Sportsman's Warehouse plans Billings outlet
By JAN FALSTAD
Of The Gazette Staff

A Utah-based competitor to Cabela's is coming to town.

Sportsman's Warehouse, which has run a store in Missoula for two years and will open stores in Helena and Bozeman by Thanksgiving, is negotiating a lease on land at 3112 King Ave. W., next to Johnny Carino's.

"We looked a couple of times in the past, but could never find an appropriate site," said Chief Executive Stu Utgaard. "I think this site on King Avenue will work."

Assuming the lease terms work out, a tire supply company that has been at that site for years will be torn down to make room for a 65,000-square-foot Sportsman's Warehouse. About three years ago, the tire business was sold and now is called Lisac's Tire Supply.

After starting with a small store in Salt Lake City in 1996, Utgaard said he will be running 67 stores by November. He expects to employ about 6,000 people by the end of this year to operate 5 million square feet of retail space. The Billings store will employ 70 people when it opens next March, Utgaard said.

When asked if he was trying to compete directly with Cabela's in this market, Utgaard listed half a dozen cities where they compete - from San Antonio, Texas, to Sioux Falls, S.D., to Spokane, Wash.

"They can't control what I do and I can't control what they do," he said. "We do intend to build a store in Billings."

A California-based front company that builds stores for the Nebraska-based Cabela's has submitted paperwork to the City/County Planning Department to buy land in Billings. The site lies off of Interstate 90 and the South Billings Boulevard exit. However, Cabela's has never formally announced that it is building here.

"We have yet to receive anything with their name on it," said Planning Director Candy Beudry.

Foursquare Properties executives were in town two weeks ago to discuss a tax increment district for that area, she said, which would help new businesses in that area pay development costs.

Cabela's uses the moniker "The World's Foremost Outfitter," and Sportsman's Warehouse uses "America's Premier Outfitter" in its advertising.

Meanwhile, Utgaard had strong words for his competitor and other big-box stores that seek public subsidies for building projects.

"Costco, Super Wal-Mart, Super Target, Home Depot, Lowe's and Kohl's all have higher sales per store than Cabela's, but nobody gives them money," Utgaard said. "They don't even ask for it, and they are very beneficial to the local community."

Utgaard said he has no public subsidies at any of his stores and has refused them when offered.

"If you take money and you give it to private enterprise of any type, then you're taking money away from school programs, police protection, fire protection, parks and so on and even to build a diamond interchange in Helena, which would benefit countless businesses," he said.

An interchange has long been planned for Helena at the Interstate 15 exit at Custer Avenue, where Utgaard is building his store.

Contact Jan Falstad at jfalstad@ billingsgazette.com or 657-1306.

Copyright ¦#169; The Billings Gazette, a division of Lee Enterprises.


Published on Friday, August 17, 2007.
Last modified on 8/17/2007 at 7:41 am


Copyright © The Billings Gazette, a division of Lee Enterprises.

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Poll results from The Daily Journal in Greenwood, Indiana.

Across the road from the property Cabela's wants to develop is competitor Gander Mountain.

Gander Mountain isn't just rolling over as Greenwood city officials are on the verge of giving Cabela's an incentive package.

Cabela's says it needs a subsidy of sorts in the form of a loan from the city of Greenwood to help it build a store.

Gander Mountain officials are raising some interesting public policy questions as they fight for their company.

The issue of whether businesses, including retailers, should get tax breaks is a fascinating one.

Tax abatements, where companies get property taxes reduced, has become as common as a cold. You'll hear officials say tax abatement is a necessary evil and that cities that want to stay competitive have no choice but to offer and grant it. Others call it corporate welfare.

In Indiana, property tax breaks were traditionally given to manufacturing businesses bringing good-paying and good-benefit jobs to the area.

Usually, there had to be significant new jobs created, and those jobs had to come with wages you could raise a family on, purchase a decent house and maybe even put away some money in a college fund.

Over the years, some officials have veered from that, giving the tax break to retailers and others. For example, a Lowe's home improvement store in Franklin got its property taxes reduced when it was granted tax abatement.

The issue is even more notable in Greenwood because the Cabela's, water park and hotel property falls in a tax increment financing district and in the fast-growing Clark-Pleasant school district.

Property taxes paid by businesses in a tax increment financing district are used to pay the cost of road and sewer improvements. The money does not go to schools, libraries or local governments as property taxes typically do.

That means schools and others don't get the additional property tax revenue coming to them so they can serve a growing population. One possible consequence is that you might have to pay more to make up for the breaks being given to businesses.

Under the Cabela's proposal, there would an uber district of sorts within the area already designated as a tax increment financing district. Cabela's property tax payments would be used to pay back the money it borrows from the city.

You'll often hear economic development officials say they need to make sure they don't ignore existing companies in their efforts to bring in new businesses.

Gander Mountain took a risk on the Interstate 65 and County Line Road intersection when few others were willing to. They must feel like they are being sucker punched.

Here's an arrangement I would like: How about using my very own property taxes to pay off my mortgage? Think it will fly?

Here are some views on the Cabela's issue.

Gander Mountain Chief Executive Officer Mark Baker has written a letter to the Greenwood City Council. Here are excerpts:

As a retailer located in Greenwood, you can imagine my disappointment when I learned your city government is considering an $18 million incentive to our direct competitor to locate right across the street from us.

We compete directly with Cabela's in the outdoor lifestyle retail market and welcome that competition; however, providing Cabela's a tax subsidy to build their store creates an unleveled playing field and a situation where government is choosing winners and losers in what should be a free market.

Gander Mountain has a strong presence in the Midwest and Indiana, with five stores in the state and our only distribution center located in Lebanon, Indiana. Moreover, we employ over 450 people at our retail locations in the state and our distribution center. The largest of our Indiana stores is in Greenwood, which we built with no public subsidy.

Here's an excerpt from Tuesday's column by Indiana economist Morton Marcus.

But then we do get examples of inappropriate local government behavior. Have you followed what is going on in Greenwood?

A sporting goods store named Cabela's is being wooed with an $18 million bond deal. A few years ago, in Hammond, Cabela's was hooked by similar public subsidies.

Hammond is depressed and depressing; Greenwood is not depressed, although it too can be depressing. In Hammond there was no nearby competition for Cabela's; in Greenwood competing merchants do exist who are not getting comparable tax breaks.

There are conditions under which public subsidies for economic development are appropriate. Cabela's in Greenwood does not meet those conditions. But November will bring elections for mayor, and a big Cabela's feather would look nice in Mayor Henderson's crown.

Yes, all is normal in our world.

And this comes from an Associated Press story:

Outdoor gear seller Cabela's is fighting Kansas' attempt to collect $392,000 in sales tax, penalty and interest on Internet and catalog sales.

The case is thought to be among the first to set the stage for clarifying Kansas' 2003 tax law on merchandise bought by Kansans online or through catalogs and delivered to them in the state.

Cabela's, based in Sidney, Neb., is the nation's largest direct marketer. The sales tax assessment does not involve sales at the store. It targets three subsidiaries - Cabela's Catalog, Cabelas.com and Cabela's Marketing and Brand Management.

The Kansas Department of Revenue audited financial records of the subsidiaries from August 2002 to September 2004.

The agency concluded the subsidiaries were "doing business in this state" under a Kansas statute enacted in 2003 and should have forwarded sales tax on tangible personal property delivered to Kansas customers for use in the state.

Recently, the Hammond Redevelopment Commission wanted something from Cabela's in return for issuing bonds, and it got employment guarantees. Cabela's is building a 185,000-square-foot facility in Hammond.

Here is an excerpt from a story in the Times of Northwest Indiana.

