DALLAS — The Austin City Council has paved the way for promoters of a Formula One race to receive $25 million per year from the Texas comptroller’s office over the next decade, but a lawsuit challenging the legality of the state subsidy still stands in the way.

William Aleshire, former Travis County tax assessor-collector and attorney representing three Austin plaintiffs opposed to the state subsidy, said he expects the first hearing on his suit in state district court this month.

Because there are no pending bond issues involved in financing the race, the lawsuit is not expected to impede planning or financing the event using private funds. However, the $25 million from the state’s fund for major events is considered a vital element of the event financing.

“This would not have been so controversial politically or legally if Formula One proceeded as a purely private enterprise project, or if they had openly involved the city of Austin years ago in actually offering tax incentives as part of a deal for F1 to locate here, instead of this after-the-fact approach,” Aleshire said.

In a 5-to-2 vote Wednesday, the City Council endorsed the event to be held southeast of the city, tentatively next June. The track for the race is already under construction.

The deal calls for the race to be held annually for 10 years. The $25 million yearly subsidy from the state would come to $250 million over that time.

Newly elected City Council member Kathie Tovo, who joined Laura Morrison in opposing the event, said she could not support state subsidies for a recreational activity after the Legislature slashed spending for schools and services for the poor.

Aleshire’s lawsuit contends that state law does not permit the comptroller to pay the $25 million unless the date for the event is less than one year away.

“The comptroller promised F1 in writing that she would pay them that money no later than July 31, 2011,” Aleshire said.

“F1 put out a press release saying the Austin race would be June 17, 2012, but the Austin race date has not been officially set by the World Motor Sport,” he said. “The date won’t be set until the World Motor Sport Council of the Federation Internationale de l’Automobile meets in September or December. The comptroller should not have promised and cannot legally pay F1 that money until the race date is set.”

Aleshire also said that the state cannot legally offer subsidies for an event unless a local government has already offered incentives to bring the event to Texas. That did not happen, and Austin officials have said that no local tax revenue will be spent on the race.

Race promoters have touted the event as an economic boon for the Austin area.  Council members supporting the race agreed.

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