Texas, which is staring at an estimated $15 billion two-year deficit, plans to commit $250 million in state funds to promote Formula 1 auto racing over the next decade. The international racing series showcases the world's fastest cars—low-slung, sophisticated machines designed to rigorous specifications (hence the word "formula") that can clock speeds of more than 200 miles per hour. Although hugely popular across much of the globe, the sport never really caught on in the States, and F1 officials stopped holding races in the U.S. in 2007.
Undeterred, a group of Texas investors, including Clear Channel Communications (CCMO) co-founder B.J. "Red" McCombs, are building a 3.4-mile track in Austin to host F1 races. State Comptroller Susan Combs, a Republican, has agreed to pay $25 million a year to underwrite races through 2022. According to Allen Spelce, a spokesman for the comptroller's office, F1's inaugural race in Austin next year will spur $300 million in spending on hotels, restaurants, and entertainment, allowing the state to recoup its investment through higher tax revenues. "It is important that the state continue to generate new economic activity to ensure that Texas continues to grow," said Spelce in an e-mailed statement.
Combs's plan to subsidize what is widely seen as a rich man's sport has drawn fire. As many as 100,000 Texas teachers stand to lose their jobs because of spending cuts, according to Moak, Casey & Associates, an Austin-based education consultant. For $25 million a year, the state could pay more than 500 teachers the average Texas salary of $48,000. "I'm not sure of the wisdom of using tax dollars to fund a racetrack," says Ewa Siwak, 44, whose job teaching German at Bowie High School in Austin is being cut. State Senator Dan Patrick, a Houston Republican, is another critic: "I don't understand why 25 people in Austin could not put up $1 million each if they thought this was a good opportunity, instead of the state making a $25 million commitment."
Bernie Ecclestone, chief executive officer of Formula One Management, the London company that oversees the annual roster of 20 races from Monaco to Abu Dhabi, says carmakers affiliated with F1 such as Fiat's Ferrari Group, Renault, and Daimler's (DAI) Mercedes, have been eager to stage a U.S. comeback. "We wanted to hold it in America all along, we just didn't have a home," says Ecclestone.
With 20 million Texans living within 250 miles of Austin and a growing F1 fan base in neighboring Mexico, track developer Circuit of the Americas is confident that it can make its $242 million investment pay off. The $25 million a year that Combs has committed will be used to pay part of the licensing fee to Formula One Management.
Michael Cramer, a former president of baseball's Texas Rangers and hockey's Dallas Stars who now runs the sports and media program at the University of Texas at Austin, is skeptical that the state will be able to make back the money. "It's a very high cost of entry," he says. "With places struggling, spending that much money on an essentially one-off event is tough to do."
The bottom line: Texas has pledged $25 million a year to Formula 1. Critics say the money should go to education or other priorities.