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.