City residents will be hired to fill more than two-thirds of the full-time positions available when Cabela's opens this fall, according to an agreement with the outdoor retailer.

Of 165 full-time positions, Cabela's is required to place Hammond residents in 142 of them through a long-negotiated agreement that finally was approved by the Hammond Redevelopment Commission.

"This sort of (local hiring) percentage is unheard of in development agreements," said attorney Kevin Smith, part of the city's team that hammered out the document. "There will be a big line for these jobs."

As construction activity at the 32-acre site moves indoors, the agreement requires that 66 percent of the work there be performed by Lake County contractors, with at least one-third of that by Hammond firms.

At least half of the workers doing the plumbing, masonry, electrical and other work must be Hammond residents and union members, or at least paid at union scale.

Cabela's will be held to regular reporting of these percentages to the Redevelopment Commission, with the penalty for failure to comply pegged at $2.6 million -- 10 percent of the $26 million in bonds sold to finance the project.

"It's amazing we got so much for Hammond residents," Redevelopment Commissioner Rosemary Wojdyla said. "And some teeth in it with a dollar cost if they don't comply."

The company also agreed to complete a landscaped berm by the time the store opens to shield homes along Northcote Avenue from the retail site. The company also will relocate a popular biking trail to the western side of the 93-acre former Woodmar Country Club property.

Here's a story that appeared in the Milwaukee Journal-Sentinel in May. Officials didn't want to give tax money to a retailer.

The Washington County Board has refused to pay a $4 million subsidy to Cabela's Inc., the world's largest direct marketer of outdoor gear, for construction of a store that opened in Richfield in September.

A slim majority of supervisors Tuesday voted against borrowing the funds that the board had pledged to Cabela's in September 2005 as an incentive for building the store in the county.

In exchange for the funds, the county was to become the owner of one or more of the store's museum-quality displays -- freshwater fish aquarium, an indoor replica mountain or wildlife dioramas.

The proposed $4 million contribution to the company was not necessary to lure it to build in Richfield, said Supervisors Richard Bertram of the Town of Barton and Donald Berchem of the Town of West Bend. They joined several other supervisors in stating their opposition to giving tax dollars to a business.

"Taxpayers do not favor borrowing money and giving it to a ... company," said Supervisor Daniel Knodl of Germantown.

The debt was to be repaid with county sales tax revenue collected on sales at the store.

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County attorney calls resolution illegal

By DAVE RANK - GM Today Staff

February 28, 2007

Despite being called illegal by Washington County Attorney Kimberly Nass, three County Board supervisors continue to lobby for a proposed resolution to rescind the county's $4 million payment to Cabela's Inc.

The financial pledge, a first for the county, was made as part of a 2005 regional agreement used to entice the national retailer of outdoor gear to build its $49 million store and development complex in the town of Richfield.

Nass and other officials say the county is bound to fulfill the payment by a web of signed regional agreements with the retailer, state, and towns of Polk and Richfield.

There is a development agreement with the retailer, a direct grant of $500,000 to Cabela's, a regional pact with the state and towns, a transfer of Highway 145 jurisdiction at the Cabela's site to the county from the state, a $750,000 community block grant agreement and the state's pledge to make highway improvements at the site, Nass said.

"A number of things have happened and all those things are tied into the county's (funding) agreement," Nass said.

Resolution author Donald Berchem claims the county can back out of the controversial payment because the deal is dependent on the County Board approving a borrowing resolution that has yet to take place.

"Let's get over this nonsense, " said Berchem, a County Board supervisor from the town of West Bend, during his presentation to the County Board's Executive Committee Tuesday morning. "Is this a good thing or isn't it a good thing to give a retail business $4 million? Let the new board decide."

Berchem has support from his fellow supervisors David Radermacher, town of Richfield, and John Stern, town of West Bend. Stern is a member of the Executive Committee.

"It is illegal," Nass said of the proposed resolution. "You can't rescind if you have a contract in place. ... I feel we have to carry out our obligations."

"Does Washington County want to break its deals?" said Douglas Johnson, the county's ad-ministrative coordinator. "I hope the majority of the board will recognize we made a promise and we should fulfill that promise."

"The status of the Cabela's agreement, according to (the county attorney), it's an agreement and if we fail to follow through, we end up in court," said Executive Committee member Mary Krum-biegel, a county supervisor from the town of Jackson.

Berchem pointed out that the county already is in a legal fight over the Cabela's payment, with a lawsuit filed by a county resident opposing that agreement.

Johnson denied that last year's board action to rescind support for a Purchase of Development Rights rural land preservation program is a precedent for a vote blocking the issue of general obligation bonds for the Cabela's project, something supervisors are claiming.

"Keep clear the difference between policy and legal contract," Johnson said. "There was no legal contract (with the PDR program). Comparing it to the Cabela's legal agreement is only a rhetorical one."

County Board Chairman Thomas Sackett, Hartford, asked Nass to provide all county supervisors with copies of the Cabela's project agreements and the proposed resolution, which the Executive Committee will again discuss at its next meeting.

This story appeared in the West Bend Daily News on February 28, 2007.

By JOHN MILLER Associated Press Writer

BOISE, Idaho (AP) _ A tax concession that allows some businesses to avoid collecting sales taxes from online and catalog sales to Idaho residents is unfair and should be dumped, a state lawmaker says.

The issue arose after the giant outdoor-goods retailer Cabela's Inc. won concessions from the State Tax Commission before opening its first Idaho store in Boise last August.

Nebraska-based Cabela's had not previously collected sales tax from Idaho residents who bought goods over the Internet or from its catalogs, and the Tax Commission allowed that to continue after the Boise store opened.

Sen. Brad Little, R-Emmett, says that isn't fair to other businesses here that do collect taxes on their so-called remote sales to Idaho residents.

Idaho residents who shop online from companies that don't collect the tax are required to send sales tax from those transactions to the state, but they rarely do.

``The Legislature should have a policy of not giving an unfair advantage to one company over another,'' Little said.

Sports Authority, another national sporting goods retailer with stores in Idaho, also doesn't collect sales taxes on its online transactions with customers from Idaho.

If Little's legislation to eliminate the tax exemption survives the state House and Senate and is signed by Gov. C.L. ``Butch'' Otter, it would boost the state's coffers by about $500,000 annually, he said.

Cabela's, which gets $1 billion of its $1.8 billion in annual revenue from online or catalog sales, often asks for such concessions when it expands its large stores in new states.

Nineteen states have approved similar exemptions. The company is now considering sites in Post Falls, Idaho, and neighboring Washington for more stores.

Some northern Idaho lawmakers fear eliminating the tax loophole could wind up chasing the company _ and the economic infusion it would provide to the local economy _ across state lines.

Recently, however, Cabela's has given up demands for the special tax status elsewhere in the United States.

In Maine, it's moving ahead with a $75 million development after dropping insistence on a sales tax waiver on catalog and online orders from in-state customers there. Like Little, critics in Maine contended such a waiver would have given Cabela's an unfair advantage over homegrown rivals, including L.L. Bean.

Cabela's spokesman James Powell didn't immediately return phone calls from The Associated Press seeking comment on the Idaho measure.

