Barely two weeks after the United States Grand Prix at the Circuit of the Americas, the circuit created specifically for the (successful) return of F1 to the country, it emerged that after just four Grands Prix, the event is under threat.

The threat comes in the form of a serious reduction in the subsidy provided by the State of Texas, leading to COTA Chairman, Bobby Epstein, admitting: "To use a technical term, I think we're screwed."

Between 2012, the first year of the event at the circuit, and 2014, the state contributed $25m each year as part of a quarter-billion dollar subsidy agreed over the next decade with (previous) state comptroller Susan Combs.

However, for 2015, with a new governor and general staff in place, the governor's office and COTA confirmed that the state's contribution, which is based on how much economic activity the event generates for the state, would drop to around $19.5m.

Whilst Bernie Ecclestone gave organisers some welcome breathing space in allowing them - like Silverstone - to pay the (ever-increasing) hosting fees in arrears, when the official 2016 calendar appeared in December the United States event featured an asterisk and the words "subject to agreement with the promoter and the ASN".

With some feeling the event is now already doomed, a move which could prove disastrous in a country already so badly treated by the sport over the years, there is fresh hope in the shape of a letter that has been discovered from Combs, dated 10 May 2010.

According to Forbes, the letter states: "In response to the requirements of the race promotion contract for the Formula 1 United States Grand Prix in Texas, I hereby certify the following: With the understanding that the first Formula 1 United States Grand Prix race will be held in Texas in 2012, full funding of the entire sanction for 2012 will be paid to Formula One World Championship Limited (‘FOWC’) no later than July 31st, 2011.

"In subsequent years, two through ten, of the race promotion contract, i.e. 2013 through 2021, we will be sending $25 million dollars to FOWC by the end of July 31st of each year preceding the actual race event.

"We look forward with great enthusiasm to this event and a successful mutually beneficial relationship for many years to come."

In other words, the state guaranteed the annual $25m payment, and while the government has changed there is no caveat suggesting that the arrangement would be subject to change under such circumstances.

The new governor, Greg Abbott, has claimed the letter is "merely an effort to indicate broad support" but it is difficult to see how such a claim would stand up in a court of law.

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READERS COMMENTS

1. Posted by rgsuspsa, 30/12/2015 20:55

"Regarding COTA and an alleged subsidy for ten years from the State of Texas, no legally binding and valid contract between the State of Texas and COTA has benn shown to exist. A letter of goodwill is not a contract, nor an ethical obligation to subsidize a business that is otherwise financially untenable. As far as the court system in Texas, or any U.S. state is concerned, underwriting entertainment events for the benefit of private corporations is not a legal obligation of a governmental body.

Every indication is that COTA was not a financially sound private business model from its conception, like the majority of auto racing venues in the U.S., as well as Europe. The difference between the U.S. and Europe is that the public coffers are not available for subsidization of an entertainment business's financial irresponsibility."

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2. Posted by Tweek, 30/12/2015 18:46

"Sooo lemme get this straight....... Nurburg and COTA are hosed, Monza was only saved by taxing the locals, and Lotus was purchased for less $$$$ than a child's allowance. When is Bernie gonna give us some news that isn't related to this increasing his bank balance? "

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3. Posted by geek49203, 30/12/2015 16:09

"1. I am not a lawyer, but I agree -- This letter has about zero weight in the legal wranglings.

2. What has happened is, like other F1 sites, the plunging price of oil has caused the locals to be counting the pennies. Texas doesn't have the money when the price of West Texas Intermediate Crude is at $36 as it did when it was $146. This means that the governments involved are counting pennies as are the fans and local sponsors.

3. I can't do the math in a way that allows CoTA to have enough revenue from F1 to even pay the local property taxes. It's great that they have a WEC show, but that won't move the needle high enough to make the thing profitable. And do you really think that an IndyCar show will run on the same venue as a F1 show (not saying that it would even happen or that it would even be profitable). So even if the $25 million is restored, it's really a death watch for this venue.

4. F1 has augmented world-wide sponsor dollars (which are in decline) with oil money (see point #2) and government money. As we've seen in France and Germany, governments are reconsidering F1. Certainly -- akin to the Olympics -- the hype about the profit for locals hasn't always been borne out. In the case of Austin, the declining out of town (300+ miles according to NASCAR standards) fan turnout, combined with competition with U-Texas football (which already filled up the hotels and restaurants on that weekend) mean that there is considerable grumbling.
"

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4. Posted by gturner38, 29/12/2015 3:55

"A letter is not a contract and even if it was a contract, if it was written in such a way as to be in conflict with the law governing the METF fund, the law would override the contract."

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5. Posted by sumpnz, 29/12/2015 2:39

"A letter from Susan Combs won't hold contractual weight. Especially if it's dated before the contract itself. The contract will supersede that letter in that case. It comes down to how the contract for the subsidy is written. If it's "$25mil/year for 10 years" then COTA will get their money. If it's "up to $25mil/year based on a calculation of economic effects" then COTA will have to show that the calculation used was improper and the correct (per the contract) calculation gives them more money. If they can't do that they (COTA) are SOL."

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6. Posted by Simon in Adelaide, 28/12/2015 21:20

"Another payday for the lawyers.

I cannot believe Texans can be o shortsighted given the appearance of an American F1 team in 2016 and the opportunities for promotion and marketing, something that Americans are supposed to e very good at."

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