Project will spur economic development

Paul Schlaack grew up in Michigan loving sports like football, basketball and golf. But he never guessed he would one day develop a motorsports complex in Iowa.

“I always said, ‘If the good Lord would give me an opportunity to make a living in sports, I’d do it in a heartbeat.’ Never in my wildest imagination would I have guessed motorsports.”

The unimaginable has become a reality for Schlaack, president and CEO of The U.S. MotorSport Entertainment Corp. Two weeks ago, the Newton City Council unanimously approved a resolution authorizing a development agreement between the city and Schlaack’s company to develop a $30 million motorsports complex in Newton. Schlaack said he would not develop the facility without unanimous approval by the council. Following an initial 5-1 decision, Newton officials held a second vote in which they unanimously gave Schlaack and his partners the green light to speed ahead with the project.

“They were excited, enthused and tenacious to make the project happen,” said Dan Stanbrough, chief operating officer of U.S. MotorSport. “We feel fortunate to have the quality of people we dealt with. They deserve a lot of credit.”

Newton officials say the city’s financial contribution to the project will be approximately $9 million, including a $1.3 million economic grant for the purchase of a 226-acre tract near the town’s airport and more than $7 million for public improvements, roadways and sewers. To help offset those costs, Aldridge said the city drafted a letter last week to apply for Vision Iowa funding. Two years ago, the Jasper County Board of Supervisors and another group of potential track developers sought $20 million from the Vision Iowa Board to help finance a racetrack in Newton, but their application was rejected last fall.

“Our situation has changed now with Mr. Schlaack on board, and we have been encouraged by a former member of Vision Iowa to reapply because funds are available,” Aldridge said. “Not to knock them for giving money to other projects, but none of those projects have the magnitude to draw tourists to Iowa that this would.”

Under the development agreement, in exchange for five years of tax abatement, developers must build a facility with a minimum assessed value of $30 million. City officials say the track will generate an estimated $1 million annually in commercial property taxes, as well as 20 to 40 full-time jobs and as many as 120 part-time jobs.

“This is the biggest project to come to Newton since the Maytag Plant 2 was built,” said Aldridge, a native Newtonian. “The support for this project has been overwhelming from Newton to Polk County.”

Developers say the 7/8-mile oval track will have 25,000 permanent seats with the option of adding 10,000 more. The complex will host 20 to 25 daytime weekend races annually, including Indy Racing League and ARCA-sanctioned events, although the speedway has not yet been sanctioned by those racing bodies. It will also host other “first-class entertainment” events, including rock and country music concerts.

Developers are cautious about discussing the project’s future, careful not to get caught up in the hype surrounding it.

“I tend to be a reasonably unemotional person when it comes to business,” said Schlaack, a former executive for Equitable of Iowa Co.s. “If there’s anything Dan and I bring to this project, it’s focus and direction. Most people forget in the enthusiasm of the moment that most things are done with plain, old-fashioned hard work, and that takes time. There are lots of details to sort through, and the journey is going to teach us things as this continues to evolve.”

“We believe in the process,” added Stanbrough. “But we’re very excited about the economic benefits for Newton as well as the whole state. I don’t know how to define what the magnitude could be; it’s certainly going to be substantial.”

Stanbrough and Schlaack also emphasize that they do not have a relationship with NASCAR at this time and that NASCAR has not given them a preliminary indication of whether it will sanction races at the facility.

“It should be clearly understood that NASCAR is a sanctioned body, and they sanction places like Bristol [Motor Speedway in Tennessee],” Schlaack said. “The media have been using NASCAR synonymous with motorsports. But it’s not a generic term.

“We have looked at a number of sanctioning bodies and the economic impact of the types of races. It is highly unlikely that a Winston Cup race would ever take place at our facility. We would be delighted if we were sanctioned for that, but at this point, it’s highly unlikely.”

Schlaack said the economic impact per event could be as high as $40 million. “Some of the numbers you see are staggering,” he said. “There’s nothing hard and fast at this point, but we’re doing a lot to understand the market and factors concerning the market.”

Jon Ewing, Newton community development director, said the developer’s methodical and fair approach to negotiations is refreshing.

“What I respect about Paul is he lays out his terms and there’s no equivocation,” he said. “He won’t come back and chisel you for changes, and he expects the same from the city.”

Schlaack has not established a timeframe for construction or the start date for racing. Ewing said he has not spoken with the developers about dates, but he said earthwork could begin as early as this fall and racing could start in the spring of 2005. The racing season, he added, is likely to run from May to October.

Developers currently are reviewing the demographics of race fans. Schlaack said approximately 33 percent of all racing fans will travel 100 to 200 miles to attend an event, and another 33 percent will travel more than 200 miles. With the Newton track located about 280 miles away from neighboring speedways in Kansas and Illinois, he said those figures support their decision to locate in Newton.

“We’re not putting this facility in competition with those in Kansas or Joliet, but from a marketing standpoint, we connect the two areas,” he said. “It should enhance the market for motorsports entertainment. That’s fascinating to me.”

