SAY NO TO OUTDOORS RETAIL SUBSIDIES

Business lure debated
Lawmakers' approval of incentives opens can of worms
BY JOHN P. McDERMOTT
The Post and Courier

June 21, 2006
The outdoor-outfitting business has been heating up in Charleston, with a growing mix of competitors taking dead aim at the pocketbooks of local anglers, campers and hunters.
Buddy Barton of Barton and Burwell Fishing & Hunting is among those under the gun.
'It's a very competitive business,' he said. 'You fight the Internet, you fight the big catalogs.'
Now, local outfitters like Barton are shell-shocked to learn about new legislation they say would provide a public subsidy to a bigger out-of-state competitor. Last week, lawmakers in Columbia overrode vetoes by Gov. Mark Sanford and approved incentives tailored specifically for Cabela's Inc., the big Nebraska-based outdoors chain that has been stalking sites in North Charleston for one of its elaborate retail stores.
'To subsidize someone to come here to compete with local businesses, I find it abhorrent,' Barton said.
The incentives, which were tucked away in a larger economic developmentbill in the final hours of the legislative session, have pried open a new debate about the use of tax breaks to attract jobs to South Carolina.
Without identifying the company, Sanford called the Cabela's inducement 'egregious' and unprecedented in a June 13 letter to House Majority Leader Bobby Harrell, who helped sponsor the House version.
Harrell defended the Cabela's add-on this week. He said North Charleston Mayor Keith Summey called on him and Sen. Glenn McConnell to support the incentives. Harrell called the use of taxpayer assistance in this case 'a unique situation.'
'We thought it was a good idea,' he said.
Unlike manufacturers, retailers have had little if any leverage in extracting incentives from public agencies, given the competitive nature of their industry and the mostly low-paying jobs they create.
Cabela's has stood apart from most of the field by touting its stores as major tourist draws. Along with expansive selections, most of the sprawling stores are decked out with aquariums, restaurants, gun libraries and fake indoor mountains adorned with wildlife taxidermy displays.
The incentive strategy has been effective. In just one example, Wisconsin last year agreed to pay up to $5.25 million on road improvements to accommodate a Cabela's outlet.
Depending on size and other factors, a store can cost between $40 million and $80 million and employ several hundred workers.
'We attempt to design our destination retail stores to provide exciting tourist and entertainment shopping experiences for the entire family,' the company said in a regulatory filing. 'We believe these factors increase the revenue for the state and local municipality where the destination retail store is located, making us a compelling partner for community development and expansion.'
The debate over taxpayer assistance for Cabela's has grown as the chain moves forward with an aggressive national expansion. Lawmakers in Kentucky are now wrestling with the question of whether to dip into public coffers to lure the retailer. In Indiana, the company agreed to open in Hammond, capping seven months of negotiations that yielded what the town's mayor described as 'generous' state incentives.
A real estate developer for a competing outdoor chain, Gander Mountain, has launched a national campaign decrying incentives for retail projects. One of its tag lines: 'Cabela's has made a sport out of fishing for subsidies. Will North Charleston take the bait?'
The South Carolina legislation amended an existing tourism act without specifically naming Cabela's. The provision makes financial assistance available for to up to four stores designated as 'extraordinary retail establishments.' It also made tax breaks available if those same locations include aquariums, museums or natural history exhibits.
Retailers like Cabela's that fit the bill could claim tax credits and recoup a rebate of their sales tax revenue if they build a store in the Palmetto State. As for Cabela's, it has not publicized its plans.
Summey said this week that North Charleston remains in discussions with the company. The city could build the company's museum with money from the sales tax rebate, he said.
Summey said the value of the Cabela's package would be more than offset by tourist-related tax revenue, such as hotel accommodations fees, that the company will generate. 'This legislation isn't taking anything away from the state,' Summey said. 'It's adding to the state.'
Others aren't so sure. David Ewald, whose Minnesota-based Ewald Consulting works for a developer that is lobbying against retail incentives, questioned the tourist impact. He said the novelty of Cabela's will wear thin as more stores dot the landscape. The chain is already committed to opening north of Atlanta. It also has said it is scouting sites in North Carolina's Triad area.
'They get communities all excited about all this out-of-state tourism money,' Ewald said. 'But if they're expanding all over the country, where will the tourists come from?'
Sanford said he is concerned about the precedent the General Assembly has set. 'This bill moves us into incentivizing retail investment for the first time in our state's history,' he wrote in a letter last week to the Senate.
Sanford argued the tax breaks were not adequately analyzed or debated, as they are when a manufacturer seeks incentives. He went on to say that 'because retailing oftentimes uses part-time and lower-paying jobs, it's more difficult to quantify the economic impact than in the jobs we have incentivized to date.'
Sanford said the Cabela's provision was crafted by elected officials instead of the Commerce Department, undermining a key role of that agency.
'In fact, one could reasonably make the case that ... this bill moves us toward 170 ?secretaries of commerce,' because if any firm can strike a better deal and larger incentives by working through ... the House or Senate ... then why bother with the secretary of commerce?' Sanford said.
He said the deal favors one retailer over others while requiring existing outfitters to subsidize a competitor. In addition, the 'groundbreaking' sales tax rebate could encourage other companies to argue for similar breaks.
The Cabela's deal prompted Sanford to direct Commerce to review and report on all of its inducements by the next legislative session. 'The creation of these special incentives opens the door for a long-overdue discussion,' he said.

