SAY NO TO OUTDOORS RETAIL SUBSIDIES

How much is too much for Cabela's?

Sunday, January 07, 2007

By Rob Kirkbride

The Grand Rapids Press

WALKER -- When Cabela's decides on a new site for one of its megastores, it does so with its hand out.

Incentives are the bait used by communities to reel in the stores that draw millions of customers with a "wow factor" of mountains, waterfalls and wild-game replicas to peddle its outdoor gear.

But debate is growing -- and centered in Walker -- over whether it is wise to pony up those expensive incentives to retailers, even one with the mystique of Cabela's.

While most of its stores snagged sweet economic packages, some communities are growing more reluctant.

A growing number -- including a town in Maine last year -- simply say no to the deal-making.

That has come as the 46-year-old Nebraska chain has stepped up its construction plans for new stores, making them more common.

A Cabela's store, usually 150,000 to 185,000 square feet, is planned for a new shopping center at Int. 96 and Walker Avenue in Walker.

The company estimates the store would attract 3.5 million visitors a year, generate $3.15 million in sales tax revenues and employ 263 workers.

Last month, Cabela's informed West Michigan leaders the price tag would be $15 million in incentives. Otherwise, no store will be built, a representative of the retailer told a private meeting of Walker city officials and state lawmakers.

But that is no slam dunk. The state has a longstanding policy of reserving its funds to attract manufacturers with its good-paying jobs.

Some believe $15 million is a small price to pay.

"I'm looking at the numbers, and this is not typical retail," said incoming state Sen. Mark Jansen, R- Gaines Township. "This is much more than retail.

"This could be a very positive thing for our economy in West Michigan."

But competitors such as Gander Mountain, which has several sporting goods stores in West Michigan, cried foul. They never received a penny of assistance and still built stores here.

Gov. Jennifer Granholm supports the Michigan Economic Development Corporation's position of not providing incentives for retailers, spokeswoman Liz Boyd said.

Still, Cabela's is pulling in incentives for many of its projects as the company continues to grow rapidly.

Consider a few examples:

· The incentive package for the Hammond, Ind., store set to open in about a year totals $37.5 million;

· A store planned for Gonzales, La., includes incentives of $50 million.

Cabela's makes it clear that it counts on incentives.

"We have always said that we expect at least 30 percent of the store's costs would be funded by economic incentives," Mike Callahan, senior vice president of retail operations and marketing, said when asked during its quarterly conference call with analysts in November whether incentives have diminished.

"As we look to 2007 and 2008, that remains the case," he said.

A typical Cabela's costs about $50 million to build, some more or less depending on the size.

If Cabela's expects 30 percent incentives, that's about $15 million per store -- the amount being requested in Walker.

Despite the price to attract them, Cabela's is a savior for some small towns. The stores attract millions of customers a year, many from out of state, and spur development of hotels, restaurants and other tourist businesses.

Dennis Highby, president, CEO and director of Cabela's, said he receives proposals several times a week from communities.

Are the incentives worth it?

It depends on who you ask.

Transforming communities?

West Virginia state Sen. Andy McKenzie, whose district includes the Cabela's store and distribution center near Wheeling, W. Va., said the state's incentive package was "worth it and then some."

Cabela's has transformed the blue-collar area in West Virginia's panhandle, he said.

Unemployment is 3.4 percent, nearly two percentage points less than the rest of the state. And more than 3,000 jobs have sprouted up from a 1,200-acre field near Int. 70 that three years ago was empty.

"Here you have the third-largest city in West Virginia, and we couldn't buy a pair of underwear in our city" before Cabela's was built, McKenzie said.

The West Virginia panhandle is about 10 miles wide at Wheeling, a town of 31,000. When the shopping centers arrived, they were built on the Ohio and Pennsylvania sides of Wheeling -- not in West Virginia.

Now, shoppers from both neighboring states come to West Virginia to buy at Cabela's, McKenzie said.

Development came at a price. Incentives totaled more than $100 million. They included free land, a $35 million grant from the state's Economic Development Grant Committee, $57 million from sales-tax increment financing bonds, property tax breaks and a $13 million "Cabela's Exit" off Int. 70.

Despite the breathtaking price tag, McKenzie said it was a small price to pay.

"Our biggest problem now is that we have too many jobs for the people in the county," he said. "We have to advertise to get people to move back home."

West Virginia state Sen. Edwin Bowman said he used to drive seven hours to the Michigan Cabela's store in Dundee while on a fishing trip.

