Contract disputes have endangered the proposed 2012 U.S. Grand Prix at the Circuit of the Americas in Austin, Texas.
Bernie Ecclestone, head of Formula One Management (FOM), has given COTA officials one week to resolve their financial issues or he will cancel the race.
“It’s all very simple—they don’t have the money,” Ecclestone told The Associated Press on Thursday. “We don’t have a contract. If they want to come back to us, if it’s not signed before the end of next week, I suppose it won’t be on the calendar next year.”
The original contract holder, Tavo Hellmund and Full Throttle Productions, was unable to meet the terms of the contract and FOM canceled the deal. The other owners of COTA, investors Red McCombs and Bobby Epstein, stepped up to take over the race, but have been unable to prove that they can afford the sanction fee.
Texas Backs Out
The original 10-year contract between FOM and Tavo Hellmund was based on Hellmund’s long-time personal relationship with Bernie Ecclestone, and upon the premise that the state of Texas would advance Hellmund $25 million per year for the sanctioning fee—the money FOM charges tracks to hold Formula One races.
When Hellmund proved unable to raise funds or prove credit sources according to the original contract, FOM deemed him in breach and canceled the deal.
Now Texas Comptroller Susan Combs, who originally helped engineer state support for the deal, has changed her mind, apparently upset that Formula One has added another U.S. Grand Prix to the 2013 schedule. The second race will certainly dilute interest in the Texas event—Formula One fans would have two chances to see a Grand Prix without traveling overseas, potentially halving the market for either race.
Texas would presumably still pay out of the Special Events fund, but not until after the race; the promoters will have to raise the $25 million fee on their own ... if that is indeed the sanctioning fee. It seems the $25 million fee—low by F1 standards—might have been a special deal available to Tavo Hellmund only.
COTA Wants a Deal
Circuit of Americas co-founders McComb and Epstein (without Hellmund) hoped to take over the same contract, but Bernie Ecclestone says there will be no contract until McComb and Epstein come up with letters of credit proving they can afford the race—including paying the (possibly larger) sanction fee without state assistance.
McComb and Epstein announced early this week that they have halted construction on the track until the new contract is signed. This is unlikely to sway Ecclestone, though. FOM has many different options for races; Turkey wants to get back on the schedule, and France would like to host a race.
Formula One very much wants to tap into the U.S. market—and now that they have a deal in place in New Jersey for 2013, the Texas race isn’t as important to the series.
McCombs and Epstein have no leverage against Ecclestone. If they don’t meet FOM’s price, they will be stuck with a partially completed track, which has already cost them $40 million and will need much more than that to be completed, and no headline series to race there.
Ecclestone has said that he wants the dispute resolved by the date of the Brazilian Grand Prix, Nov. 25. If McCombs and Epstein cannot, or choose not to accept FOM’s terms, or cannot supply letters of credit, COTA, McCombs, Epstein, Texas, and U.S. race fans will all lose out.
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