Consulting Firm Urges States to Require Retailer to Collect Sales Tax by John Buhl
In response to agreements that outdoor sporting goods retailer Cabela's has with 19 states to remove its sales tax collection obligation in spite of having nexus, a consulting firm is calling on states to enact legislation that would prevent multistate retail chains from avoiding tax collections on remote sales. Date: Feb. 22, 2007 Full Text Published by Tax AnalystsTM A government relations consulting firm is advising state lawmakers to adopt sales tax nexus legislation that would prevent multistate retail chains from avoiding tax collections on remote sales. "The Secret Tax Break: How Cabela's Short Changes States for Profit" -- written by Ewald Consulting of St. Paul, Minn. -- examines the outdoor sporting goods retailer Cabela's, which obtained waivers from the requirement to collect the tax for online and catalog purchases in all 19 states where its bricks-and-mortar stores are located. Ewald Consulting completed the study on behalf of Oppidan Investment Company, a business partner with Cabela's competitor Gander Mountain. Cabela's also sells via the Internet and catalogs. In 2005 the retailer reported over $1 billion in catalog and Internet sales, according to the report. "We may need state legislation to clarify sales tax laws [regarding] nexus," David Ewald, president and CEO of Ewald Consulting, told Tax Analysts. "We need to make sure there is a level playing field." According to the study, the waivers offered to Cabela's give the company an unfair advantage over other online retailers with bricks- and-mortar stores. The report also says that it sets a precedent for other multistate businesses to follow that could further reduce state revenues, putting the burden on the customer to remit sales taxes to the state department of revenue. Recent media coverage of the Cabela's sales tax agreements has led to mounting pressure from local politicians and retail competitors. Idaho state Sen. Brad Little (R) has introduced HB 67, which would overturn the Cabela's waiver in Idaho. Also, the company rescinded its waiver request in Maine, although it says it will still go ahead with plans to build a store there. (For prior coverage in Idaho, see State Tax Notes, Feb. 5, 2007, p. 295, 2007 STT 22-11 , or Doc 2007-2422 [ PDF]. For prior coverage in Maine, see State Tax Notes, Nov. 6, 2006, p. 357, 2006 STT 209-13 , or Doc 2006-22050 [ PDF].) "It gives [Cabela's] a big advantage over small businesses that can't [rearrange] their corporate structure," said David Clough, Maine director for the National Federation of Independent Business (NFIB). "And if you permit this, what's to stop other large, multistate corporations from doing the same thing?" Ewald said Cabela's has "badgered" states into complying with its request, lobbying governors and state officials for private letter rulings as a requirement before building a store. The consulting group's report includes excerpts from an anonymous e-mail sent from Cabela's to an unnamed state representative, in which a Cabela's representative declares that the company would no longer pursue a store in that particular state because its sales tax waiver request was denied. "In order that we can be profitable in any state, we feel that receiving these tax incentives are absolutely necessary," the e-mail says. In a written statement provided to Tax Analysts, Cabela's counters that the report's claims are poorly researched and an attempt by Gander Mountain to spread "misinformation for corporate gain" by attacking its competitors' expansion efforts. The statement also says the Ewald Consulting report overlooks the tourism, new jobs, and additional tax revenue provided by Cabela's retail stores. "Our ability to partner with local and state governments on our projects has been very successful," Cabela's President and CEO Dennis Highby says in the statement. "Given [Gander Mountain's] financial difficulties in recent years, this certainly seems like an attempt on their part to slow us down." The company defends the sales tax collection exemptions, arguing that Cabela's stores require significant improvements to surrounding public roadways, sewage, and utilities that can cost tens of millions of dollars. "Because surrounding businesses and the community as a whole share in the financial rewards from that construction, most believe the costs for those improvements also need to be shared," says Mike Callahan, Cabela's senior vice president for retail. "Gander Mountain has negotiated and accepted similar financing options in many communities." Does Cabela's Have Nexus? Cabela's has contended that its catalog, online, and retail store operations are sufficiently separate, so that building a store does not create sales tax nexus. However, the study counters that there is an "undeniable collaboration" between the affiliates, including cross-marketing and allowing returns from online purchases at retail stores. "A year ago we had people in [several different] states buy something taxable online without paying sales tax, and they were able to return the item to the store without any problem," Ewald told Tax Analysts. "All of their operations are conducted under the same company name, so there's no difference to the consumer." Ewald added that in Borders Online LLC v. Board of Equalization, a similarly structured corporation in where required to collect sales taxes on online purchases. (For the California Court of Appeal, First Appellate District decision, see Doc 2005-12108 [ PDF] or 2005 STT 107-8 .) But Diann Smith, general counsel for the Council On State Taxation, said that in SFA Folio Collections Inc. v. Tracy, the Ohio Supreme Court ruled that Saks Ohio could accept merchandise returns on behalf of the catalog company without creating nexus. (For the Ohio Supreme Court decision, see Doc 95-59911 or 95 STN 161-29.) "In that case, the sales staff accepted returns to help the customers and create goodwill for their store, not to benefit the mail order company," Smith said. Smith said the corporate name is relevant in "piercing the corporate veil," but other factors -- such as whether one corporate affiliate is undercapitalized or its operations are controlled by another affiliate -- have to be analyzed to determine whether sales tax nexus exists. Also, states have the option of making policy decisions to attract businesses, Smith said. "If a state were to say, 'We want [to attract] this business here because we want those new jobs,' that would be a legitimate position." Future of the Nexus Debate In August 2006 the Multistate Tax Commission rejected a model statute to clarify when out-of-state vendors with in-state affiliates have sales tax nexus. Nevertheless, Ewald said he was hopeful that with additional public scrutiny, either public pressure or new legislation would put an end to the practice of granting sales tax collection waivers behind closed doors. "This is about public tax dollars, and it should be discussed openly," said Ewald. Addressing the confidentiality of the letter rulings Cabela's received, the Maine NFIB's Clough said: "It would be helpful to at least know what is going on with [these rulings] in a general sense, without naming the company." Sheldon Laskin, the MTC's national nexus program director, told Tax Analysts that pressure from other taxpayers could play a significant role. "Other competitors, like Lands' End, had used the same argument, but they eventually started collecting [sales taxes]," Laskin said. "One of the big reasons Maine [eventually] turned [Cabela's] down was because of Lands' End's objection." John Buhl jbuhl@tax.org

TIF Epidemic Infects Local Governments

Written By: Daniel McGraw
Published In: Budget & Tax News
Publication Date: March 1, 2006
Publisher: The Heartland Institute


In 2004, the city of Fort Worth approved an economic development initiative that seemed to have all the numbers on its side. A billion-dollar company would come to town, bringing more than 500 jobs and luring an estimated 2.5 million visitors to the city each year.

And the cost to the city didn't seem that much: $30 million to $40 million in total tax breaks to be parceled out over the next 20 to 30 years. The company receiving the tax breaks would be Cabela's, a hunting/fishing megastore headquartered in Nebraska and now expanding across the country.

But when the numbers are peeled back, and the real costs of giving the tax breaks to Cabela's are studied, Fort Worth's economic development initiative isn't all it appears. The economic development tool--tax increment financing, or TIF--is being used by cities big and small, and critics claim it is the latest form of corporate welfare, with hidden costs.


Overestimate Benefits

The facts are simple, according to the experts. Stores such as Cabela's are already profitable, and incentives like TIF just make them extremely profitable.

Moreover, no one believes the original estimates of the number of visitors to the Cabela's store were realistic. Cabela's no longer offers firm visitor estimates, and Fort Worth officials admit the original estimates of tourist interest were overly optimistic.

"There is always this expectation with TIFs that the economic growth is a way to create jobs and grow the economy," says Greg Le Roy, author of The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation. "But what is missing here is that the cost of developing private business has some public costs. Roads and sewers and schools are public costs that come from growth. But private businesses need to pay their fair share, and then maybe the tax rate for the general public would not grow, or could be reduced."


Use of TIF Explodes

Tax increment financing has been around for 50 years, but in the past 10 years it has become a development aid most cities and states use ... and many corporations expect. Here's how TIF works:

After a local government has designated a TIF district--most states say the area must be blighted--property taxes (and sometimes sales taxes) from the area are divided into two streams. The first tax stream is based on the original assessed value of the property before any redevelopment. The city, county, school district, and other taxing bodies still get that money. The second stream is the additional tax money generated after development takes place and the property values are higher. Typically that revenue is used to pay off municipal bonds that raise money for infrastructure improvements in the TIF district, for land acquisition through eminent domain, or for direct payments to a private developer for site preparation and construction.