"I called my wife after I went shopping," he said. "She asked how much I spent. I was afraid to tell her that I had spent $1,800."

The Wheeling store, opened in 2004, has become an anchor tenant at a booming development on Int. 70 between Columbus, Ohio, and Pittsburgh, Bowman said.

He is on the side of incentives. "You need to understand that you may have to give something to get something," he said.

Not everyone in West Virginia is impressed.

Gov. Joe Manchin has said that if he was governor when the Cabela's deal was crafted, he would not have offered incentives.

Steve Spence, executive director of the state's Development Office, said Manchin supports business but has a "different philosophy than the previous governor (who ushered through the Cabela's package). He is not focused on using grants to attract business."

Texas says yes, Maine no

The tradeoff worked for Texas taxpayers, officials there say.

A Cabela's store was built in Buda on a 126-acre dairy farm that had paid less than $2,400 a year in property taxes. Now, about $2.9 million in taxes will be collected each year.

"In Buda, it was definitely worth it," said Warren Ketteman, executive director of the Buda Economic Development Corporation.

Cabela's received $61 million in incentives when it opened its Buda store last year. The money paid for new roads, water lines and other improvements, Ketteman said.

Still, not everyone will wave money to lure a Cabela's to town.

A few weeks ago, the Scarborough Town Council in Maine approved a $75 million retail center anchored by a Cabela's -- without any incentives. Cabela's had threatened to pull the plug unless the state agreed that its catalog sales remain tax-free for customers in Maine.

The state dug in its heels.

Maine is expected to reap $2.75 million in new sales taxes and $470,000 in income taxes annually.

"Increasingly around the country, states are wising up," said David Ewald, president of Ewald Consulting, the public relations firm for Cabela's rival Gander Mountain.

"To my knowledge, I don't think they've ever seriously announced they were coming to a location and then walked away" if they don't get the incentives, he said.

Cabela's is not alone in asking for incentives. Competitors such as Bass Pro Shops get incentives for huge sporting-goods stores.

Cabela's officials declined requests for comment, other than to send along a news article to show Gander Mountain accepts incentives as well.

However, Gander Mountain, which received a $1 million grant for a project in Roanoke, Va., turned down the money in a Dec. 26 letter to the county board there.

"We have been informed by Gander Mountain that they have a strict policy which does not allow them to accept public assistance in any form," developer Lawrence Barrett wrote.

Where Michigan stands

The Michigan Economic Development Corp., which works to expand business investment in the state, has told Cabela's "no."

MEDC spokesman Michael Shore said the agency has a "limited toolbox" and saves incentives for higher-paying, high-investment jobs, usually in manufacturing.

"We just don't do retail," he said.

The City of Walker also has said it does not have the money to support an incentive package for Cabela's but hinted there could be money through state Brownfield Tax Credits used to clean up contaminated land. The site is a former apple orchard.

Walker Planner Frank Wash said the city lacks incentives to attract a business such as Cabela's.

"Most states, other than Michigan, are fairly aggressive with their economic development tools," he said. "Even in this difficult economic climate, we don't have the tools to compete with other places across the country. "

He thinks the situation needs fixing. "This project is high profile enough that I hope the state takes a look at our economic development tools and comes up with a better solution."

Jansen said he is organizing a West Michigan legislative summit in Walker in late January to discuss ways to attract Cabela's.

His staff is inviting legislators from Kent, Ottawa, Allegan, Ionia and Muskegon counties to the meeting.

"We need to start talking regionally about what this is going to do for us," Jansen said.

The Cabela's in Dundee, south of Ann Arbor, is the only other one in the state. That project received more than

$35 million in incentives, mostly for road improvements.

But other Michigan communities have attracted tourism retailers without incentives.

Canton Township near Detroit attracted the popular Swedish furniture store IKEA last year with little assistance, said Supervisor Tom Yack.

If IKEA would have asked for assistance, "It would have been a short conversation," he said. "I wouldn't even bring that back to my board. We don't do things like that for retailers."

IKEA spent $1 million of its own money on road improvements, Yack added.

The state did spend about $6 million on improvements for road improvements at two Int. 275 interchanges. But that was needed for fast-growing township's 87,000 residents whether IKEA built or not, he said.

"Even if they would have asked, I feel comfortable in saying we would not have provided any financial incentives whatsoever," he said. "How would I explain (the use of public money to attract a retailer) to taxpayers?"

Send e-mail to the author: rkirkbride@grpress.com