SAY NO TO OUTDOORS RETAIL SUBSIDIES

Rivals: Bass Pro incentives aren't sportsmanlike

BY CHRISTINE KRALY
ckraly@nwitimes.com
219.762.1397

VALPARAISO | At Doris Salada's small Country Bait Shop, crickets are a delicacy.

Customer Traci Henson, of Hebron, drives about 15 miles out of her way for the 10-cent critters. Her son's leopard gecko loves them, and they're bigger and more affordable than those sold at other shops, she said.

So when Bass Pro Shops comes to the area, Henson said she still will make the 20-minute trek to Salada's store to make sure the lizard gets fed.

Salada is the owner of one of a few local bait and tackle specialty shops that could end up competing for customers with Bass Pro when it comes to Portage this fall.

Salada said she is not concerned about losing her regular customers, because she sells items in her petite, tackle-lined shop that Bass Pro probably won't. And if it's not in stock, she'll hunt it down for her clients.

"They know I'll look and try to find what they want," she said. "I treat my customers right."

Tucked behind a gas station on the edge of an unpaved, rock-covered driveway, the store's unassuming wooden fish sign tells visitors when it's open. When her husband died in 1999, Salada became the sole proprietor of the store they'd owned since 1982.

Paired with a loyal customer base and the convenience of being less than a mile from four fishing lakes, Salada thinks she still will be in business after Bass Pro opens in November.

But not everyone shares her confidence.

A Portage merchant, whom The Times chose not to identify, said the megastore's arrival is "definitely going to make an impact" on smaller shops.

"I'm leery of people who come in and suck the money out of our area and send it someplace else," she said.

She said competition - especially coming from a visible, national brand - isn't bad, but "favoring with money" is not fair to "the little guy."

An employee of Range Master Outfitters in nearby Chesterton said the store would not comment on a competitor.

The merchant said smaller stores like Salada's offer a level of familiarity and personal expertise that customers might not get at larger chains like Bass Pro.

"Bigger is not necessarily better," she said.

In her reel and net-filled store, Salada bagged Henson's crickets and encouraged her to try a new candle that just came in. Sure, two-year customer Henson could write a check for the purchases, Salada said.

Before her husband died, Salada used to be a worrier, she said. Back then, she might have been more nervous about Bass Pro. But now, "I don't worry about tomorrow."

"You can't fight city hall," she said. "You can't fight big business."

Not enough bang for buck
Megastore offers to come and bring jobs, but wants big tax breaks, grants

By Steve Bailey, Globe columnist | February 17, 2006

HAMBURG, Pa. -- Cabela's, the giant outdoor retailer, is a magnet for hunters and corporate tax breaks -- a very Republican mix that Bush & Co. tried hard to capitalize on during the last campaign with visits to stores in key states.

Dead-eye Dick Cheney is a fan. ''It's not hard to get me into a Cabela's," the vice president said at a town hall meeting at one store. ''My wife, Lynne, will vouch for that. I've got a lot of stuff that I just had to have from Cabela's." We know.

Sitting like a fortress on a hill atop the interstate here, the mammoth Cabela's superstore is a Disney World for the outdoorsman -- 250,000 square feet of guns and fishing rods, camouflage gear, and tents. There is a deer museum, a 55,000-gallon fresh-water aquarium, an archery range and life-sized wildlife dioramas. The place was also built with $32 million in state and local tax breaks and grants.

Massachusetts may soon have not one but two of these monster outdoor megastores within five miles of each other. Cabela's and its archrival, Bass Pro Shops, are both looking to build on busy Route 1. One big difference between the two: Cabela's wants as much as $25 million in tax incentives and grants; Bass Pro Shops says it needs no such incentives at all.
Why does one retailer say it needs tax incentives to move here and the other does not? Because it thinks it can get them.
The two retailers have been playing this shakedown game all over the country as they expand out of their heartland base. Cabela's has received more than $350 million of government subsidies as it expands, according to one of its smaller competitors, Gander Mountain. That is the equivalent of giving Cabela's seven million free fishing rods at an average cost of $50 per rod for resale to its customers.

Cabela's and Bass Pro have sold themselves as not just another retailer, but as destination locations that can draw tourists and spur economic development. (Bass Pro, for instance, claims its flagship store is Missouri's number one tourist attraction.) And communities, desperate for jobs, have responded. Massachusetts, with one of the nation's slowest-growing economies, is hungry for jobs, too -- and ready to play.
Bass Pro, the bigger of the two chains, has committed to open a store as part of New England Patriot owner Robert Kraft's plans to build a retail complex of more than 1 million square feet adjacent to Gillette Stadium. The store, expected to be 150,000 to 175,000 square feet with 300 to 400 employees, could be open by next year. Neither the Krafts, who built Gillette Stadium largely with private financing, nor Bass Pro is asking for tax incentives.

