COTA Austin - construction and infrastructure

[xpensive]

This very thread, My 26, 2010;

Any which way you slice it, there has to be a USGP, problem is to find a venue of course. Phoenix and Dallas didn't work, we know that. Are all the classic tracks out of the question?

I find it difficult to judge if MrE was serious about Austin to begin with, NJ seems to be far closer to the F1 tradition and related audience than anywhere in the deep south? Austin looked to me quite an odd venue for Formula One from the word go?

[Ray]

Ray,

Yea, I agree Bernie is too evil to reliably do business with.

I don't agree with your image of Tavo as an innocent fall guy. In the stories above he denies demanding a $39 million payoff, which is an indirect way of confirming he did demand a payoff. If he simply gave the contract to COTA because he couldn't fullfill his obligations then there would apparently be no problem.

With any luck you and I can meet at the 2013 New Jersey race to argue about this over beers. Hell, I'll invite Tavo too.

Yeah we do differ in opinion. Tavo has a lot of time invested in this project, and the ones for V8 SC and MotoGP. To simply give that away would be stupid. The $39 million dollar buyout can't be confirmed off of one reporters phone call, so I don't know why denying something that isn't proven to be true is admission of guilt. Besides, the medias job is to tell lies and stir the pot. All media is that way and I'm willing to bet that reporter pulled that figure out of thin air to goad Tavo into saying something they could take out of context later and cause a big stink. I don't know who is more evil or less trustworthy, the news media or Bernie. Both are evil to the core and I wouldn't trust either. Hell, I wouldn't even go to the press and say anything unless everyone that was involved was there. All that does is add fuel to the fire and cause ridiculous speculation that does more harm than good.

I see it as Tavo is between a rock and a hard place and he didn't necessarily put himself there. If he's not being paid by any party of course things are going to grind to a halt. We know for sure that Susan Combs is a liar and I don't doubt the investors aren't lying either. Having that much money being thrown around they definitely wouldn't go forward unless they could get the Texas taxpayers to pay the vast majority of the costs so they wouldn't have to. After Susan Combs reneged on her commitment they probably stopped writing checks too. I know for a fact they don't want to pay a dime of promoting that race or any other race, they want money from the races held there. His company is a promotion company and after the reneged guarantee from the state of Texas they probably stopped paying what bills were there to build the track, and Tavo is left holding the bag and gets all the negative attention.

Oh and I probably won't go to the New Jersey race. I refuse to be sexually molested or hit with x-rays to travel in my own country via airplane and I'm not driving all the way to NJ. I'd drive to Texas in a heartbeat because I have family members to stop and pick up/drag them to the races with me but not on the way to Jersey. Besides, I would get to piss of Texan morons with my lowered truck as I scoot down the freeway. One dude even gave me the finger and said I "ruined" my truck last time I was in Ft. Worth. Was the best laugh I've ever gotten and he got beet red when I busted out laughing in his face and told him thanks for the compliment. But I do love Texas, great highways and great food. Driven from side to side 4 times all by myself and loved every mile of it.

[hairy_scotsman]

The original understanding is that Tavo will supply the contract and fund it via the Texas subsidy and/or other means. You will pay to build the track, which represents the vast majority of the upfront costs.

That's not how the deal was set up. The investors were to pay Bernie's fee by 7/31/11 and then be reimbursed by the METF. They can't/haven't paid.

You begin writing large checks to Tilke and various heavy construction companies. Then Tavo calls you up. He says he can't actually fund the responsibilities in the contract. He thinks it would be swell if you would pay those costs in addition to building the track.

It was never going to be Tavo paying those fees, and from what I've been hearing the investors weren't writing many checks, either...rather they were keeping Austin Commercial working with lines of credit.

Oh, and one other thing-- Tavo helpfully suggests that you should also pay him to buy the contract itself, otherwise he'll sit on it and take down the whole project. Tavo has no money in the game so it's a believable threat. You get pissed, tell Tavo to go f@ck himself and stop work at the track. End of story.

