Government

With newbo evolve debt looming, Cedar Rapids officials say they won't 'bail out' GO Cedar Rapids

The main stage photographed during preparations for New Evolve in Cedar Rapids on Thursday, Aug. 2, 2018. (Hannah Schroeder/The Gazette)
The main stage photographed during preparations for New Evolve in Cedar Rapids on Thursday, Aug. 2, 2018. (Hannah Schroeder/The Gazette)

CEDAR RAPIDS — As a key meeting between city officials and GO Cedar Rapids approaches next week, several members of the Cedar Rapids City Council said they would not support providing new hotel-motel tax money to “bail out” the financially troubled tourism bureau.

However, they say they are open to seeing a plan from GO Cedar Rapids and could potentially support one that ensures public hotel-motel tax money goes toward the tourism bureau’s mission of promoting the community, attracting visitors, booking conferences and hosting events

“They need to come back with a plan of how people can get paid and how they will move forward,” Cedar Rapids Mayor Brad Hart said Thursday. “I don’t think it is the city’s job to bail out the vendors. They need to show value.”

City officials will need to decide in the coming months, or possibly sooner, what to do with $500,000 in hotel-motel tax money. The money is set aside, and if GO Cedar Rapids was on more solid footing the organization would receive it in the third and fourth quarters of fiscal year 2019, which begins Oct. 1.

The city is expected to withhold GO Cedar Rapids’ hotel-motel tax allocation for the first and second quarter to repay itself for a $500,000 advance issued last year to help pay for a zip line, which never materialized, and to book acts for “newbo evolve,” a three-day festival GO Cedar Rapids put on last month. Withholding the money was part of the agreement if GO Cedar Rapids didn’t repay the amount by Sept. 1, a deadline that wasn’t met.

The nonprofit’s future has been in doubt since suffering a $2.3 million loss on newbo evolve — more than the organization’s $2 million annual budget — and is in major debt.

GO Cedar Rapids owes Bankers Trust $1.5 million for a line of credit used for the festival. Loan terms require the bank be paid first before others who are owed money. GO Cedar Rapids intentionally canceled $300,000 in checks to vendors to avoid bouncing them.

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While GO Cedar Rapids generates revenue from other sources, such as events, member dues and a destination marketing fee, the city — through hotel-motel taxes — has been its major financier. The last three years, GO Cedar Rapids has received $1 million annually, which is by the far the largest hotel motel-tax allocation in Cedar Rapids.

A meeting between Jim Haddad, GO Cedar Rapids interim president, and a couple of city officials, including Cedar Rapids City Manager Jeff Pomeranz, is scheduled for next week where Pomeranz expects to learn more details of Haddad’s plan, he said.

“We don’t have a proposal from them at this time, but we expect to hear from GO Cedar Rapids next week,” Pomeranz said. “I am not sure what they are going to ask for. ... We are happy to listen to any reasonable proposal.”

It’s unclear how the organization can settle its debts and continue operations without city support, which appears tenuous.

“I don’t know if they are going to request anything from the city, but if they do, they are going to have to make a very compelling case as to why the city should be involved,” council member Tyler Olson said.

“If the question is ‘Can we and should we bail out this last event?’ I am reluctant to do so,” council member Dale Todd said. “We went out on a limb as it was, and I think we have to abide by that (deal to withhold hotel-motel tax).”

Council member Scott Olson said, “We want to see where the money would go to. They have staff to pay for and debt that exceeds their annual budget. ... They have to resolve the issue — does GO Cedar Rapids continue to exist? Does it reorganize? I am not sure there is support to pay off their debt.”

Council member Ann Poe said she is not ready to release money to GO Cedar Rapids at this point, but could if the group presents a viable plan.

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“My overall suggestion — and nobody has asked me — I think they need to regroup; start over again,” Poe said. “They need to downsize, keep staff that generate income in our community, and go to a location they can work closely with the convention center and VenuWorks. ... I would be inclined to support them using a few key folks, regrowing the organization and rebuilding confidence in the community.”

VenuWorks books acts for the U.S. Cellular Center, McGrath Amphitheatre, Paramount Theater and the Cedar Rapids Ice Arena, among other venues in the state.

Haddad said he would not address speculation and rumors, the organization’s balance sheet, who he’s been meeting with or what scenarios are being discussed. Haddad was hired on a temporary basis on Aug. 27 to replace Aaron McCreight, who was fired for his role in newbo evolve and “misleading” the board, board members have said.

“There’s too much speculation in this whole thing,” Haddad said. “My job is to come in and put together a plan. We need to avoid speculation, and we need to deal in facts.”

A timetable for presenting GO Cedar Rapids’ plan is subject to how conversations with various stakeholders go, he said. He reiterated that his goal remains to keep the organization viable and pay back all the money it owes. The organization is also continuing to review options for hiring an independent firm to conduct an audit of newbo evolve. When a firm is finalized and a timetable established, that will be made public, he said.

l Comments: (319) 398-8310; brian.morelli@thegazette.com

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