Reach John McDermott at 937-5572 or jmcdermott@postandcourier.com.

Reno Gazette-Journal


At what cost?
Cabela's outdoor retailer is nearing its final approval to reap $83.7 million in tax breaks for a Reno store, but competitors are arguing such subsidies are inappropriate because the stores are spreading so quickly.

Reno and other cities won't see the tourism boost from massive Cabela's and Bass Pro Shops they are banking on, opponents argue, because too many are being built.

Officials working on bringing Cabela's to Reno, however, counter that the big specialty stores stocked with thousands of guns, fishing rods and other gear will continue to attract shopping tourists even as new stores open in California, and provide a substantial economic benefit the region wouldn't see without the subsidy.

The Reno store will have 2.5 million visitors a year, they estimate, with 88 percent from out of state.

But the public relations campaign initiated by Minnesota-based Gander Mountain, which has stores across the eastern half of the U.S., is trying to convince public officials that Cabela's and Bass Pro stores don't deserve the tens of millions in tax subsidies local governments are providing them to attract tourists.

"Would Disney World be so special if there was one in every state?" said David Ewald, a spokesman for the anti-subsidy campaign, which is funded by Gander's developer Oppidan Investment Co.

"Especially in a time of high gas prices and intense competition with Bass Pro (which plans a Sacramento store), I can't see how Cabela's makes the case they will be destination retail in Reno."

The Cabela's store planned for Boomtown Reno west of the city will keep $69 million in sales taxes collected at the store to pay off bonds for the development under a plan approved by the Washoe County School District on Tuesday. Such taxes normally would fund public services such as education.

Not only will Cabela's retain 75 percent of its sales taxes, but because it is located in a new redevelopment area, most of its property taxes will be returned to the area for reinvestment in the business community.

The $14.3 million in Cabela's property taxes returned to the redevelopment district and the sales taxes total $83.7 million through 2028, when the bonds would be paid off, according to a report prepared for the city.

"Sales tax anticipated revenue" bonds were legalized by the 2003 Legislature to help land Cabela's in Northern Nevada, according to the law's sponsors. But STAR bond projects must get more than half their business from tourists.

The city report by Meridian Business Advisors says the Reno store will generate $50 million in annual sales, and that 68 percent of that, $34 million, would be California shoppers.

That assumes 80 percent of the Cabela's online catalog sales within 150 miles of Boomtown would convert to in-store sales. Their logic -- shoppers prefer a store to walk into rather than purchase online.

The report did not consider what impact new Cabela's or Bass Pro outlets in Northern California would have on the Boomtown store sales. Besides Bass Pro's plans for a Sacramento store, Cabela's officials have said they plan several California stores.

Cabela's officials said they would not bring a store to Reno without the STAR bonds, and have made the same argument in several states as they expand from their Nebraska headquarters. The company has 14 stores and another 14, including Reno, on the way.

"We are never going to go any place where we cannibalize our sales or are not going to be an attraction," Cabela's spokesman David Draper said. "Reno will be the farthest west store we have for some time. It will definitely be an attraction."

Draper said he has heard of the anti-subsidy campaign.

"We don't think Gander is on the mark," Draper said.

But the anti-subsidy advocates point to Cabela's last quarterly report filed with the Securities and Exchange Commission, where the company reported lower sales at its Owatonna, Minn., store following a new store opening in Rogers, Minn. The Owatonna store is similar in size to the Reno store, which is larger than a Wal-Mart.

