116 3rd St SE
Cedar Rapids, Iowa 52401
CEDAR RAPIDS - Facing more than $2 million of debt following this summer's expensive 'newbo evolve” music and cultural festival, the GO Cedar Rapids tourism organization will fold and leave unpaid vendors in the lurch.
Debt accrued from the August festival - $300,000 more than the organization's $2 million annual budget - was too much to overcome, GO Cedar Rapids interim chief executive officer Jim Haddad said Friday.
'The real estate cliché is location, location, location. In this situation the cliché is debt, debt, debt and we could never get over that hurdle to find an effective way to pay off that debt,” he said.
Haddad, a former Yellowbook USA executive and financial consultant, was hired in August to lead the private nonprofit organization out of the debt it accumulated during the first-time festival called newbo evolve on Aug. 3-5. The festival featured musical acts Kelly Clarkson and Maroon 5, celebrity speakers and other events.
The president and community events director of GO Cedar Rapids were both fired in the days after the festival as the extent of the financial debacle became more clear.
Haddad said the organization considered all options to stay afloat, but declined to give specifics. Ultimately, the group's board of directors Thursday approved plans to cease operations.
GO Cedar Rapids' nine employees will be paid for their last day but Haddad would not comment on whether they will receive severance pay or extended benefits.
'Everybody put forth their best effort to make this work. That's little solace to our employees, little solace to the vendors who don't get paid, but I can assure people we tried everything we possibly could,” he said.
Come Monday, the GO Cedar Rapids legal entity still will exist, but will become a dormant nonprofit and cease activities, he said. The entity was established in 1982 as the Cedar Rapids Convention and Visitors Bureau and rebranded as GO Cedar Rapids in 2016.
With no assets or reserves, the debts - which includes a $1.5 million loan from Banker's Trust and hundreds of thousands owed to vendors - cannot be paid, he said.
'Essentially there are no assets to pay it off. As a dormant corporation, there's no recovery,” he said, adding that the debts to vendors range in amounts from a few hundred dollars to several thousand. 'Small, large, medium, in terms of debts, in terms of size of organizations. Large organizations, small mom and pop shops in the city.”
Scott Valbert, director of corporate communications with Banker's Trust, said when asked to comment Friday that the bank does not share details on customer relationships.
The city of Cedar Rapids had provided GO Cedar Rapids a $500,000 advance ahead of the newbo evolve event, which will be recouped through hotel-motel tax funds that would have gone to the organization later this year.
Casey Drew, city finance director, said the city is a separate entity and therefore not covering any of the organization's debts. But he said the city felt it was important to carry on the marketing efforts.
'GO CR is not the city of Cedar Rapids, it is a separate entity and it's unfortunate, we feel bad for those vendors who did not get paid. But at the same time it wasn't the city that ran that event, it wasn't us that put it on, so what we're trying to do is make sure that we continue to promote tourism and support the events that are coming in the future,” Drew said.
The city announced Friday it temporarily will take over the marketing role for tourism, conventions, meetings, sports tournaments and special events. The city's initiative is expected to continue 12 to 18 months on a transitional basis.
Those operations will be managed by VenuWorks, which books acts for the U.S. Cellular Center, McGrath Amphitheatre, Paramount Theatre and the Cedar Rapids Ice Arena, among other venues in the state.
VenuWorks is determining staffing needs for the added operations, which will be funded using the $500,000 in hotel-motel tax proceeds that would have gone to GO Cedar Rapids.
According to a city news release, Cedar Rapids will promote community assets and work to solicit groups to hold meetings, conventions and events in town and encourage tourism. Drew said efforts will be made to complete commitments already made by GO Cedar Rapids.
Drew said it's possible the community ultimately creates a new convention and visitors bureau.
'That will be something we will start right away and hope that within the next 12 to 18 months that we will have a plan, but we will be engaging with the community on that,” he said.
The city had been the main financial backer of GO Cedar Rapids for years, providing $1 million annually through hotel-motel tax revenues.
To the south, Josh Schamberger, president of the Iowa City/Coralville Area Convention and Visitors Bureau, said the news of GO Cedar Rapids shutting down was unfortunate.
'Conferences, amateur sporting events and group leisure travel injects millions of dollars each year into the Cedar Rapids economy,” he said in an email. 'CVBs also play a leading role with area quality of life efforts which is one of the more important community economic development components.”
Schamberger said he is confident Cedar Rapids will bounce back.
'That CVB has been a strong one for well over 30 years and it's terrible that it all comes crashing down on account of a few people,” he said.
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