116 3rd St SE
Cedar Rapids, Iowa 52401
As the extent and implications of GO Cedar Rapids' losses over producing the 'newbo evolve” festival have become more clear in the last few months, Gazette readers have been posing questions about what has turned out to be a financial fiasco. Here are questions you asked, with answers our reporting has revealed.
How can GO Cedar Rapids be a separate entity if there were city officials on the board?
There are two city of Cedar Rapids officials on the 18-member GO Cedar Rapids board of directors: Assistant City Manager Angie Charipar, who served as the city liaison on the six member executive committee, and City Council member Scott Overland, who served on the board at large. While the city provided $1 million a year in public money to the organization - about half its budget - the city did not have a controlling stake on the board. They legally are two separate entities with separate boards and bylaws.
How did things get this far?
Efforts to create a signature event for Cedar Rapids go back a ways. Here's a brief chronology:
July 2017: GO Cedar Rapids board approves the 'newbo evolve” plan. Its budget was greater than $3.8 million, board president John Myers later says.
Fall 2017: City twice approves advancing $250,000 from GO Cedar Rapids' expected allocation of hotel-motel tax money with the condition the amount be repaid by Sept. 1, 2018, or the city would withhold future installment to effectively repay itself.
December 2017: Agency's board signs off on a $1.5 million line of credit from Bankers Trust after GO Cedar Rapids exhausts the $500,000 city advance.
January: GO Cedar Rapids publicly announces the festival to be called 'newbo evolve” and featuring Maroon 5, Kelly Clarkson and celebrity speakers.
August: By the time of the Aug. 3-5 festival, GO Cedar Rapids sells 8,340 tickets combined for the Clarkson and Maroon 5 concerts out of targeted 11,000 per concert, and gives away 3,804 complimentary tickets. Only 602 of a planned 4,000 three-day passes are sold. Passes cost $375 plus tax, later reduced to $275.
Aug. 21: GO Cedar Rapids announces the event lost $2.3 million and the board fires CEO Aaron McCreight, who previously had fired Scott Tallman, the community events director. The board accuses the men of providing inflated ticket sale and sponsorship figures and spending beyond what the board had approved.
Oct. 15: With the city unwilling to continue providing tax money and not enough private support, GO Cedar Rapids was unable to overcome its debts and folded, still owing $800,000 to vendors and $1.5 million to the bank.
Where there any warning signs (alternately, why were warning signs ignored)?
A: Members of the GO Cedar Rapids board of directors said they were provided inflated ticket sales and sponsorships, which led them to not take additional cost cutting measures.
Still, there were numerous warning signs.
A Gazette report days after the festival was announced pointed out the overall budget - about $4 million - and festival passes - $400 apiece - were out of whack with established events in Iowa. Several seasoned event producers also questioned whether the plan would work.
GO Cedar Rapids board meeting minutes from July 2017 to July 2018 show financial matters came up that appear to be warning signs:
' McCreight warned the board in June the staff had made all the cuts it could.
' The board several times approved increasing the budget, including taking out a line of bank credit, extending the credit and twice approaching the city for advances, none of which was part of the original plan. Sponsorships were not selling as well as anticipated, prompting GO Cedar Rapids to seek lower amounts.
' The board knew or should have known $400 festival passes were not selling. Early on, McCreight pointed out that money was needed for cash flow because Ticketmaster proceeds for Kelly Clarkson and Maroon 5 were not going to be received until after the event. Cash flow consistently was identified as a problem throughout the year leading up to the event, the minutes show.
' The board allowed GO Cedar Rapids to negotiate for weeks with Maroon 5 to be the main act, despite being rebuffed multiple times. Board chairman John Myers later acknowledged they paid Maroon 5 too much, though the exact amount has not been disclosed.
' Lulls in ticket sales were acknowledged, but McCreight blamed poor sales on the marketing agency, which was 'causing more problems than helping spread the word.” The board approved dismissing the agency and spending considerably more on a new firm rather than demand the festival pass concept be changed.
