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Point Austin: Race-off

Tovo's Place 3 council campaign gets off to a dubious start

By Michael King, Fri., May 6, 2011

"We're off to the races!" might be the opening call for the Kathie Tovo campaign, which kicked off its Place 3 City Council run with TV ads and mailers denouncing a potential "city subsidy for a racetrack." The racetrack is the Formula One venue now under construction near the airport, scheduled for its first event sometime in 2012. According to Tovo's salvos, the F1 track is under consideration for a "$40 million subsidy" from City Council, or as Tovo puts it in her TV ad, "We're in a budget crisis, and the City Council may give $4 million a year [for 10 years] to subsidize a racetrack."*

It's an inflammatory charge – always useful in a challenger's campaign. Is it accurate?

Asked for an explanation, Tovo campaign manager Mark Yznaga said the "subsidy" in the ads refers to the state's Major Events Trust Fund, administered by the state Comptroller's Office, which has tentatively proposed $25 million annually for 10 years (the fund to be replenished annually from the additional taxes generated by the event) to underwrite franchise fees associated with F1. The fund, says Yznaga, also requires a "local match." "That's been estimated at $4 million," Yznaga said, referring me to state Sen. Kirk Watson's website, which usefully summarizes Senate Bill 1515 (the 2009 enabling legislation that added F1 races to the events eligible for Major Events funding). In fact, the comptroller's Director of Communications Allen Spelce told me, the additional $4 million is not a "local match" of up-front money; rather, it represents an estimate of the funds for which the city will be "eligible for reimbursement," by applying to the state for the extraordinary expenses anticipated to be associated with hosting the event.

Yznaga also pointed to the city water infrastructure, which, while already planned for the area, is "oversized" for F1 purposes and for pass-through to subsequent development and is being built (by the racetrack owners to city specifications and eventually greater cost) on an accelerated schedule. "That's real money," he said. True – but it's money the city would have spent anyway on infrastructure it will continue to own when the project is completed – exactly like the water and sewer infrastructure servicing any new business and every Austin neighborhood.

As for the Major Events Fund: 1) The city (not the racetrack owners) would be applying for the money, as reimbursement from the state for the city's event-related outlay; 2) no application has been made for any "subsidy" or incentives, and assuming the previously appropriated fund survives this year's budget battle, legally no application can be submitted prior to one year before the first event; 3) the Major Events Fund is directly tied to event-related income to the state and city. As the Watson summary puts it: "The applicants [i.e., the city of Austin] would not be eligible for incentives in a greater amount than the event would create in tax revenues."

In other words, the incentive, which is distinct from any broader economic benefits like jobs or research facilities, is performance-based, and the city (or county) theoretically recoups its investment from the event itself.

Don't Ask for Water

Moreover, all public discussion thus far of the city's involvement has been tied to the extra public safety expenses inevitably associated with a major public event – anticipating such costs for F1 (at, say, $4 million a year), the city would be able to apply to the state for reimbursement. But Yznaga said such expenses are "not specified" in the law – it "could be roads, electrical ... all kinds of things." (Thus far the only potential road expenses under discussion have been expansion of nearby Travis County roads – but Tovo's not running for commissioners court.) Yznaga says any such expenditures should be subject to the city's multistep "coherent incentive process" (designed to woo new major employers, and not requested by F1), and there's a question whether a racetrack "is somewhere public money should be going at all." Describing standard utility extensions to a new business – in the city's "desired development zone," yet – as an "incentive" certainly brings new meaning to the term.

Football's OK

I asked Yznaga if the Tovo campaign would apply the same standard to all major public events – e.g., the Austin City Limits Music Festival, South by Southwest, UT football games – and whether the city should incur no extraordinary public safety expenses for such events, but instead let the public fend for themselves. "South by Southwest, ACL, and football are not really comparable," he said, "because football has been played in this area for 100 years. We already have a stadium. This is a brand-new facility that's coming in. That's a significant difference – that's the reason we need to follow our process as to how we use incentives, how we use public money." By that grandfathered century standard, music fans – unless they're singing "The Eyes of Texas" – are on their own.

Yznaga reiterated his claim that it's not just public safety money under consideration, and suggested (as do Tovo's fliers) that because Armbrust & Brown attorney Richard Suttle represents the racetrack owners, and Armbrust & Brown attorneys have donated (according to Yznaga) roughly $18,000 (in limited legal increments, as in every campaign) to Place 3 incumbent Randi Shade's campaign, that somehow the fix is in, and Suttle has already worked a deal for council to "subsidize a racetrack." Yet the racetrack is already under construction using private funds, the only "public money" authorized for expenditure thus far is to construct already planned water infrastructure that the city will own, and the proposed "subsidy" is for public safety costs for an event for which the city can apply to the state for reimbursement.

In that context, I asked Yznaga if he didn't think it misleading – and a frankly unfair charge against the current council and Shade – that, in Tovo's televised words: "The City Council may give* $4 million a year to subsidize a racetrack."

"We think it's legitimate," Yznaga concluded.

Tovo goes on to charge that the current council is "more concerned about making big development deals than preserving the quality of life and affordability of Austin for the people who live here." It's a common Austin political refrain – indeed, it qualifies as a relentless local political cliché. It's worked well enough before that it's reasonable for Tovo to expect it will work once again.

Unfortunately, that doesn't mean it's true.

*Due to a transcription error, this quotation originally read, "the Council is considering giving.…" The correct version is "the Council may give.…"

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