COTA investors wanted the rights transferred to them by Tavo, not the other way around. They needed them to secure another major line of credit because presumably they either didn't have the money they needed or weren't inclined to spend it if they had it. They wanted 'em, but apparently they didn't wanna pay a fair price.

It seems clear that Tavo never had any plausible means of fullfilling the contract. From the beginning he was either incompetent or a simple blackmailer. Am I missing anything? Anybody else have a plausible story that explains everything?

Anyone who didn't know from day 1 that Tavo wasn't going to be the guy to fulfill the $25M fee had to be an abject idiot. Seriously, from the moment this project was announced anyone with a pulse should have been able to discern that. It was never a secret.

[WhiteBlue]

http://www.autoweek.com/article/20111117/F1/111119835

This sounds quite plausible. They were hoping to pay Bernie with the money from the major event fund. Due to the delay of the race the fund money was also supposed to be delayed. This probably started the whole mess.

Now, that their difficulties have come to the notice of the public the fund money will only be paid after an evaluation of the actual economic impact of the race. It was very dumb of them to drag it out that much and not keep the thing private.

One can only hope that Hellmund is true with his claim that the money is now in place to pay FOM. I think that Bernie is playing this very straight. If the COTA guys fulfil the obligations - even if they do it delayed - he will probably put the show on. In my view he is perfectly entitled to do so. There is no reason that Austin should receive even better conditions. They got a pretty sweet deal already if you compare it with Asian and Arabian race fees. Usually I am against Bernie but in this case I think he has acted correctly. He over charges, that is true, but when he has done a deal he sticks with it.

COTA needs to cough up the money if the race is to go ahead. Let's hope they do it. It would be a shame to ruin this plan. I think it will be a fantastic race and to through it away after so much work is done would be a stupid.

[hairy_scotsman]

Look guys, I know it's easy to make kneejerk reactions like "Bernie is evil and is screwing the U.S. out of a race", or "Susan Combs is lying", or "Tavo H. doesn't know what he's doing", but I really don't believe any of that is true. If you look at the big picture, it appears that these three parties, and Dorna, are working in concert to resolve this situation.

Look at Combs' move. There's more to it than most people think there is. She's been fine with this deal for 18 months, but she suddenly made her move in the same week that Bernie made his moves, and COTA stops construction, and Dorna says MotoGP is in doubt if there's no F1 race here. Coincidence? Really? This move hurts the investors in this deal...REALLY puts them behind the 8-ball.

Bernie can do whatever he likes with the rights to the race, esp when he's supposed to have been paid 5 months ago.

Tavo's influence lies in his ties with Bernie, his political contacts, his knowledge of racing and the racing business, and his racing ties worldwide. As far as I can discern, the guy is on a speed-dial basis with damn-near every significant motorsport figure the world over. He also still has the MotoGP rights with Kevin Schwantz, and the Aussie V8s rights.

The investors have the checkbook (that appears now to not be as big as advertised).

COTA investors screwed this thing up when they began cutting Tavo out of the deal and weren't willing to pay him a fair price to transfer the rights to CoTA. Then they miscalculated on their end-around to Bernie when they withheld payment that was due 7/31, forcing Bernie to cancel Tavo's rights contract. Through some MASSIVE leap of fantasy, they seemed to think they could get the same $25M deal from Bernie even after disrespecting Tavo (essentially Bernie's family) and ****ing all over the deal Bernie and Tavo had set up.

See where I'm going?

The investors thought they'd be clever by getting rid of Tavo & playing hardball with Bernie. Instead, they got a massive lesson in what hardball really is.

They underestimated Tavo, Combs, and Bernie (and maybe Dorna as well). COLOSSAL mistep.

Think about it.