''We are proud of our ability to attract a preeminent retailer like Bass Pro Shops without it being contingent on any public money," says Stacey James, a spokesman for the Kraft Group. Cabela's sees it otherwise. In discussions with state officials and with those in Plainville, where the store would be located, Cabela's has identified a series of tax breaks and state and local grants it will be pursuing. One Romney official said the incentives would add up to as much as $25 million, split about evenly between the local community and the state. A Cabela's spokesman confirmed that is in the ballpark. In addition, he said, the retailer wants to exempt its customers from the state sales tax on their Web and catalog purchases.

''We are an economic engine," says Cabela's spokesman James Powell. ''When we come to a community we bring a lot with us. We think it is a wise investment for communities." The state office of economic development declined to comment. ''We're not going to give the place away. But we are definitely interested," says Rob Rose, chairman of the Plainville selectmen.

The outdoor superstore concept has exploded nationally. In the last five years, the total square footage of outdoor lifestyle retail space has grown to more than 14 million square feet from 1 million. Cabela's has 14 stores with another dozen to open this year and next; Bass Pro has 33 stores and another 19 stores coming. If every state had a Disney World, how magic would the Magic Kingdom be? Cabela's same-store sales are already slipping.

Hamburg's huge Cabela's -- the biggest in the chain -- is an impressive store, but that is what it is: a store. You can get a wild boar target for $189.99 and a used Smith & Wesson .38-caliber handgun for $249.99. But you can get many of the same brands of jeans and jackets and shirts anywhere. On Wednesday I randomly checked the license plates on 200 cars; 152 of them -- or three-quarters -- were from Pennsylvania. The out-of-state tourists from Maryland, New Jersey, and Delaware largely stayed home that day. Meanwhile, Hamburg (pop: 4,100), just 1 1/2 miles away, might as well be 50 miles away for all the good it appears to have done the sad downtown. And Bass Pro and Gander Mountain have stores in Harrisburg, just an hour away.

Communities have been paying big money to bring in low-paying retail jobs. Buda, Texas, for instance, gave Cabela's subsidies worth $61 million, or about $271,000 for every full-time job, according to an estimate by Gander Mountain. Reno, Nev., spent $52 million, or $208,000 for every job. At $25 million, Massachusetts would be getting a relative bargain: $111,000 for each of the 225 full-time jobs. Then the jobs are expected to pay about $10.60 an hour.

Massachusetts needs jobs. But it also needs to be smart how it spends its scarce resources. Money used to build a retail store can't be used for something else.

The point is to get the most bang for your buck. If backing up the truck for a retailer that will pay $10 an hour is the best we can do, then we are in more trouble than we know.

Steve Bailey is a Globe columnist. He can be reached at bailey@globe.com or at 617-929-2902.

http://www.dailyherald.com/opinion/fencepost.asp

Subsidies for big box will not pay off

Re: your coverage of Hoffman Estates’ proposed subsidy of at least $17 million for a Cabela’s store, this would be a poor “catch.” Cabela’s, the nation’s largest outdoor sporting goods purveyor, sells most of its goods via catalog. But it’s now on a store-building binge. Cabela’s specializes in huge stores – some more than 200,000 square feet. Featuring taxidermy and aquariums, they’re touted as tourist “destinations” that attract millions of shoppers per year. But don’t be fooled by the numbers. This proposed deal – like most big-box deals– is a lousy catch. It won’t create many good jobs. And the store’s ability to draw out-of-state sales tax dollars will wane as Cabela’s saturates more markets.

As well, much of the property tax revenue it would generate won’t fund public services. Under “tax increment financing” or TIF, when a property is redeveloped, the property tax assessment goes up so the property tax bill goes up. The increase, or “tax increment,” gets diverted to subsidize the store instead of supporting schools, police, fire, and other public services. If the store boosts regional growth, those costs will greatly increase — guess who will foot the bills?

A Cabela’s would also mean millions more car trips in the region, more air pollution and traffic congestion. It’s also likely to harm competing area retailers, many of which have long-standing roots in their neighborhoods. For this, taxpayers in 12 communities across the country are already subsidizing Cabela’s for more than $300 million!

Taxpayer subsidies cannot create more spending on outdoor sporting goods – and therefore more jobs and tax revenue. We don’t have more money to spend on fishing rods just because we have more places to buy them. Hoffman Estates should let this “catch” get away – and live better to tell the story!