More important, Stanbrough said, the Newton facility will help connect tourists to other Iowa attractions, including Living History Farms, the Science Center of Iowa, the Des Moines Art Center, Adventureland, the Iowa Cubs, the Iowa Events Center, the Iowa State Fair and the Knoxville Raceway. “This could be a great opportunity to create synergy between events in Iowa,” he said.

Schlaack said studies show that the average fan at major races spends $185 daily, including $100 for lodging, $50 for merchandise and $35 for food. Those dollars could be spread around the state, not to mention businesses near the speedway. “There should be the potential for substantial development around the motorsports complex,” he said.

“We’re going to put ourselves in the position of the fan and look at development opportunities that fall in line with that vision,” Stanbrough said. “We know what hotel accommodations are typical of a complex like this, and we know a little bit about the food and support services that will make the complex vibrant and profitable. We don’t want services that are not in concert with what we think the fans will want.”

Ewing concurred, but added that businesses can’t survive solely from the patronage of race fans.

“We have to be careful because we have to recognize that a business can’t live off the speedway 365 days a year,” he said. “There aren’t going to be 25,000 people out there every day. We need to look at how much business comes from the motorsports complex and how much business they draw from the community and the interstate.”

With any business venture comes risks, and Aldridge said he is concerned about the taxpayers’ liability should the facility put a strain on the city’s resources, including police, fire and ambulance services. “Those could be added expenses to the city,” he said. But he said the revenue from the track’s property taxes could be used to meet any extra expenses.

Ewing said the developers began working with the city six months ago to reduce the risk to taxpayers.

“There were some difficult, intense negotiations, and we had to work towards a development agreement that would provide the maximum possible protection to taxpayers, but also to meet the developers’ needs,” he said. “It takes understanding and compromise to bring it together in a viable arrangement and a number of months to get there.

“They wanted to do the project here; this is where the dream started,” he said. “It’s an excellent site and its location is proximate to all of Iowa.”

The 73-year-old Aldridge, who is in his eighth year as mayor and has announced he will not seek re-election, said he hopes the tax revenues generated by the track will be used to promote additional economic development.

“I would love to see a Bass Pro Shop or Cabella’s store in Newton located near Interstate 80,” he said. “That would be a huge draw for the state of Iowa.”

Coincidentally, developers in Colfax recently attempted to bring a Cabella’s retail outlet to their city but were unsuccessful, said Colfax Mayor Keith Warrick.

Still, Warrick said, news that Newton’s motorsports complex will become a reality will spur development in Colfax, located 15 miles west of the county seat. In June, a 60-room Comfort Inn motel will open on the north side of Interstate 80 in Colfax. Plans are under way for a second motel to be built near the Comfort Inn, and officials are in search of a family-style restaurant to locate there as well.

“The racetrack would be a glorious thing for the Newton area,” Warrick said. “It would help the whole county and would be big for the motel and restaurant businesses.”

In Newton, Ewing said city officials have already been approached by a developer who has made a verbal commitment to construct a $7 million apartment complex.

“It’s really interesting, he said. “Developers look at the dynamics of the community and they’re reading the addition of this project as significant to the attitude of the community and its image of being forward-thinking.”

In addition to possibly attracting some much-needed market-rate apartment housing in Newton, Ewing said he hopes the motorsports complex attracts townhouse developers.

“Newton does not have a good selection of townhouse living,” he said. “It’s interesting to me that communities smaller than us have them, yet we have a lot of empty-nesters that would enjoy them.”

“I think you’ll see all elements of development,” Stanbrough said. “I was encouraged to hear from the city that they are already getting inquiries on home building. That was one of the most exciting things I’ve heard.”

In addition to commercial development that would be directly tied to the needs of race fans, such as restaurants, hotels and gas stations, Ewing said development of commercial flex space would allow a variety of users, including offices, warehouses and storage facilities, to build near the speedway.

Attracting people to events and businesses, is one thing, but attracting families is another. Aldridge said people who erroneously subscribe to the stereotypes regarding race fans fail to recognize that racing is a family-oriented form of entertainment.

“I think a lot of people think racing is about gambling and drinking,” he said. “But the people who are around the sport tell me that most of the drivers are very religious and close to their families, and that rubs off on the fans. The fans are common citizens, they’re not riffraff, they behave very well.”  Aldridge said the motorsports complex is one example of the projects needed to retain Iowa’s youths.

“We lose so many of our young people all over Iowa,” he said. “We don’t have a lot of recreational opportunities available. With racing being one of the fastest-growing spectator sports in America, here’s one thing we can do.”

Schlaack said he hopes the project spurs additional development in Iowa. He said he would consider developing another motorsports complex outside Iowa if this one is successful, but did not say when or where.

“I hope in my heart of hearts that people come to realize what a wonderful place Iowa is for economic development,” he said. “My hope is that state, county and city governments will do everything in their power to help finance and encourage development throughout our state. All we have to do is be a little imaginative. If a farm boy like me can work with smart people like Dan to bring this project to fruition, anybody can do it.”