The length of time the taxes are diverted to pay for the bonds can be anywhere from seven to 30 years.

Local governments sell the TIF concept to the public by claiming they are using funds that would not have been generated without the TIF district. If the land was valued at $10 million before TIF-associated development and is worth $50 million afterward, the argument goes, the $40 million increase in tax value can be used to retire the bonds. Local government officials also like to argue the TIF district may increase nearby economic activity, which will be taxed at full value.

Given the competition between cities eager to attract new businesses, tax increment financing is not likely to disappear anytime soon. "Has it gone overboard?" asks University of North Texas economist Terry Clower. "Sure ... but the problem is that if a city doesn't offer some tax incentives, the company will just move down the road." According to Clower, "In a utopian world, there would be no government handouts, and every business would pay the same tax rate. But if a city stands up and says they aren't doing [TIFs] anymore, they will lose out."


Business Competitors Lose

Instead, it's the competitors of TIF-favored businesses that lose. Academy Sports & Outdoors, which employs 6,500 people, has about 80 sporting goods stores in eight Southern states, including a store in Fort Worth. When the Fort Worth City Council was considering the TIF for Cabela's, Academy Sports Chairman David Gochman spoke out against the tax incentives.

"This is not a nonprofit, not a library, not a school," Gochman said. "They are a for-profit business, a competitor of ours, along with Oshman's and Wal-Mart and others."

But for now, Fort Worth has the Cabela's store, down the road from the Texas Motor Speedway, which also has its own TIF. Housing and retail are growing in the area, but they were growing before the Cabela's store came to town. A half-dozen shopping centers nearby were on the drawing board well before the Cabela's TIF was considered. Within a five-mile radius of the hunting/fishing megastore, 10,000 new homes have been built since 2000. The area is expected to grow by 20,000 people in the next two years.


Big Corporations Are Big Winners

Some of the country's largest corporations have been TIF's major beneficiaries in Fort Worth: RadioShack, Dell Computer, Pier 1, NASCAR, and Cabela's. In each case, city hall records show, the company made TIF a condition of its coming to or staying in Fort Worth.

"The plan has veered so far from its origins that it has become little more than welfare for the rich," said Fort Worth businessman Louis McBee, who has fought TIFs. "Find the blight around the Texas Motor Speedway. Find it around Cabela's. Find it in many TIFs around the country. What this is is a corporate giveaway, and the common tax-paying citizens are left paying for it."

Daniel McGraw (danielmcgraw@sbcglobal.net) is a Forth Worth-based freelance writer and author of First and Last Seasons: A Father, a Son and Sunday Afternoon Football (Random House).

For more information ...

In March 2003, the Developing Neighborhood Alternatives project, a research effort in which The Heartland Institute participated, published The Right Tool for the Job? An Analysis of Tax Increment Financing. The executive summary and two-volume report are available online at http://www.heartland.org/Article.cfm?artId=11868.

Additional information on tax increment financing is available through PolicyBot™, The Heartland Institute's free online research database. Point your Web browser to http://www.heartland.org, click on the PolicyBot™ button, and select the topic/subtopic combination Taxes/Tax Increment Finance.

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

Tim Steele

Posted: Wed Dec 06, 2006


...On December 1, representatives from Cabela's met with the officials at Walker City Hall to talk about what it would take to locate a store at the Orchard Park development. Cabela's is looking for an incentives package worth $15 million.

"They want $15 million," said Zach Bossenbroek of the Walker Orchard Land Partners. "This would fund the public infrastructure, roads primarily."

Those roads would access the 240-acre mixed use site where Cabela's is interested in building, but only if someone can come up with the money.

Walker is out. They have no funds.

24 Hour News 8 learned Cabela's asked the Michigan Economic Development Corporation for the money. But the MEDC told 24 Hour News 8 state law prohibits tax incentives for retailers. The reason is if you give to one retailer, you have to give to all the retailers.

The MEDC's focus is promoting manufacturing.

Should Cabela's get the break they're looking for? Or would it be bad public policy to provide this kind of break?


Tim Steele
Web Managing Editor
tim.steele@woodtv.com

Lucky13

PostPosted: Wed Dec 06, 2006 12:25 pm

Location: Grand Rapids

Regardless of what kind of business Cabela's is or how many people they're going to employ, I think it's wrong for them to expect Walker to roll out the red carpet and allow them a 15M tax incentive.

That's one of the problems with this state, we have given everyone an exception to the rule of business and now EVERYONE expects a hand out.

EQUAL RIGHTS FOR EVERY

From: Mackinac Center News Release
Sent: Thursday, December 07, 2006 11:46 AM
To: Mackinac Center News Release
Subject: Cabela's Lacks Jobs Impact; State Should Refuse Assistance

For Immediate Release
Thursday, Dec. 7, 2006
Contact: Michael D. LaFaive
Director of the Morey Fiscal Policy Initiative
989-631-0900

Study Finds Cabela’s Has No County Jobs Impact

State should avoid targeted assistance even to large and successful businesses, say Center analysts

MIDLAND — Mackinac Center Director of Fiscal Policy Michael D. LaFaive today cautioned policymakers that offering financial incentives to Cabela’s Inc., the outdoor sporting goods giant, would likely not result in any net new job creation. Published reports indicate Cabela’s is seeking $15million in government business incentives in exchange for locating in Walker, Mich.

LaFaive cited a recent econometric analysis by Mackinac Center Board of Scholars Member Michael Hicks, who studied Cabela’s employment impact in six counties nationwide — including Michigan’s Monroe County — from 1998 through 2003. Hicks found that the retail chain had “no persistent impact on employment” in those counties or in surrounding counties. “What little positive change I found in employment tended to disappear within three months of a new store’s opening,” said Hicks, a research professor at the Center for Business and Economic Research at Marshall University and an assistant professor of economics at the Air Force Institute of Technology. His study is scheduled for publication in the semiannual Journal of Regional Analysis and Policy.

Michigan Senate Majority Leader Ken Sikkema is reportedly calling for assistance for Cabela’s Walker location from the Michigan Economic Development Corporation, a state agency he criticized last year. The MEDC has not pledged incentives so far.

“State business incentives tend to become political, not economic,” said LaFaive. “They create exciting job announcements, but they don’t result in an actual increase in employment.” LaFaive and Hicks are co-authors of the 2005 Mackinac Center study “MEGA: A Retrospective Assessment,” which detailed the lack of economic development impact of the Michigan Economic Growth Authority, an MEDC-affiliated program that provides targeted business incentives.

#####

nwitimes.com on Saturday, November 11, 2006 12:11 AM CST

McDermott denies federal investigation

BY SUSAN BROWN
sbrown@nwitimes.com
219.836.3780

HAMMOND | Representing Mayor Thomas McDermott Jr. and his family, attorney Kevin Smith on Friday denied federal authorities are investigating the family's role in the deal that landed a Cabela's sporting goods store in Hammond.

The allegations first surfaced Nov. 4 in a blog belonging to Maurice Eisenstein, a political science professor at Purdue University Calumet.

In the blog, Eisenstein reported two sources confirmed the McDermott family is being investigated by a grand jury for the Cabela's deal.

"We are in the process of determining all of the mayor's and his family's legal options regarding the defamatory remarks that are categorically false," Smith said. "It's our opinion these comments are made intentionally, with malice and no regard to the truth."

