Business

Hawkeye Downs on precipice of new future

An expanding CellSite Solutions has ideas to help

Cars pass the grandstand during practice runs May 2 at the start of SPI Outlaw Street Drags at Hawkeye Downs Speedway. The drag strip is 300 feet long with brackets that accommodate any sort of car, truck or sport utility vehicle, motorcycle and even ATVs and side-by-sides. (The Gazette)
Cars pass the grandstand during practice runs May 2 at the start of SPI Outlaw Street Drags at Hawkeye Downs Speedway. The drag strip is 300 feet long with brackets that accommodate any sort of car, truck or sport utility vehicle, motorcycle and even ATVs and side-by-sides. (The Gazette)
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CEDAR RAPIDS — Its speedway, bingo games, trade shows and concerts have made Hawkeye Downs an Eastern Iowa destination for decades, drawing every year an estimated 100,000 visitors and pumping millions into the economy.

But in debt even with an annual infusion of public money, Hawkeye Downs needed its own checkered flag.

If a deal with a Cedar Rapids company goes through, it may have found one. The iconic racetrack and entertainment venue sits on the precipice of a new era as CellSite Solutions prepares to purchase the property to fuel its own expansion and revive the luster of the attraction.

Facility officials announced Sept. 29 the board had approved a letter of intent to sell Hawkeye Downs for $2.6 million to CellSite. The Cedar Rapids used telecommunications equipment supplier will move its headquarters to the 93-acre property’s southwest corner and become Hawkeye Downs’ landlord, though some aspects of what that arrangement entails are still to be determined.

In the weeks since the announcement, company President and Chief Executive Officer Carter Kramer said he’s seen lots of positive feedback from the public as well as ideas for new events.

“We want to make it a place of interest again in Cedar Rapids, where people are excited about going out there and we draw hopefully a crowd that is a little more diverse,” he told The Gazette last week.

Kramer said the deal is moving along quickly and ideally will close by the holiday season.

CellSite then could make progress on its new headquarters, which will mark a significant expansion for the company’s local footprint.

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The city of Cedar Rapids, which has supported Hawkeye Downs with funding over the years through hotel-motel taxes, is financially backing the CellSite deal also.

Officials have supported a 10-year, 50-percent property tax break, providing reimbursement on taxes paid on new land value created by the CellSite expansion.

The proceeds would account for a local match for the state’s high-quality jobs tax incentive program, under which the Iowa Economic Development Authority awarded CellSite further tax breaks Friday.

“I think this is a terrific solution to increase our tax base and create some jobs. But as important as that, it also can help provide some capital for Hawkeye Downs,” Cedar Rapids Mayor Brad Hart said. “I think it is a win-win.”

NEW MANAGEMENT

Under the new ownership arrangement, the not-for-profit All Iowa Agricultural Association, which oversees Hawkeye Downs, plans to lease the racetrack and expo halls from CellSite.

Hawkeye Downs would not pay CellSite for its lease on a month-to-month basis but instead provide a percentage of its revenue before expenses, Kramer said.

Both Hawkeye Downs and CellSite Solutions will have the option to hold their own events.

“It’s a big facility, so we want to take advantage of having that space out there,” Kramer said, suggesting live music, fireworks and even minivan races as possibilities.

In addition to auto racing, Hawkeye Downs hosts bingo, trade shows, meetings, conventions, concerts, consumer shows, motocross events, venues for trade and educational programs, go-cart racing, bicycle racing and auctions for individuals and families visiting Eastern Iowa, according to the racetrack’s website.

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Though CellSite and Hawkeye Downs still are working out a formal leadership structure, Kramer said, a new agreement has the potential to “funnel the decision-making process down” to a smaller number of voices, compared with a 12-member board.

CellSite also will retain some ability to veto events it believes will not be profitable, he said.

“Our ability to make money is based on their ability to make money,” Kramer said. “We will definitely be monitoring more closely from an accounting perspective what the events are bringing in, how they’re bringing it in and how can we do a better job of running that facility as a business, not just as a place for Friday night fun time.”

Kramer said the Hawkeye Downs property’s space was a key factor for CellSite in choosing to relocate there, where it has room to expand in case it needs a few acres of outdoor storage space — likely a nonstarter on a smaller industrial lot.

CellSite’s new headquarters will be 60,000 square feet, or more than three times larger than its current 18,000-square-foot location at 1720 I Ave. NE, with what Kramer said would be indoor space for logistics and warehousing, and dock doors for shipping and receiving materials.

The total cost of land acquisition, site preparation and construction for the headquarters will come out to $6.3 million, according to CellSite’s application for state tax incentives.

The company expects to purchase the land and move to a temporary facility by March, and build the new headquarters between August and July 2021.

As part of its expansion, CellSite will retain 54 employees and create 16 new jobs, 10 of which meet the state’s high quality jobs wage threshold of $22.27 per hour, according to Caleb Mason, the city’s economic development analyst. The other six would earn more than $20 per hour.