Greg LeRoy
Executive Director
Good Jobs First
Washington, D.C.

BY MARK KIESLING
Times Columnist
This story ran on nwitimes.com on Wednesday, January 25, 2006 12:12 AM CST

There's been a steady drumbeat coming from various places pointing out that while Cabela's is asking for financial aid to build its planned Hammond store, Bass Pro Shops has offered to build in Portage without such a lure.

Up until now.

Bass Pro will appear Thursday before the Portage Economic Development Commission, asking for what is likely to be the first step toward the authorization of $15 million in revenue bonds.

It's true that Bass Pro is making the request of the city, while Cabela's has gone to the state to be granted a sales tax increment financing package, a package normally only offered to industry.

But the notion of Bass Pro as a self-sufficient, self-sustaining entity that can stand on its own two financial feet has just gone overboard.

1/7/2006 4:57:00 PM Email this article • Print this article
Did Gander Mountain STIF Cabela's?
(Munster) Times of Northwest Indiana
BY PATRICK GUINANE, Times of Northwest Indiana
pguinane@nwitimes.com

INDIANAPOLIS | A competing outdoors retailer has been lobbying state officials to put the lid on government subsidies for a Cabela's in Hammond and Bass Pro Shops in Portage.

The message is that Gander Mountain doesn't need government assistance, and neither should its competitors.

This fall, a public relations firm connected to the Minnesota-based Gander Mountain sent Republican Gov. Mitch Daniels and top officials at the Indiana Economic Development Corp. a report titled, "Leveling the Playing Field: Making the Case for Limiting Government Incentives for Retail Development."

The report was paid for by Oppidan, a Minnesota investment company that is the exclusive developer for Gander Mountain stores.

A spokeswoman for Ewald Consulting, the Minnesota public relations firm that wrote the report, said it also has been distributed to officials in Illinois, where Cabela's has plans for a store in north suburban Hoffman Estates. Hammond officials received the same report before a vote on the Cabela's plan last fall.

When Daniels was in Northwest Indiana on Thursday, he pointed out that Gander Mountain did not ask for incentives like those the IEDC is negotiating with Cabela's and Bass Pro Shops.

Gander Mountain has five Indiana locations, including one in Merrillville and new stores in Terre Haute and Greenwood.

The report connected with Gander Mountain suggests that Indiana lawmakers are considering legislation to eliminate retail subsidies such as STIF. But no legislation has been filed along those lines, and House Speaker Brian Bosma, R-Indianapolis, said ending STIF isn't on his agenda.

The Gander Mountain report includes a "case study" of Owatonna, Minn., the site where Cabela's opened its third retail store in 1998. The report questions whether taxpayers got a fair return on the $4.5 million in financing put up by state and local government. It also challenges the "destination retail" description Cabela's gives itself, pointing out the company now has plans for another store 90 miles away in Rogers, Minn.

Daniels on Thursday repeated his desire to lure Cabela's and Bass Pro Shops to Northwest Indiana.

But Hammond Mayor Tom McDermott Jr. said those remarks don't match what he has been told by Cabela's officials.

"What I'm hearing is that there's no communication between them and the IEDC," McDermott said.

"They're complaining to us, and I don't know what to tell them. I don't know who's telling the truth. When I talked to Cabela's, they told me they've never been treated so badly as they're being treated in Indiana.

"What I heard the governor say last night is completely contradictory to what Cabela's is telling me, and I don't know who's telling the truth."

Known for sprawling stores and museum-quality wildlife displays, Cabela's has dubbed its stores "destination retail" venues. Hammond officials were eager to offer $25 million in property tax incentives to build a Cabela's store on what used to be the Woodmar Country Club.

The IEDC, meanwhile, has refused to approve the company's request for $40.7 million in sales tax increment, or STIF, financing.

In an interview with The Times that will be published in Sunday's Forum section, Daniels reiterated his opposition to STIF.

"I think it's a very questionable policy. I don't think it's an accident that it's never been used anywhere (in Indiana)," he said.

What's wrong with development subsidies?
There are many problems with both the concept of development subsidies and the way in which they are typically implemented, monitored, and enforced. Criticism of subsidies and calls for reform come from both the private and public sectors, as well as from both ends of the political spectrum. The major problems with development subsidies include:

1. The process of awarding subsidies lacks transparency and public participation
Most subsidy decisions are made in private meetings, with the public only being let in on the details at the press event announcing the signed deal. The shroud of secrecy and relegation of development decisions to the domain of "experts" by companies and public officials often serves to discourage public participation. When avenues for public participation are available, such as a public hearing, they tend to be poorly publicized and announced too late for community members to organize more than a cursory response to the issues on the agenda.