Smith said to his knowledge, neither the mayor, his family nor anyone else related to the Cabela's deal had received any subpoenas or requests for information from any grand jury or the U.S. attorney's office.

While Cabela's officials were not available for comment Friday, Smith said the same went for Cabela's.

"Cabela's is a family-owned corporation that deals 100 percent above board and responsibly," he said. "To even make innuendoes (otherwise) is irresponsible."

The U.S. attorney's office did not return calls Friday, but earlier in the week the office's spokeswoman, Mary Hatton, said the office could not comment.

Eisenstein said his sources had not indicated it was a federal grand jury that was hearing the case.

The source also did not address whether the grand jury was convened or at what stage, he said.

Eisenstein called the credibility of his source "impeccable."

Eisenstein said his blog did not say who was being investigated.

"Their threat to sue I find fatuous," he said. "The problem (with Cabela's) has been raised by many people, and he never answered any accusations about it."

McDermott has threatened to sue Eisenstein and others before, Eisenstein said.

"I'm sorry he's using this tactic to shut people down," Eisenstein said. "That's the way he operates."

MONDAY, NOVEMBER 06, 2006 9:20 AM

Retailer Cabela's hunting for incentives

BY KYLE STOCK

In June, lawmakers in Columbia tailored and sold a suit of incentives custom fit for Cabela's Inc., a Nebraska-based retailer with a catalog empire and 18 stores nationwide that is weighing a location for North Charleston.

It wasn't exactly a camouflage outfit, but it was delivered in a stealthy manner.

Tourism interests were pretty excited, including North Charleston Mayor Keith Summey, who envisioned a steady stream of out-of-towners flocking to the proposed store and filling nearby hotel rooms. After all, the legislation specified a huge $25 million property, including a waterfall and a giant aquarium, and was contingent on Cabela's delivering 700,000 out-of-towners a year.

However, local retailers - mainly fishing and hunting stores - were less excited. Where lawmakers saw a waterfall, they saw a tide of their tax dollars subsidizing the competition.

Also, a lot of folks doubted that a Cabela's in North Charleston would draw tourists who would not have come otherwise.

So I wasn't surprised a couple of weeks ago to learn that Cabela's is playing some incentive hardball with Kentucky. I received an anonymous fax of a September e-mail from a Cabela's executive telling an unnamed person that the retailer was no longer looking to build a store in the Bluegrass state.

The author - a person in "new store development" named Barbara Wynkoop - noted that Kentucky lawmakers had turned down Cabela's request for so-called NEXUS status, which would have exempted the company from levying state sales taxes on catalog orders from Kentucky residents, even if it built a store in the state.

"In order to be profitable in any state, we feel that receiving these tax incentives are absolutely necessary," Wynkoop wrote.

Cabela's recently threatened to pull out of a Maine project for the same reason, drawing the ire of L.L. Bean, which does not enjoy such privileges. Last week Cabela's said it would go ahead with that project without the sales tax exemption.

When asked about Wynkoop's e-mail, Cabela's officials said in a short written response that the company presently had no plans to build a store in Kentucky, but that it might if it found the right location and "an appropriate partnership."

Kentucky's Commerce Cabinet admitted they were "hot and heavy" with Cabela's earlier this year when the Legislature was in session, but dialogue had become less frequent, and no doubt more chaste, in recent months, after lawmakers killed a package of incentives crafted for the retailer.

The deal-sweetener was tacked onto a more controversial measure, which was "allowed to die a natural death," according to George Ward, secretary of the cabinet.

Ward is convinced that a Cabela's store, with its elaborate displays and seminars on fly-fishing and hunter safety, would be a huge visitor draw.

"In Dundee, Michigan, they call it the state's largest tourism attraction," Ward said. "Every year I drive past it (to visit family), there's just one more business there - a restaurant or a hotel. Now they're building a water park."

Cabela's posted a $72.6 million profit last year, while its income has increased by an average of 14 percent in each of the past five years. But part of that growth has nothing to do with selling rods, guns and camping gear. At the end of 2005, the company had $16.6 million in grants from governments around the country that it could keep if it lived up to certain promises.

One of the company's financing strategies is to buy a heap of bonds from local governments, the proceeds of which are then used to build its huge stores.

As the municipalities pay off the debt, Cabela's essentially gets a free store, plus interest income.

At the end of last year, it had $144.5 million of these bonds on its balance sheet.

Last week, Cabela's posted $15 million in third-quarter profit, down 8 percent from the year-earlier period. Analysts had expected more, but the company said its bottom line was crunched by opening new stores. Its revenue in the three months ended Sept. 30 rose 14 percent, to $490.5 million.

And its stock rose Friday after it released its earnings. But whether Cabela's stock is rising in the halls of power in South Carolina remains to be seen.

Reach Kyle Stock at 937-5763 or kstock@postandcourier.com.

Cabela's ends fight over sales tax

By JOHN RICHARDSON, Staff Writer Portland Press HeraldWednesday, October 25, 2006

Cabela's, the outdoor equipment retailer, has withdrawn its request for a controversial tax ruling and is moving ahead with plans for a megastore in Scarborough.

The Nebraska-based company submitted a brief letter to Maine Revenue Services late Tuesday, ending months of speculation about whether the store would drop its expansion plans here because of a disagreement over sales-tax liability. The company also sent the letter to the project's developer and the Scarborough Planning Board, which met Tuesday evening to begin reviewing the proposal.

"What this means is we're no longer waiting for the ruling," said Gene Beaudoin of New England Expedition LLC.

Beaudoin's development company wants to make a 125,000-square-foot Cabela's store the anchor of a $75 million mixed-use project on Haigis Parkway. After discussing the letter from Cabela's, Beaudoin presented details of the project, including office buildings, a 200-room hotel, restaurants and a bank.

Cabela's had said it would not come to Maine unless the revenue service ruled that the company will not have to collect sales taxes on catalog and Internet sales in the state. Although state law says a retailer with a physical presence in Maine must collect those taxes, the company has argued that its retail business is separate from its catalog and Internet business. A ruling against the retailer in Maine could open the door to other states demanding payment.

Cabela's pitch drew objections from L.L. Bean and others who said a ruling in the company's favor would give one retailer an unfair advantage over others.

Company and state officials have been exchanging information on the legal standards and Cabela's corporate structure for months.

The letter from Cabela's Senior Vice President Mike Callahan resolves the question of whether the retailer still wants to expand here. "We look forward to opening a Cabela's retail store in Scarborough," Callahan wrote.

But it does not entirely explain why the company is dropping its request for a tax ruling and, in effect, agreeing to collect the catalog sales tax if the state wants it to.

"Cabela's is presently re-evaluating its expansion strategy in the Northeast, which may result in a modification of our approach in Maine. We would like to withdraw our pending ruling request as it will not accurately reflect any changes caused by any new approach," Callahan wrote.

The letter does not say how Cabela's is changing its expansion plans, and Cabela's officials could not be reached late Tuesday.

One modification that could settle the issue in Maine and avoid a precedent for other states would be to bring some piece of its catalog or Internet business here in addition to the retail store.

A Maine call center or distribution center, or even an Internet kiosk, could allow Cabela's to collect the tax without setting a precedent for states with retail stores alone, according to state Sen. Lynn Bromley, D-South Portland. Bromley, Sen. Philip Bartlett, D-Gorham, and others have been talking to Cabela's officials about creative ways to preserve the Scarborough plan.

"I think this is just really good news," Bromley said. "My hope is they bring their online functions here."

The cost of collecting sales taxes in Maine was never a big issue for the retailer, Bromley said. Cabela's receives about 165,000 catalog orders from Maine every year, for about $10 million.

Cabela's was more concerned about setting a precedent for other states and being able to compete against similar national chains such as Bass Pro, she said.