"The numbers in Owatonna have been down slightly, but we planned for that and they have not been significant," Draper said.

Other doubts

A report from Washoe County Finance Director John Sherman on the store showed doubts, too.

"Although Cabela's provides compelling evidence for their ability to draw customers from great distances, this data is both in the past and in the Midwest," Sherman wrote.

Gas prices also are a factor. Sherman's report notes that Sacramento residents pay about $35 per trip to Reno at current gas prices.

And Cabela's own Securities and Exchange Commission reports note that with other outdoor retailers expanding across the nation, fewer people could travel to visit the stores.

"Our continued retail expansion will result in a higher number of destination retail stores, which could adversely affect the desirability of our destination retail stores, harm the operating results of our retail business and reduce the revenue of our direct business," reads the company's last annual report.

"If you look at the map of their U.S. locations (and proposed stores), there is very little clear air in the whole map, especially in the north and middle of Texas," Ewald said of Cabela's and Bass Pro. "They are going in there as fast as they can go and calling it destination retail."

The anti-subsidy advocates also point out that hunting and fishing retailers are growing much faster than the sports themselves.

In Nevada, the number of tourists and locals buying hunting and fishing licenses has fallen since 2001, with fishing licenses down by 33,000, or 27 percent. The number of hunting and hunting-fishing combo licenses is down about 555 in that time, according to the Nevada Department of Wildlife.

Cabela's officials said they are hoping those numbers rebound.

"With people like Cabela's, Gander, Bass Pro, we are raising the visibility of these sports by bringing in these urban store locations," Draper said. "We are hoping to reverse that trend. We contribute to a lot of causes and are fighting that to bring those numbers up -- youth groups, women's groups."

He also said that Cabela's is a lifestyle store, selling items such as furniture to appeal to non-hunting outdoor lovers.

"You don't have to hunt and fish to shop at Cabela's," Draper said.

Boost to business

Boomtown executives said despite the spread of Cabela's and Bass Pro, landing the trophy retailer at the Reno hotel-casino is good business.

People who support the Cabela's deal, which still needs to be considered at public meetings by the Nevada Commission on Tourism and Reno City Council, say the benefits outweigh the costs of the diverted taxes.

Tourists visiting the store are expected to spend $163 million annually in Reno outside of Cabela's, according to the Meridian report.

The city, county and school district will benefit from the 25 percent of sales taxes Cabela's doesn't keep and property taxes that don't go to the redevelopment district, which will exceed expenses to those areas by about $14 million through 2028, according to the city report. Officials argue that money wouldn't be available if Cabela's wasn't landed with the subsidies.

"It is an experience going to Cabela's," Boomtown General Manager Jack Fisher said. "We expect to improve hotel occupancy, improve gaming revenue and all the other amenities we have here, too."

Fisher said other major outdoor retailers such as Bass Pro and Scheels that have announced plans for Northern Nevada stores add to the region's appeal, and don't detract from Cabela's.

"That really makes us a destination for that type of retailing," Fisher said. "If you can't find it at Cabela's ... you can find it at Bass Pro, and that is a big plus for our region."

'Corporate welfare'

Anti-subsidy advocates don't argue the mega stores are a boon to the area, but simply are against giving them tax breaks, which they call corporate welfare.

"I can see how local governments can be romanced by this notion that we are going to bring something in to bring all these tourists to town," Ewald said. "But when Cabela's figures out where their customers are, they're not stupid. They build where the customers are. Why do you have to pay them to come?"

Subsidies are "blatantly unfair" to other outdoor retailers, such as Gander, which like Cabela's is publicly traded.

"Not only don't they get subsidies, they don't ask for them," Ewald said. "There is a huge competitive disadvantage when they build their stores and pay for them, compared to someone else shaking down the public for millions of dollars."

Other retailers hurt

While Gander doesn't have any Northern Nevada stores, other outdoor retailers in the region agree the subsidies to Cabela's offer an unfair advantage.

Reno Fly Shop owner Dave Stanley says he will likely have to close his business after 23 years once Cabela's opens.

"I can compete on a level paying field, but when the scales are tilted, I can't," Stanley said. "Having that extra thousands of dollars a month (from sales taxes) would be an advantage I'm not going to get."

He said the city and county have to make decisions that benefit them the most.

"The unfortunate part of that is in the process, the number of sporting goods stores in town will be impacted by Cabela's. Do I think it is fair? No. Do I think that matters to anybody in the city or county? No."