Finances the problem with F1 contract

AUSTIN, Texas (KXAN) - The phrase "Start your engines" was heard out at Austin's Formula One racetrack area Thursday -- but it wasn't directed at race cars. The bulldozers were loaded up and off the site after the project hit a wall this week with news of a problem that developed among those spearheading it.

On Thursday afternoon, race promoter Tavo Hellmund of Full Throttle Productions said it was a simple fact: "We don't have a contract. We have failed to fulfill our financial obligations. It's that simple."

The countdown to a Dec. 7 deadline is under way as the situation can be rescued if developers secure a letter from a bank by then which states F1 boss Bernie Ecclestone will be paid a $25 million sanctioning fee before the first race is held.

"My eternal hope is that there will be a race next year," Hellmund said. "My role is to bring my experience, relationships with content ... Any of you who have known me a long time know that I am sad and worried, but I'm hopeful because this project means the world to me."

Hellmund said it was not his role to handle the money. "I don't pretend to know the financing part of it."

He said Ecclestone was not to blame, but that "We should be praising Mr. Ecclestone. We were in breach on multiple issues as recent as May ... He sent many letters we were all aware of and we failed to fix it."

Hellmund said he did not want to point fingers and that the project has been under-funded. "I don't think there's any shame in that," he said.

"It may be that the timing was barely off," he added. "If they ask you for payment and you can't do it over and over and over ... and they were willing to tear up the old contract and write up a new one."

That's where the problem lies.

The many parts

On Dec. 7, the Motor Sports Council meets to ratify the 2012 racing calendar. No money paid, likely no race for Austin, according to Ecclestone .

Last June, Circuit of the Americas and F1 submitted the proper application to the Texas Major Events Trust Fund , along with an economic impact study. That was a year out from when the first race was initially set for, in June 2012. METF rules state an entity can apply for funds no more than one year out from a scheduled event.

When the first race date was later changed to Nov. 18, 2012, it caused a problem. The state process requires another application and economic impact study be submitted to METF, since the June study is no longer any good. The METF could potentially provide up to $25 million to the project.

In the meantime, news is out that New Jersey may also get an F1 race, which concerns the Texas Comptroller's Office -- overseer of the METF -- because of the negative economic impact that might have on an Austin race.

METF takes into consideration money that would be brought into the area via taxes and benefits to hotels, restaurants, car rentals and alcoholic beverage taxes. An event has to bring in at least  $15 million to be eligible for such funds.

Circuit of the Americas and F1 officials have to come to an agreement by the Dec. 7 deadline and get a race firmly in place on the 2012 racing calendar in order for another application to be submitted to METF.

Construction on the race track outside Elroy, east of Austin, had been moving along smoothly since early summer. Permits for construction of four buildings on the site were issued in July . The value of property in the adjacent area has reached upwards of $1.5 million, according to real estate broker Jack Miller of the GoodLife Team . He said if a deal isn't reached, prices will fall back down to what they were before the project was put in place -- all together having an impact on the economics of the Austin area, along with new jobs that came along with it.

With less than three weeks left to get to a new starting line, it's unknown what could happen to the entire project if details aren't resolved by Dec. 7.

Midday Thursday, president of Circuit of the Americas, Steve Sexton, issued the following statement:

"We have been excited for and working towards a 2012 USGP race and now understand that Mr. Ecclestone is interested in moving the Austin race to 2013. We know the U.S. market is important to the teams and their sponsors and 2013 certainly allows time for the Circuit of the Americas to be ready."

Sexton came to Austin and Circuit of the Americas in February after holding the role of president of Churchill Downs Entertainment. Under his leadership in Kentucky, the historic venue had six consecutive years of attendance growth. The Kentucky Derby also posted the second, third and fourth highest attendance records.

In an article published Thursday in the London Independent , Ecclestone said he is pushing back an Austin race to 2013 because the race track won't be ready, which is a conflict to a statement made in the same article by Sexton, as follows: "Funding is secured and construction is on schedule. There is no question that if [Ecclestone] wants the US GP race to happen here in