19/11/2011
NEWS STORY
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The Formula One world is now coming to terms with the fact that there is next to no chance that the United States Grand Prix will take place next year due to a dispute between Tavo Hellmund, the race promoter, and Bobby Epstein, the majority owner of the Circuit of the Americas track in Austin.
Many observers in F1 have been asking why F1's boss Bernie Ecclestone has not cut them any slack given that there were question marks over the tracks in India and South Korea right up until the month before their races took place, the F1 supremo not dismissing their chances as he has done with Austin. The difference is that Ecclestone was paid by India and South Korea whereas Austin missed its deadline as Pitpass has reported. It put in place a series of events which seem to make it impossible that the race will ever take place. However, there is one way forward.
After the deadline for payment was missed Ecclestone cancelled Hellmund's race promotion contract which left Epstein in an awkward position as he majority owns a track which is under construction but has no contract to host an F1 race on it. This is what recently led him to cease construction on the site until Ecclestone gives him a contract with the same terms as the one Hellmund had.
However, there was a more serious consequence of Ecclestone's critical comments. The $25m (£15.8m) race fee payment for the race was due to be supplied by the state of Texas by July 31 2011 and the race was originally scheduled for June 17 2012. However, the race date was moved to November 18 2012, due to the extremely hot weather in Austin in summer. This led to Ecclestone's payment deadline being missed since the state's money could not be released more than a year before the event.
Ecclestone told Pitpass' business editor Christian Sylt that Epstein was not prepared to sign a letter of credit with him guaranteeing that payment would be forthcoming. He adds that, contrary to Epstein's claims, it does not look like there is enough money to finish construction of the circuit to host the race which is why Ecclestone finally snapped and said "I wouldn't want to put my money down that [the race] will happen."
Texas' state comptroller (effectively its finance director) Susan Combs, took immediate action in response to Ecclestone's comments. The last thing Combs wants is for the state to pay out money to Ecclestone when he says there is a real risk the race will not happen. Combs prevented this from happening by saying that "the only dollars that can be spent on the United States Grand Prix are tax revenues attributable to the successful running of a race. The state of Texas will not be paying any funds in advance of the event."
However, if the race hosting fee will only be paid after the Grand Prix has taken place, there is no way Ecclestone will give it the green light since other F1 circuits pay upfront. Combs' comments effectively prevent the US Grand Prix from ever taking place in Texas under the organiser's current model. However, that doesn't mean to say it can't take place under a different plan.
If the circuit owners were prepared to pay Ecclestone the race hosting fee from their own pockets then the Grand Prix could take place and this cost could be recouped from the state once it had taken place. Not only would this enable the race to go ahead but it may also make the most financial sense.
Austin is renowned for being one of the greenest cities in America so if the 1000-acre circuit site is left in its current half-built condition the state may try to take legal action to make someone pay for the damage done. To prevent this from happening it is likely that there would need to be what is known as revegetation on the site which essentially means replanting and rebuilding the soil. It is understood that this could cost as much as $10m (£6.3m)with the winding up payments to the more than 300 workers and contractor firms likely to come to twice as much as that.
All in all it could add up to a bill of around $30m (£18.9m) just to close the circuit. If $25m of this money was instead spent on paying the fee to Ecclestone it would keep the race alive and the amount would then be repaid by the state after it took place. True, the circuit owners would still need to foot the rest of the money to finish construction but the circuit's president Steve Sexton recently confirmed "our funding is secured" so that shouldn't be a problem. It would seem to make more financial sense to keep the circuit moving forward rather than to close it.
However, as we all know, F1 and financial sense don't always go together.