They HAD the "family" price already through Tavo. They just didn't pay it. As a result Tavo's rights belong to Bernie again and they have to pay Bernie's price. Now COTA is dealing with Bernie (and a pissed off one at that), not Tavo. No friends & family discount. Additionally, Combs is saying "You're no longer getting the reimbursement before the race because your deal has now fallen out of those parameters, AND further dealings with you will be more heavily scrutinized because you effed this up". The MOST they'll get from the METF now will be $25M. If they pay Bernie now, they won't get reimbursed until early 2013, EVEN IF there's a 2012 race...and the price has likely gone up. They'll have to make up the difference between the METF funding and Bernie's price, every year. That difference over 10 years will likely add up to $100M or more. Had they paid up back in July, they'd be getting set for full reimbursement in a month or so.

Now Dorna's saying their race may be in doubt if there's no F1.

So in a nutshell everyone is bringing pressure to bear on the investors, saying "No Tavo? No discounted F1 rights fee" or, "No Tavo? No advance payment", or "No Tavo? No MotoGP".

Now we see who blinks first. My guess is it won't be Bernie, or Tavo, or Combs...

[hairy_scotsman]

http://www.autoweek.com/article/20111117/F1/111119835

One can only hope that Hellmund is true with his claim that the money is now in place to pay FOM.

Hellmund isn't making a claim that the money is in place. He's pointing out that that is what the CoTA investors are claiming ( http://www.kxan.com/dpp/sports/auto_rac ... -work-site ) and putting the onus on them to make good on their debt if the money really is there.

Meanwhile Bernie has come right out and said the COTA investors can't pay.

( http://www.racer.com/sexton-2013-a-poss ... le/217032/ )

I think that Bernie is playing this very straight. If the COTA guys fulfil the obligations - even if they do it delayed - he will probably put the show on. In my view he is perfectly entitled to do so. There is no reason that Austin should receive even better conditions. They got a pretty sweet deal already if you compare it with Asian and Arabian race fees. Usually I am against Bernie but in this case I think he has acted correctly. He over charges, that is true, but when he has done a deal he sticks with it.

Exactly. Thinking they could screw Bernie's good friend and then still get the same "friend/family" price was a misjudgment of epic proportions. If they thought they'd get a cheaper deal somehow, they clearly had lost their minds.

COTA needs to cough up the money if the race is to go ahead. Let's hope they do it. It would be a shame to ruin this plan. I think it will be a fantastic race and to through it away after so much work is done would be a stupid.

They need to cough it up or agree to be bought out.

[hairy_scotsman]

Oh, and here's a great interview with Susan Combs re: CoTA funding from just a day or two ago:

http://www.statesman.com/blogs/content/ ... in_f1.html

[WhiteBlue]

HS, I think you are totally on the money with your view. An epic underestimation on behalve of the CotA investors. It would be a typical Bernie to raise the price under such conditions. One has to remember that he has been under tremendous pressure by FiA and FOTA to reestablish a USGP. Now that he has a second iron in the fire he suddenly finds himself with a beautiful BATNA (best alternative to negotiated agreement) and CotA is holding an empty bag. The way it looks to me this is an impressive lecture to Mr. Epstein of how to shoot his own foot in business. The guy is the lead investor in CotA and he looks like a fruitcake now.

[bhall]

While I wouldn't call that interview "great," I think it's quite revealing nonetheless.

In it, Combs repeatedly declines to speculate on the future of the proposed USGP because, she says, the state has not yet received from race organizers an application for money from the Major Events Trust Fund (METF). Further, she says it's neither her job nor the state's to "save" this event.

"This is a private enterprise activity. I treat them all the same. You show up when you’ve got your ducks in a row. We take a look at it."

I guess she's simply forgotten about her enthusiasm for the race when it was announced in May of 2010 and Gov. Perry's praise "...for her work in bringing this exciting event to the Lone Star State.”