David Ewald, a Minnesota-based consultant who monitors state tax policies toward Cabela's for Gander Mountain, a competing chain, said it's unusual for a state not to agree with the retailer's interpretation of tax law. "It sounds like Maine had some backbone," Ewald said. "It proves what we've said. The retailers will go where they can make money, and you don't need to give them money to come."

Bromley said that interpretation is not exactly accurate.

"There were four or five times that Cabela's was very willing to fold up the tent and go," she said. "It was close to dead many times."

Bromley said she and others saw a lot of positives in the plan, including hundreds of jobs with good wages and health insurance. She also did not want to present the image of Maine as being unwelcome to businesses.

A spokeswoman for Gov. John Baldacci said he was delighted by the company's decision.

"At the beginning of this process, Governor Baldacci said he hopes Cabela's comes to Maine. This is another example of Maine being open for business," Crystal Canney said.

CEO Makes Case Against Corporate Welfare: An Interview with Mark Baker

Gander Mountain CEO stands against tax handouts
Written By: David Ewald
Published In: Budget & Tax News
Publication Date: July 1, 2006
Publisher: The Heartland Institute

With nearly 100 stores in 18 states, Gander Mountain is the nation's third-largest outdoors retailer. Unlike its two larger competitors, Bass Pro Shops and Cabela's, Gander Mountain has achieved impressive growth without seeking targeted tax incentives from state or local governments.

In this interview, Gander's chief executive, Mark Baker, tells us why he believes government officials should oppose retail tax incentives.

Ewald: Gander Mountain has launched a national campaign in opposition to government subsidies in the outdoors retail industry. What is wrong with subsidies?

Baker: Competitors of Gander Mountain have successfully convinced state and local governments in several states to provide large tax incentives in order to build stores in their communities. They portray their stores as "destination retail" in order to secure the incentives, claiming that by having their store in a community it will draw millions of tourists, and their wallets, to the area. However, these retailers are in the marketplace to sell product and turn profit, and like all retailers they analyze the markets to determine where their customers live and shop.

Playing one community off another, these retailers push for tens of millions of dollars from taxpayers to help finance their stores. Even more troubling, in some cases they are persuading states to give them favorable "nexus rulings" that are costing taxpayers even more in lost sales tax collections.

Cabela's estimates that tax increment financing and other forms of government assistance [cover] about one-third of the cost of building new stores--or an average of $10 million to $20 million per location. However, the public financing packages can be larger. For instance, Cabela's received a tax increment financing package totaling $40 million to build a mammoth 180,000-square-foot store in Kansas City, Kansas.

Neither Cabela's nor Bass Pro would disclose the total amount of public money they have received over the years, but our estimates put the combined total at well over $400 million. When you add the value of the nexus rulings, the total goes even higher.


Ewald: What are you doing to oppose these subsidies?

Baker: We've put together and distributed a booklet and educational materials for state and local officials all across the country outlining our concerns. We are meeting with state and local officials directly, and communicating with the media and opinion leaders all around the country. We are building coalitions with taxpayer groups and other nonprofit organizations that share our concerns. We have worked extensively to identify and assist grassroots opposition in targeted communities.

We are building a network of like-minded individuals and think tanks that can defeat these proposals on the ground. We are doing everything in our power to encourage a discussion about retail subsidies and educate the state and local officials that will have the final say.


Ewald: Why doesn't Gander Mountain join in and take the subsidies?

Baker: We believe in the American system of free enterprise and consider these demands to be anti-competitive and fundamentally inappropriate. We cannot in good conscience go down that road and maintain our integrity as a good corporate citizen. We think it's wrong. So we are unwilling to accept the "everyone is doing it" argument and become part of the problem.


Ewald: What do you see as the negative impact of these subsidies on the communities involved?

Baker: Resources that could be used for education or true economic development are being wasted on private retail developments. 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 our estimates. Reno, Nevada spent $54 million, or $208,000 for every job.

It also should be noted that incentives to lure retail into a community often do harm to businesses already located in the area. Local stores and other national firms like Gander Mountain, who don't seek subsidies, are placed at a competitive disadvantage by this practice. Studies have also demonstrated that the promises of increased revenue, jobs, and economic growth are seldom fulfilled.


Ewald: Cabela's and Bass Pro argue their stores are "destination retail" and are appropriate for governments to subsidize. How do you respond?

Baker: The idea of destination retail may have held some merit when you had a very small number of outdoors megastores in the country. But the industry's exponential growth, with Cabela's planning stores in all 50 states, makes these claims obsolete.

If they built 50 Disneylands, do you think they'd be as successful as three? I think Cabela's and Bass Pro have really interesting stores, but when you get to 30, 40, or 50 of them, they become much less of a destination. There are already examples of these companies opening new stores within the purported drawing area of one of their existing stores.


Ewald: Do you consider any government subsidies for retail to be appropriate?

Baker: Yes. Sometimes, government infrastructure expenditures for improved roads or services may be necessary for the construction of a major new development. Modest expenditures of that kind may be appropriate, and Gander Mountain does not object to an appropriate level of government involvement.

But those are not the kind of expenditures we are objecting to. Our competitors are brazenly demanding that taxpayers finance a significant portion of their direct investment costs. Moreover, they ask for favorable tax rulings that exempt Internet and catalog sales from applicable taxes.


Ewald: Bass Pro and Cabela's have criticized Gander Mountain for also accepting subsidies. How do you respond?

Baker: That argument is a red herring. In just a few instances, Gander Mountain or the project developer has received tax assistance of limited amounts for a limited duration, typically amounting to less than $85,000 per store for a five- to seven-year period. Compare this to the $500 million accepted by Cabela's and Bass Pro for subsidy deals in total across the nation for both firms, not including the special tax deal Cabela's has been securing on Internet and catalog sales.


Ewald: How does the explosion in outdoors retail construction over the past few years affect this debate?

Baker: Government policymakers need to understand what's happening in the outdoors retail industry. In the past 10 years, the retail sporting goods industry increased square footage from 1 million to 14 million across the nation. There will be 77 Bass Pros and Cabela's by the end of the year.

As these stores become less unique and more ubiquitous, arguments for government subsidies become ever more unsubstantiated. Gander has been opening about 20 new stores a year for the past two years and plans to open seven to nine more in the next year--all without government subsidies.

FRIDAY, SEPTEMBER 22, 2006 8:13 AM

Sanford still on the hunt
Panel could hinder Cabela's incentives

BY CAROLINE FOSSI

The Post and Courier

Gov. Mark Sanford says he has "one last chess move" up his sleeve to foil an unprecedented set of tax breaks aimed at luring a major outdoor retailer to North Charleston.

Unless lawmakers reconsider legislation crafted for outfitting giant Cabela's, Sanford said Thursday he may ask an arm of the state Commerce Department to oppose the incentives created in that bill.

The Coordinating Council for Economic Development, a 10-member panel that includes some Sanford appointees, must approve certain parts of the package. While the council could not derail the deal entirely, it could throw a wrench into the works, the governor said.

Sanford tried to kill the bill, which for the first time in state history created tax breaks and other incentives for retail businesses. Lawmakers overrode his veto in June.

Sanford said he opposes the legislation because it would force other Palmetto State merchants to subsidize a multimillion-dollar competitor. "We would welcome them (Cabela's) to South Carolina, but we have real problems doing it in this particular way," Sanford said.

The outfitter is said to be eyeing a North Charleston site known as the Ingleside Plantation tract, at Interstate 26 and U.S. Highway 78. It would be the company's first South Carolina store.

Competing retailers say they don't have a problem with Cabela's setting up shop in the state. But most oppose the use of incentives.