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In its state application, CellSite said it had 53 employees and would create 14 jobs, with 11 meeting the wage threshold.

NEW LIFE

Hawkeye Downs, which has had several names through the years, has a long history in Cedar Rapids as a destination for leisure and recreation.

The All-Iowa Fair called Hawkeye Downs home from the 1930s until 2006, drawing thousands of visitors during its peak in the 1950s.

Horse races, rodeos and motorcycle and car racing date to 1925 and its reputation as a speedway has continued, although attendance has waned for a variety of reasons.

Some have been critical that the Hawkeye Downs’ racetrack was converted from dirt to asphalt in 1989. The course, which has half and quarter mile tracks, is said to be one of only two paved racetracks in the state.

Still, the organization boasts 100,000 visitors annually, a $7 million annual economic impact from visitor spending and a nearly $3 million impact in workforce earnings. The visitors support 498 jobs, according to Hawkeye Downs’ website and documents.

Cedar Rapids has supported Hawkeye Downs through its hotel-motel tax revenue grant program, designed to benefit organizations that help draw visitors to the community. In recent years Hawkeye Downs has been receiving $150,000 annually, which is the second-largest grant next to money allocated to the city’s tourism operation.

Hawkeye Downs leaders promised to use its hotel-motel tax grant to create new events, hire a marketing position and lay the groundwork for a capital campaign to improve the grounds and facilities, according to the most recent funding application.

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The venue still faced years of financial challenges, and the sale to CellSite looks to provide a much-needed infusion.

In a 2017 public financial disclosure for the Internal Revenue Service, the All Iowa Agricultural Association ended the year with a negative $370,726 in fund balances and negative $169,275 after totaling revenue and expenses. The annual expense budget was $631,576 that year. According to the Linn County Recorder, the mortgage also has had liens.

The association will be able wipe away its debt through the sale, President Julie Kraft had said.

The deal also is set to expand Cedar Rapids’ tax base. As a not-for-profit, Hawkeye Downs was exempt from paying taxes on the property valued at $4.2 million, including $1.6 million in land value alone, according to Cedar Rapids Assessor data.

As a private company, CellSite would pay an estimated $75,000 a year in taxes over the next 10 years, and potentially more depending on what other site improvements are made, according to city officials.

CellSite has committed to invest at least $200,000 — including to fix the leaky North Exhibition Hall roof and on a facilities “face-lift” — an amount Kramer believes could be exceeded by a significant margin.

Under the city’s tax break, CellSite would be reimbursed $463,000 and pay $757,000 in net taxes, of the $1.2 million in expected taxes generated at the site over 10 years.

“I am excited to see new life being breathed into Hawkeye Downs and that area,” City Council member Ashley Vanorny said. “This is not necessarily how I imagined it. ... But any proposal regardless of how good it is has to be funded. This gives Hawkeye Downs an opportunity to have some longevity, to restore some structures that are currently existing, and I hope they use it wisely to invest in the current facility, revamp it because there are much needed, necessary repairs. And, I hope it gives the racing community some longevity as well.”

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Under its high quality jobs program, the Iowa Economic Development Authority gifted CellSite two additional tax breaks amounting to $220,000 — a five-year, 2-percent investment tax credit worth $100,000 and up to a $120,000 refund of sales, service or use taxes paid during construction.

NEW PLANS

CellSite Solutions on Oct. 1 submitted multiple concept options for repurposing its former location, on I Avenue NE, for Cedar Rapids staff to review, according to the city’s online development portal.

Kramer said his goal is to demolish the old headquarters in the first quarter of 2020 and build an “eye-catching” three-story building, with an estimated $8 million price tag.

The project would have about 80 two-bedroom, two-bathroom units and a rooftop deck overlooking the Robert W. Plaster Athletic Complex, near Mount Mercy University’s recently renovated Rinderknecht Athletic Center.

“Our goal is to bring something into this part of town that is going to be not your normal ‘out-of-the-box’ apartment building,” Kramer said.

Those plans are expected to come forward in the coming months, Mason said.

CellSite also is in communication with an interested buyer for about 3 acres of undeveloped land it owns at the corner of 16th Avenue and Wiley Boulevard SW, near West Side Transport’s current location.

Kramer did not disclose the potential buyer’s identity but said he believes it would make a “good addition” to that corner.

CellSite also bought land on 66th Avenue SW in July for a new 10,000-square-foot warehouse, where its logistics and craning division now functions, and Kramer said a company goal is to consolidate some of its storage locations nationwide back into Cedar Rapids — a move he said could further bolster its employee count.

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Founded in 2010, CellSite currently stores and ships used telecom shelters from 19 locations throughout the United States, according to its website.

Kramer said the company removes telecommunications equipment from an annual 600 sites nationwide, and performs equipment installations at about 500-600 sites at the same time.

Comments: (319) 398-8366; thomas.friestad@thegazette.com

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