2. Subsidies often lack binding requirements as to the benefits companies must produce
Many subsidies have few if any requirements companies must meet to qualify for aid. Although some subsidy programs are targeted at the neediest areas, certain types of businesses, or industries that an area hopes to attract, many subsidies are handed out with little thought given to whether the project is the best use of taxpayer money or offers the greatest benefits to communities. The result can be taxpayers paying to promote poverty-wage jobs and sprawl. Subsidy programs that do have requirements often lack the legal teeth (known as clawback provisions) to stop payments or demand refunds of subsidies paid in the event that a company fails to live up to its commitments.

3. Company commitments are often poorly monitored and enforced
Requiring companies to meet certain standards to qualify for subsidies does nothing if a company's compliance with the agreement is not monitored and enforced. Many jurisdictions never check up to make sure that development projects create the jobs, pay the wages, or meet the environmental standards or investment requirements they agreed to as a condition of a subsidy. When a company is found to be noncompliant, officials are often reluctant to enforce penalties, fearing that they will be cast as "anti-business."

4. Subsidies come with hidden costs 
Tax expenditures -- uncollected income, sales, and property taxes -- are generally the largest subsidies companies receive. Very few jurisdictions figure out how much a subsidy deal is actually worth, or track how much they are spending on subsidies in their budgets. In addition, economic development subsidies can produce hidden taxpayer costs when subsidies are giving to companies that pay poverty-level wages. In those cases, taxpayers pay twice: once for the direct subsidy, and again for programs such as Medicaid, food stamps, and housing assistance that are funded through taxpayer dollars and are needed by a company's workers need to make ends meet.

5. The costs vs. benefits of subsidies to taxpayers are rarely analyzed
Public officials rarely evaluate the actual outcomes of projects against their projected impact on an area's development. In addition to getting hard figures on the costs of subsidies and better monitoring of compliance as discussed above, development officials need to assess whether the larger expectations of the project -- such as the creation of multiplier effect jobs or the attraction of other new firms to the area -- pan out. Even with that information, however, it can be hard to say what new development, including the subsidized project itself, would not have happened "but for" the subsidy, and which would have gone ahead regardless.

6. Subsidies often go to companies that would have built there anyway
Subsidies are increasingly treated as entitlements rather than enticements, both by companies shopping for the best deal and by governments trained to reach for their checkbooks at the rumor of a corporate relocation. Companies such as Boeing, Marriott, and Sears all spurred bidding frenzies by putting out relocation feelers, and then collected millions in tax breaks for staying put. In reality, location decisions rarely hinge on subsidies. Business basics -- proximity to markets, availability of labor, quality of infrastructure, quality of life, etc. -- determine where companies move. It is public goods that benefit all employers that are the key to a good business climate, although a company is never going to turn down free money. Spending for economic development is best directed to education, skills, and infrastructure, not expensive, company-specific subsidy giveaways. 

7. Subsidies divert money from public goods
Money not collected through tax breaks would otherwise go to fund roads, schools, fire departments, and other public services that benefit all citizens and businesses. New development in an area increases the demand for such services. When large corporations avoid paying their fair share, the burden gets shifted onto working families and small businesses. The rest of us pay more, or the quality of our public services declines, or usually some of both.

8. Subsidies put local businesses at a disadvantage
Subsidies are disproportionately handed out to large companies moving into an area from out of state, giving them advantages that long-standing, existing businesses don't get. Fiscal conservatives, free-traders, and libertarians often oppose subsidies on the grounds that they interfere with the market, giving government-aided preference to one group over another. Small business owners bear the brunt of the impact of this unfair competition. These companies may have long histories as community members and taxpayers, but it is the big corporations new to the area that get special breaks. The situation gets even uglier when governments subsidize large retailers such as Wal-Mart. In those cases, multi-national big-box giants receive taxpayer aid to open stores that compete directly with local merchants.
9. Subsidies promote an economic "war among the states"
Subsidies also fuel competition among state and local governments looking to attract large companies to their regions. Companies are experts at playing jurisdictions off one another, often with the help of professional site location consultants, who work to create bidding wars that up the size of subsidy offers (and the size of the commission the consultants receive). The result is a race to the bottom that benefits no one but the companies. Many public officials realize this and want to stop offering subsidies altogether, but fear that they will be left at a competitive disadvantage.