"It would give Cabela's an unfair advantage," said Stu Utgaard, chief executive of the Sportsman's Warehouse, which recently opened its first South Carolina store in Columbia.

Local retailers agreed.

"I still don't believe in corporate welfare," said David Clifford, owner of the Seacoast Sports and Outfitters store near Kiawah and Seabrook islands.

Clifford said if the state is going to offer tax breaks to big retailers, it should offer them to small, local businesses as well. "If everybody benefited ... I would strongly support it," he said.

Sanford said he plans to urge lawmakers to nix the deal when they return to the statehouse in January.

"The store hasn't been built yet," Sanford said. "There is still a chance to get state policy right."

Last month, Sanford wrote to about three dozen Charleston-area hunting, fishing, boating and camping stores, asking for their help in criticizing the law.

While incentives are common to lure large industrial or manufacturing projects, they are unusual in the retail sector, given the highly competitive nature of the industry and the mostly low-paying jobs it creates.

The legislation passed in June was tailored specifically for a chain like Cabela's, but did not identify the company by name. It offers sales and income tax credits to an "extraordinary" retail destination that has an aquarium or museum and draws at least 2 million visitors a year. It also required a minimum $25 million investment and at least $2 million a year in sales-tax collections.

Other states have offered incentives to the retailer, stirring controversy in some places. The company has said that the negotiation of tax breaks is a key part of its business strategy.

The bill's sponsors and other supporters, including North Charleston Mayor Keith Summey, have said incentives are justified because Cabela's stores double as tourist attractions.

The chain is known for its expansive layouts, which often feature aquariums, restaurants, gun libraries and fake indoor mountains adorned with wildlife taxidermy displays. The company, which also has a sizeable catalog business, posted a $72.6 million profit last year.

Local tackle shop owner Mike Able said he's talked to dozens of retailers and customers across the state who oppose the Cabela's incentive plan.

Many have contacted lawmakers to voice their opinions, said Able, co-owner of Haddrell's Point Tackle & Supply.

But he doesn't expect the General Assembly to change course. "That's like admitting they were wrong," he said. "There aren't many politicians that would do that."

Reach Caroline Fossi at 937-5524 or cfossi@postandcourier.com.

Outdoor retailer eyes Lacey
Cabela’s could bring 400 jobs; jurisdictions would bear costs
BY CHRISTIAN HILL

THE OLYMPIAN

LACEY — Cabela’s, which describes itself as the world’s foremost outfitter of fishing and hunting gear, is considering a store site in Lacey, but the city, state and property owner would have to spend up to $30 million to land its 400 jobs.


The Nebraska-based company has expressed a strong interest in property in Hawks Prairie for a $40 million store.

Negotiations have just begun on the property off Marvin Road just north of its Interstate 5 interchange.

The economic effect of the store could be tremendous for the community. Cabela’s is known as much for being a tourist attraction as a retailer, and its stores are top draws in many of the states where it operates. The stores feature two-story replica mountains with waterfalls and beaver ponds, 50,000-gallon aquariums with live fish, outdoor walking trails and taxidermy displays that, a spokesman said, can rival what visitors can find at the Smithsonian.

The store is projected to be 225,000 square feet. To compare, the Hawks Prairie Wal-Mart is expanding to become a 216,076-square-foot “supercenter.”

According to one estimate, Cabela’s would attract millions of visitors each year and create hundreds, possibly thousands, of direct and indirect jobs. Of greater interest to South Sound, the store is projected to generate millions annually in new spending from tourists and area residents. The store also could finally realize Lacey’s longtime dream of having a vibrant commercial center in Hawks Prairie.

“You probably couldn’t ask for a better anchor or better draw,” City Manager Greg Cuoio said.

But those benefits wouldn’t come cheaply.

Landing Cabela’s will require a hefty incentive package. The city has applied for nearly $10 million in state grants to help pay for the estimated $29.7 million in road and utility improvements needed for the store. Without the financial assistance, the project can’t move forward, according to documents obtained by The Olympian.

In addition to the grant, the city will kick in $5 million toward the rest of the cost of the infrastructure, estimated at $19.8 million; the property owner has committed to pick up the remainder. The city has left open the possibility that Cabela’s might pick up some of that cost.

The company also must negotiate an agreement for the property. Landowner Tri Vo and his partner have offered about 38 acres at no cost to Cabela’s, according to a letter Tim Holland, the company’s director of new store development, wrote to Lacey Community Development Director Jerry Litt.

The acreage is part of a larger property that Vo and his partner acquired late last year.

“Based on the foregoing assumptions, Cabela’s has a strong interest in moving forward with discussions and investigation of the location and learning more about the potential incentive package,” Holland wrote in the letter, obtained by The Olympian through a public-records request.

Reached Monday, Vo said he was doing research about Cabela’s but declined to comment further.

Company spokesman James Powell advised against reading too much into the inquiry.

“It’s not uncommon for us to be in entry-level discussions without that meaning we’re going to be coming to that location,” he said. “That might be the case there.”

Powell said the company is in an aggressive expansion mode. Cabela’s is one of the largest catalog retailers — mailing 150 million catalogs a year — and it wants its retail division to match that success, he said.

The company operates 14 retail stores — none on the West Coast — and plans to open six more this year.

“It’s very likely we’ll be doing more than that in ’07,” he said.

Powell said it’s likely the company is looking at other properties around the state, but declined to name specific locations.

Asked about the importance of an incentive package to secure a store, Powell responded: “For a large store, it’s very important to crucial, I would say.”

The incentives are sizable, but both the developer and city realize that Cabela’s has the ability to draw hotels and other retailers around its stores.

It’s the type of activity the city has been seeking since it zoned the property as a business district to pull visitors into Hawks Prairie.

A family trust held the property for decades, and it wasn’t until Vo and his partner bought the 374-acre property in October for $25 million that the city’s vision was revived. The property Cabela’s is eyeing is only a tiny portion of what Vo and his partner purchased.

Michael Cade, executive director of the Economic Development Council of Thurston County, said he would expect Cabela’s shoppers to come here from as far as Seattle and Portland.

“They are a retailer that brings dollars into the area, and not just from local people,” he said. “It’s destination retail.”

Cade said he tried to woo Cabela’s when he was in a similar position in Snohomish County. Cuoio said the city staff made its first contact with Cabela’s six years ago.

Cabela’s is looking to open the proposed store in early 2008, according to Cuoio.

Cuoio said he has heard that company representatives are impressed with the property’s wooded terrain, easy access to I-5 and view of Mount Rainier.

But he said a lot of pieces have to fall together for a proposal of this scale to become reality.

“While we’re enthused, we’re measured in our outlook,” he said.


ADDING UP THE COSTS

The effort to draw Cabela’s to Lacey won’t come cheaply for the property owner or city.

The city estimates it will cost $29.7 million to make the needed road and utility improvements to serve a proposed 225,000-square-foot store.

The city and developer tentatively have committed $19.8 million for the projects. The city has applied for state grant money to cover the rest.

The improvement projects and costs are:

• Ten thousand linear feet of new roadway to connect to the store, $9.4 million

• The right of way for the roadway, $8.8 million

• Widening Britton Parkway, $720,000

• Adding a lane to the southbound offramp from I-5 at Marvin Road, $500,000

• A regional facility to collect stormwater from the store site and new roadway, $4.3 million

• A lift system and pipes to collect wastewater and move it for treatment from the store and surrounding properties, $3.5 million

• An acceleration lane for the I-5 interchange, $100,000

• Development fees and other off-site improvements, $2.4 million.

The city filed a pre-application for the grant money earlier this month. State officials will review and comment on the application by Friday. The city must submit a final, more formal, application by April 3.

The Legislature is expected to earmark up to $49.5 milion in 2007 for projects that will compete for the money.

