Being the prophet of doom is not always the most difficult of the soothsaying pastimes. When Bobby Epstein and Red McCombs cut Tavo Hellmund from the deal agreed to partner in the COTA build project and the F1 race promotion of the newly returning US GP – the writing was on the wall for COTA before an F1 tyre turned in anger.
The TJ13 2012 article, Law suit involving Austin GP promoter, detailed the dispute between Ecclestone’s family friend, Tavo Hellmund and the partners in the COTA project.
Ecclestone was clearly unimpressed with the behaviour of McCombs and Epstein toward Hellmund and made this clear in an interview with Adam Cooper. “I was disappointed insofar as he [TAvo] had what he thought were partners that could finance the business and wouldn’t let him down. Really, they let him down, and they’re trying to steal from him, get him out of [the project] and do the whole thing themselves.”
The contract Ecclestone signed with Hellmund for a US GP was torn up following Tavo’s exit from the project and Ecclestone forced a new and less sympathetic set of terms and conditions on McCombs and Epstein. Bernie explained his rationale: “Knowing that they were going to be the people bankrolling him, and knowing what happened to them [and what they did to Tavo], we don’t feel that they are reliable as they should be”.
This meant the upfront fee to Ecclestone – as a guarantee COTA would in fact be constructed – in all likeliness was raised. But more importantly the FOM protection offered to ‘new’ F1 race hosts – who have suffered the start-up costs of delivering an expensive new F1 facility – was given to McCombs and Epstein. By comparison, Malaysia and Singapore for example were given guarantees that their race would not suffer regional competition either side of their event during the term of their first contracts.
The result in year four of the US GP in Austin, COTA was scheduled back to back with the returning Mexican GP.
Epstein revealed following the race that the event had been a financial disaster, but specifically cited the loss of revenue from ‘concessions’ running into ‘millions’. The numbers attending the F1 event in COTA in fact held up well, given fears that up to 40% of their audience in the first three years had been fans travelling from Mexico. The Sunday race figures were down from 2014 by just 6,000.
However, COTA has been receiving a state subsidy of $25m because of the economic benefits received in Austin and Texas from out of state fans specifically visiting the area because F1 is in town. Incremental tax receipts alone in previous years have been estimated at around $22-23m.
Despite the COTA claims that F1 fan numbers at the US GP were only down around 5%, Officials with the governor’s office have revealed to the ‘Statesman’ that the state pay out to COTA this year will fall by 20%. A loss of nearly $5m. Having heard this news, Bernie Ecclestone responded saying that, “If it’s changed, it’s going to be difficult to continue the race in Austin.” The state subsidy is a significant contribution to the race hosting fee Ecclestone charges COTA – which despite this in previous years has made a loss on the F1 weekend.
Epstein is more direct with his assessment of the bad news. “To use a technical term,” he said, “I think we’re screwed.”
There may well now be a legal dispute, because as part of the deal to build COTA, Epstein and McCombs believe they received guaranteed state subsidy of $250m guaranteed for 10 years. COTA officials are accusing the state office of changing the criteria used to calculate the state subsidy, given that attendance was down just around 5%. Epstein described this as “a breach of trust,” adding, “the state clearly made promises. I think we made a deal, and we lived up to our end of the deal. It’s like you go to a restaurant and order a dinner, and then after you’ve eaten the meal they change the price.”
The reduction in the COTA subsidy is no post event surprise for the owners, because when announced Bobby Epstein remarked, “It hit us cold. No one could foresee this coming.” Tavo Hellmund’s former business partner revealed had the tickets not been sold, they would have considered cancelling the 2015 F1 COTA event. He concludes, “But the big question now, is – Is the race coming back?’”
FOM would levy hefty penalties on the COTA race promoters should they withdraw from the F1 calendar in 2016. Yet, this will be weighed against the increasing losses COTA is suffering and whether the whole project should be abandoned.
A deal to sell COTA earlier to IRG Sports & Entertainment, a Florida-based company that owns multiple race tracks around the country, fell through.