Austin City Council has delayed a vote to approve the staging of the United States Grand Prix at a purpose-built circuit on the outskirts of the state capital, despite urgency being required to see off a legal threat to the event.

Despite warnings from F1 organisers that the project needed to be approved by Thursday [23 June], the council decided to postpone the key vote - on whether to approve the running of the race from 2012 - until next Wednesday [29 June]. Approval from the council is required to see off an anti-subsidy lawsuit which has been lodged with the courts and threatens to derail the much-hyped deal to return F1 to the US.

Three residents of Travis County have filed a legal action in an effort stop the state using $25m of public funding annually to pay F1 for the right to stage the event, and that could be enough to stop Tavo Hellmund's project in its tracks, even though work has already begun on landscaping the Circuit of the Americas facility. The lawsuit claims that state comptroller Susan Combs misused the area's Major Events Fund to secure the USGP, alleging that there should have been more public consultation, the offer of tax incentives and a proper selection process before the decision was taken.

The Major Events Fund works by providing funding based on the extra sales tax revenue the state believes will be generated by attending fans, with a figure of more than $280m being attached to the F1 event. Any event receiving money from the fund must also have been won in competition with venues outside Texas, and supporters of the USGP bid will claim that rival sites in New York State were being mooted before the surprise announcement that Austin had been awarded the race.

"All applicable state rules and regulations were followed," a statement from Combs' office insists, "Like other Major Event Trust Fund events, such as the Super Bowl, NBA All Stars and the Final Four, we feel the F1 event will be good for Austin and Texas. By bringing F1 to Austin, we create jobs and spur economic development. The comptroller's office has followed the law as it is laid out in statute and administrative rules."

Attorney Bill Aleshire, however, claims that Coombs promised to stump up $25m a year for a ten-year deal well before news broke of any tax incentive offer was made by the state. Aleshire has already made his opposition to the race well known [see story here], and filed suit on behalf of the Travis County residents, who additionally claim that the funds diverted to F1 should have been used to improve 'essential services' within the state.

"When we are firing teachers, librarians, school nurses, art and other activities as well as under-funding health care for the aged and the poor, to agree to spend $250m on a bunch of con artists and their expensive toys is unconscionable and immoral," Bill Bunch told ynn.com.

Austin City Council was due to stage a meeting with F1 promoters yesterday [Thursday], but Aleshire insists that that was too late in the process, despite the city and F1 representatives reaching an agreement that would have race promoters, and not the city, place around $4m into a trust fund every year through the ten-year deal

"This is the first time that the Austin City Council has taken any action on the incentives on F1," he noted to ynn.com, "The action should have occurred a year ago, or two years ago, if we were going to comply with the statute in a competitive process to try and bring F1 here."

Despite the lawsuit claiming that no date has been set for the race, the FIA has already slated 17 June 2012 for the first race at the Circuit of the Americas, work on which has been underway for more than six months.

The vote was delayed despite council members appearing to be generally in support of the event, and mainly because of concerns over the small print of contracts relating to the city's endorsement, loopholes in environmental requirements and an agreement that would eliminate local taxpayer support for the event. The backing of the council is essential, however, as, without it, the race would not be eligible for any state subsidies, including access to the Major Events Fund. More than 250 people, from both sides of the argument, signed up to speak at the council meeting, although not all managed to get their voices heard on the day. The vote to delay a decision was carried 6-1.

"It doesn't make any sense to do this wrong, and there are serious issues to be resolved," councillor Laura Morrison told the local Statesman newspaper after calling for the delay, "I think it's the responsible thing on our part to take the time to do this right."

Attorney Richard Suttle, representing the event organisers, said any delay to the vote could have drastic effects for the event because Combs needs to review the agreement between the organisers and the city before releasing the Major Events funds to meet a late July deadline.

"It throws the project into a very bad position if you postpone," he told the council, "It is a major concern to the project, fraught with risk and could kill the deal for the city of Austin."

Circuit president Steve Sexton, however, insisted that the organisers could afford to wait for the small matter of six days if the vote eventually went in their favour.

"We're in agreement on the substance of the terms," he pointed out, "We will be good citizens of Austin. I don't believe it puts the entire project at risk."