That work, folks, was an assurance of state backing, to use the METF for its intended purpose, which is to "attract and secure" events. So, what changed?

She was asked twice if METF money could be disbursed now if a proper application was submitted. She said no twice and mentioned New Jersey ahead of all other problems both times.

"We don’t know yet the effect of New Jersey. I haven’t had time." "Because New Jersey came in. And that was something else."

I'm firmly convinced that Mrs. Combs/Texas, however you want to refer to that entity, is the sole reason behind the complications currently plaguing this project. It's not COTA; it's not Tavo Hellmund/Full Throttle; it's not even Bernie Ecclestone.

The METF money was to secure the race with FOM. Hellmund/Full Throttle and COTA would have then had time to sort their differences and to do so free of the pressure caused by the imminent threat of FOM terminating the contract. But, like I've said before, as soon as Texas lost its position of exclusivity in having an F1 race in America, they balked on their agreement.

At best, it's a gross misunderstanding of economic reality. At worst, it's just stupid and childish pride.

[bill shoe]

useful comments, but I'm not buying them. The recent meme in this thread is to portray Tavo as having no responsibility to do anything once the initial announcement was made.

This seems inconsistent with his recent press conference where he used awkward and vague language and was shut down by his lawyer/minder at least once-- if you had no responsibility then you have nothing to hide or be legalistic about.

Also, we all seem to agree that after the initial race announcement, Tavo demanded a payment from the other partners (we are only uncertain on the price). Why would he wait and do this after the initial announcement if he had no subsequent responsibility? His only leverage to force payment was if he had subsequent responsiblity for getting something done. Or it was the simple blackmail thing, in which case he failed.

Also, Tavo climed to be a "promoter". Promoters run events and try to make net profits from them. This seems opposite of Tavo's apparent attempt to demand an up front finder's fee for the Bernie contract and then have no further responsibility.

I do agree with the general meme that everyone thought they would out-screw everyone else. This is the only way to explain the vaugeness in the original partnership. Each partner thought they would use the slack to their advantage.

[bhall]

I think Hellmund's role is, and always has been, like that of a film producer. He set about creating a grand prix by connecting all of the disparate dots required to make it happen, even if, ultimately, he was to have no direct responsibility for any one of them. Imagine someone schmoozing at a party, and you'll get the idea.

One can only guess what commitments were made to COTA in order to secure the track, but I don't think it's far fetched to imagine they were offered a deal that promised a profitable return on the investment. And that doesn't seem like an unreasonable scenario when you realize that COTA "only" had to build the track. Hellmund/Full Throttle would then be responsible for securing any necessary sponsorships, deals with vendors, staffing for the race(s) and so on. Between F1 - which was secured for a far more reasonable fee than has recently been the case - MotoGP and V8 Supercars, as well as any other event the track could possibly host, it's clear the potential for profit exists.

COTA's job is to merely exist. Hellmund/Full Throttle's job is to facilitate the details, which it did when he put COTA, FOM and the State of Texas in the same room to create something together that none of them could have created on their own.

What matters at this point is who pays what and when, and I still contend that it was the State of Texas who dropped the ball, because none of this makes sense business-wise without funds from the METF to pay FOM's sanctioning fee.

[strad]

What matters at this point is who pays what and when, and I still contend that it was the State of Texas who dropped the ball, because none of this makes sense business-wise without funds from the METF to pay FOM's sanctioning fee.

I agree with all but mostly this.

[bhall]

If not for money from the METF, why even involve the State of Texas in the first place? What's their role otherwise?

[strad]

you are absolutely right on that.

[hairy_scotsman]

For those of you who missed it, here's video of Tavo Hellmund's press conference on Thursday:

Part 1:
http://www.facebook.com/photo.php?v=291 ... =2&theater

Part 2:
http://www.facebook.com/photo.php?v=292 ... =2&theater

Part 3:
http://www.facebook.com/photo.php?v=292 ... =2&theater