' In December 2017, board members were warned the staff member leading the planning efforts - Tallman - struggled with details, such as contracts. They also were warned of 'challenges with cash tracking” because of insufficient accounting staff.
In June, GO Cedar Rapids canceled plans for a zip line, which was one of the featured attractions of the summer plans, raising questions about whether the festival was in trouble also.
How were the problems so apparent to the public, but (apparently) not the decision-makers?
Board members and GO Cedar Rapids officials asserted the event was extensively vetted and penciled out using 'conservative numbers” even without selling out.
Why hasn't there been an audit/investigation?
A: The city has not requested the state auditor investigate, which it could do. Law enforcement at the local, county and state level have said criminal complaints have not been filed. Federal officials, keeping with standard practice, would not confirm or deny an investigation.
What is necessary to make an audit/investigation happen?
The city would need to request an audit from the state auditor, who would limit the investigation to the extent public hotel-motel taxes were involved. If the auditor's office found other issues during the audit, it could refer such matters to other authorities. Additionally, complaints from someone with a stake - like a vendor who got a bad check - could possibly trigger an investigation.
Can anyone be charged with anything?
Members of the GO Cedar Rapids board accused McCreight of misleading them and providing incorrect, inflated numbers of ticket sales and sponsorships and making unauthorized payments. In an interview with The Gazette after he was fired, McCreight said he did not think he had mislead the board. The board initially called for an independent audit, but folded without doing one.
No charges have been filed. Iowa law offers significant protections for board members and company officers, but they possibly could face civil suits.
Why doesn't the city 'just” pay the debts?
A: Support did not exist on the City Council to bail out GO Cedar Rapids, which was responsible for the losses. Council members said they do not want hotel-motel tax money going toward paying off the organization's debts, but rather toward drawing tourists.
Council members said many residents urged them not to use taxpayer money to address the situation, although others have called for public money to pay vendors.
Q: Where was the money spent?
Despite promises to do so, GO Cedar Rapids never released a full accounting of expenses or other financial information. Booking talent was a top expense, event officials have said. Other general costs included constructing a stage, building gardens, a mimosa bar, security services, police, marketing and public relations.
Why don't they just pay for it with money from red-light traffic enforcement cameras?
Proceeds from speed and red light camera fines in Cedar Rapids go to the police department. It has not come up as an option. Currently, most speed cameras are not issuing tickets, but are expected to be turned back on in the future.
Why didn't GO Cedar Rapids declare bankruptcy?
Henry Nathanson, a lawyer who specializes in bankruptcy with Nazette Marner Nathanson & Shea LLP of Cedar Rapids, said bankruptcy is a process to rid yourself of debt, and so the organization wouldn't need to file if it didn't have any assets to protect.
Who got stiffed and how much? Was anyone paid in full? Was anyone paid nothing?
GO Cedar Rapids has refused to release a list of vendors owed money or the amounts. Some vendors do not want their names released while others may have contractual confidentiality agreements, which could explain why GO Cedar Rapids hasn't released the list. Some vendors received nothing while others received partial or full payments.
Several vendors have gone on record acknowledging they are owed money, including filmmaker and celebrity speaker John Waters, who was paid in part; and the de Novo marketing firm. Both declined to say how much. A returned check for Windy City Salon showed nearly $10,000 owed. CG Activation estimated losing nearly $43,000. Cedar Rapids Police Protective Association, which provided off duty officers for the event, received none of the $31,790 owed. The city of Cedar Rapids is owed $6,750 for trash pickup and street sweeping and the city-owned DoubleTree Hotel where most of the event's speaker series was held is owed $36,931.
Dollup Beauty and Virtue Salon and Spa lost $4,000 and $4,800, respectively, according to KCRG-TV.
Answers compiled by B.A. Morelli.