in this concept. Keep the voters dumb and you will insure your future election victories.

If business’s vision is to attract this F-1 crowd, why doesn’t business fund it with their money? This 25 mil per year is going out of state. I believe the teachers who will lose their job all live in the great state of Texas.

So much for the care and concern of government for the electorate. Wouldn’t it be funny if they built this track and no one came? Perhaps they could provide free tickets to the teachers they fired. If they fire enough of them they will have quite a crowd for their races.

Posted by 12405 | Report as abusive

This is 25 million for 10 years. That works out to 2.5 million per year. Of course I went to school back when we were taught math and how to read. Perhaps Business should trump education if spending money will bring money into the state and provide some jobs.

Posted by davemod | Report as abusive

Who wants an educated labor force in a modern economy when you can have car races and football? As one of them awful big government people from up North, I’m thrilled to watch Texas (and California) shoot themselves in the foot repeatedly. Thirty years from now, the prosperity trends will have reversed and we’ll have our own private underdeveloped country right within our borders that we can suck cheap labor from when we need it. For the Northeast and the upper Midwest, where the new growth will be.

Posted by 23rt | Report as abusive

I’m a values and economic conservative and a retired Texas attorney in solo practice, i.e., small businessman. I’m thinking of coming out of retirement. Reopening my office will provide steady jobs for experienced people and trainees, as I did before, , more if somebody spots me a nice fat investment in this start-up from state funds. It looks to me like another auto racing track for Formula One would provide mostly part-time, low-pay jobs except for the very highly paid people at the top. I trust the state officials will be in touch about making a similar speculative investment in my new start-up.
I didn’t catch this plan committing the State of Texas to spend, or “invest,” $25 Million a year for ten years in a private Formula One racing venture, a speculative start-up, until I saw this article. Sounds contrary to my kind of free enterprise capitalism and risky to boot. Somebody should dig into both the State Constitution provisions relevant to such schemes as well as the politics of this.

Posted by Transaction7 | Report as abusive

TMZ: price is $85M.

The 57,000-square foot Los Angeles mansion built by the late TV producer Aaron Spelling is slated for sale to a 22-year-old heiress to a Formula One racing fortune. The home on five acres of property in Holmby Hills has a bowling alley, beauty salon, several gift-wrapping rooms and parking for 100 cars.

“The Manor,” as the property is known, had a list price of $150 million that didn’t budge during the real-estate downturn that sent prices in Los Angeles down by more than a third. The sales price was not disclosed.

http://online.wsj.com/article/SB10001424 052702303714704576384013798228854.html

Posted by Cate_Long | Report as abusive