10. Some subsidies may be illegal
Currently, a court case is challenging the legality of certain subsidies with regards to interstate competition. In Cuno v. DaimlerChrysler, the Sixth Circuit court struck down Ohio's investment tax credit, which gives companies a break on their state corporate income taxes on the condition that they purchase and install machinery in a Ohio production facility. The court ruled that the subsidy violates the commerce clause of the Constitution by discriminating against interstate commerce. The case is being appealed to the Supreme Court, but meanwhile, politicians eager to save their beloved subsidy programs are drafting legislation that would preempt the court's ruling. For more information about this case, see Michael Mazerov, Should Congress Authorize States to Continue Giving Tax Breaks to Businesses?, published by the Center on Budget and Policy Priorities.  
Courtesy of Good Jobs First

What are development subsidies and how do they work?

Development subsidies are money, tax breaks, and in-kind benefits given to companies to offset the costs of opening or expanding a new facility. Subsidies take many forms, from reduced tax rates, to cash grants, to cheap loans, to name a few.
Some people call subsidies "incentives," but that's not really accurate. An incentive motivates someone to do something they would not have done otherwise. A mountain of evidence suggests that development subsidies are often abused by companies that would have done exactly what they did anyway. "Subsidy" is also a more accurate description of what an aid program does when designed and used well: taxpayers subsidize companies to cover the additional cost of building where they serve a public purpose but could not afford to locate without public assistance. Subsidies of this type have what's called a "but for" clause that companies must meet, proving that but for help from the subsidy, the project would not happen at the site.

There are many types of development subsidies, and they reduce development costs in a variety of ways. Some of them reduce taxes; others are given as cash; still others save companies money by reducing the cost of construction or of borrowing capital. Common subsidies include:

Tax abatements reduce or eliminate the taxes a company pays to state and/or local governments. Commonly used abatements include property tax abatements, sales tax exemptions, and inventory tax abatements.

Tax credits reduce or eliminate state corporate income taxes by allowing a company to deduct a certain percentage of a specific kind of expense dollar for dollar from what it would normally owe. Examples include credits for research and development, spending on new equipment, and employing hard-to-hire workers.

Industrial Revenue Bonds (IRBs) reduce the cost of borrowing money. When local governments issue bonds, the interest on the bonds is tax-free. Companies get what amounts to a low-interest loan.

Infrastructure assistance lessens the price of construction by shifting the cost of improvements or expansion of roads, sewers, water lines, and other utilities to local governments. Improvements may be made on the project site (i.e. bulldozing existing structures or preparing land) or off-site (i.e. adding a stoplight to reroute traffic or rebuilding a bridge to accommodate heavy trucks).

Grants are subsidies given as cash to companies. Usually grants must be used for a specific purpose, such as worker training. Some states and cities award grants for general use.

Land-price write-downs reduce the cost of purchasing land. A development authority (the quasi-governmental arm of state or local development departments) typically buys the land and then transfers it to a private developer for a price below the authority's acquisition cost. The local government may also pick up the tab for the exercise of eminent domain, demolition and clearance, and/or environmental cleanup.

Tax-increment financing (TIF) uses the property tax collected on the increased property value of a new development (and in some places the newly-generated sales tax) to pay for infrastructure, land acquisition, or other costs of the development.

Enterprise Zones (a.k.a. Empowerment Zones, and by state-specific names such as Michigan's Renaissance Zones or New York's Empire Zones) are geographically designated, economically-depressed areas in which companies can get multiple subsidies (usually property tax abatements, inventory tax exemptions, and various corporate income tax breaks, including employment tax credits).

Many of these programs are paid for through tax expenditures, tax revenue that the state (or city or county) does not collect as a result of the subsidy. Others are direct expenditures, money that the government allocates in its budget, for anything from printing stamps to buying land to enable a hospital to expand. Tax expenditures far exceed direct expenditures for economic development, and are rarely tracked. Direct expenditures are part of the budget and must be approved by the city council or state legislature every one or two years.

Subsidy programs also fall into one of two categories depending on how companies qualify for them. Entitlement subsidies are automatically available to any company that meets a certain set of criteria. For example, if a job training tax credit specifies that a manufacturing company qualifies for a $2,000 tax credit for each new employee it trains, then any manufacturer that meets that requirement is entitled to claim that subsidy when it files its income tax return.

Discretionary subsidies are awarded on a case-by-case basis through individually negotiated deals between governments and companies.There may be no specific criteria that a company must meet, or very broad, loose criteria that give officials a lot of discretion in determining whether a company gets a subsidy, or how large a subsidy. Examples include property tax abatements, tax-increment financing, and land-price write-downs.

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