Sanford takes aim at Cabela's incentives
Monday, September 11, 2006

Gov. Mark Sanford, never one to shy away from scrapping with the General Assembly, fired another salvo at fellow lawmakers this weekend when he attended the Columbia ribbon-cutting for a Sportsman's Warehouse.

Sanford probably wouldn't normally make it to such an event, but a multimillion-dollar incentive package passed for Cabela's a few months ago is still sticking in his craw. The governor was on hand to note that Sportsman's Warehouse was getting no such deal.

"Getting into the business of subsidizing retailers in this way that's never been done before is a menace to mom-and-pop shops all over South Carolina," Sanford said. "It amounts to a penalty against family-owned businesses, and a penalty against straight-up competitors like Sportsman's Warehouse and Bass Pro Shop who didn't ask for special treatment and subsidies."

The governor called on the General Assembly to reel the incentives back in when they reconvene.

Sanford, however, missed the ribbon-cutting for the Tanger Outlet Center a week earlier, where North Charleston Mayor Keith Summey once again championed the Cabela's incentives. "I think it's a tourism draw," he said.

Article published September 14, 2006

Bass Pro education facility in Rossford to get $1million
State also approves rebate of sales tax

By JENNIFER FEEHAN
BLADE STAFF WRITER


The state is sweetening the pot for Bass Pro Outdoor World LLC to locate a $50 million retail development in Rossford.

Gov. Bob Taft announced yesterday that the Ohio Department of Natural Resources had committed $1 million to help develop an outdoor education center at the Bass Pro store proposed for the Crossroads of America off I-75 near the Ohio Turnpike.

The Department of Development also notified Wood County officials late yesterday that Bass Pro had qualified for a rebate of up to 75 percent of the county's 1 percent sales tax on sales made at the new store for up to 10 years or until the megasports outfitter had recouped its development costs.

"This clearly is an important step in the right direction with a little bit of additional good news in that the state Department of Natural Resources sees value to this project as well," Wood County Commissioner Tim Brown said.

State Rep. Bob Latta (R., Bowl-ing Green), who has been working for more than eight years to land Bass Pro, said the $1 million from ODNR would come from hunting and fishing license fees and from federal excise taxes on hunting and fishing equipment that is rebated to the state based on the number of hunting and fishing licenses it sells.

Mr. Latta said that money often is funneled to ODNR projects in other parts of the state. But under this proposal, local anglers and hunters would see some of the dollars they spend come back to the area.

"This would be a perfect fit," he said.

"I think it's great news for the local sportsmen in the area," Commissioner Jim Carter added.

Rick Ferguson, owner of Szuch Live Bait on Corduroy Road in Jerusalem Township, said he likes the idea that the money will be coming back to the area, but he would prefer to see it spent on educational endeavors, not bricks and mortar.

"If it's for education, I'm all for the kids. But if they're giving it to them to just build, then I've got a problem with it," Mr. Ferguson said. "It's kind of a double-edged sword for me because it's going to hurt my business if they open here."

ODNR spokesman Jane Beathard said a similar deal was given to Bass Pro when it located a store off I-275 near Cincinnati. Money generated from Ohio hunting and fishing licenses as well as the state's share of a federal tax on hunting equipment was used to pay for a large aquarium and an interpretative kiosk in the educational section of the store.

She said Ohio law forbids the use of the money to subsidize Bass Pro's retail operations. Although ODNR has underwritten native wildlife displays at Ohio zoos and at COSI, the Bass Pro projects are the only instances where the department has joined forces with a retailer.

"By Ohio law, outdoor education is one of the purposes for money generated by the sale of hunting and fishing licenses," she said. "It promotes hunting and fishing because it promotes outdoors education and the development of outdoor skills.

"They teach everything from nature interpretation to angling skills and hunting safety," she said.

County commissioners said they planned to get a letter off to Bass Pro today letting the company know that it had qualified for the sales tax rebate outlined in a new state law that was crafted specifically to attract Bass Pro.

The law applies to retail and entertainment facilities deemed impact facilities if they invest at least $50 million within two years, draw more than 50 percent of their customers from at least 100 miles away, dedicate at least 10 percent of their facility to educational and exhibition space, and maintain a minimum employment level of 150 full-time equivalent workers.

"Now that the Department of Development has said it is an official impact facility, that clears the way to negotiate with Bass Pro as to the percentage of tax and length of time," Mr. Carter said.

The timetable for the project will be up to Bass Pro, Mr. Brown said.

"When we got their letter notifying us of their interest, we Federal Expressed it down to the state for consideration, and we will act immediately again to notify Bass Pro that we have received the green light to negotiate," Mr. Brown. "We are acting as quickly as we can."

In Bass Pro's application for the sales tax rebate, it outlined plans for a 150,000 to 180,000-square-foot restaurant and retail store that would "offer northwest Ohio's largest selection of quality outdoor gear, clothing, and accessories from leading industry names, including equipment and clothing for fishing, hunting, boating, hiking, backpacking, wildlife viewing, outdoor cooking, and more."

The store also would feature a gift and nature center, a large boat showroom, an 18,000-gallon aquarium, and native wildlife and artifact displays.

Other features planned at the Rossford store are "museum-quality wildlife dioramas, huge murals and chandeliers depicting outdoor scenes, massive log and rock work, waterfalls and other water features, and aquariums stocked with native fish species."

Exhibition and recreation space would include climbing walls, archery ranges, fine gun rooms, NASCAR shops, and a laser arcade.

The company said it planned to offer free outdoor-skills workshops and invite scout, school, and church groups to the store for field trips.

Bass Pro expects the development to create the equivalent of 250 full-time jobs

Jim Provance of The Blade's Columbus bureau contributed to this report.

Contact Jennifer Feehan at:
jfeehan@theblade.com
or 419-353-5972.

Article published Sep 12, 2006

Cabela's tax break raises eyebrows
Sales tax exemption gets scrutiny in Idaho, other states

Ken Dey
Idaho Statesman

Idaho officials contend they were only following the law when the Tax Commission ruled that Cabela's Inc. would not have to collect Idaho sales taxes on its online and catalog sales.

But legal and legislative efforts under way nationwide would tighten the tax laws and eliminate the so-called gray area that allow companies like Cabela's to avoid collecting state sales taxes from online customers.

The issue has caught the attention of Idaho legislators.


"I definitely think we need to look at this in the next session. I'm concerned about it, and others are too," said Sen. Brent Hill, R-Rexburg, who will likely be the new chairman of the Senate's Local Government and Taxation Committee when the Legislature convenes in January. "I don't want people to think we're bending over backwards for the big outfits while sacrificing our small businesses and putting them at a competitive disadvantage."


Cabela's successfully argued that the company's online and catalog divisions are separate companies from the company's retail operations and therefore have no "nexus" — a physical presence, such as an office, branch, warehouse or employees — in the state to require the collection of taxes.

The Idaho Tax Commission denied the Idaho Statesman's public records request for additional information about the Cabela's ruling and rulings for other companies, citing the state's taxpayer confidentiality laws.


Deputy Attorney General Ted Spangler, who represents the commission, said rulings aren't required. If other companies are not collecting sales taxes for online and catalog sales, they're doing so because they think they're operating within the law, he said.

Time for a challenge


Idaho isn't alone in giving Cabela's a favorable ruling. The company said it has received such rulings in 11 states where it has retail stores and claimed no nexus for the online operations.

Cabela's says it requests rulings because its customers don't like paying the taxes, and the taxes put the company at a competitive disadvantage with other online retailers with no presence in Idaho that don't collect taxes.

But in Maine, where Cabela's hopes to build, a number of state and business leaders are speaking out against Cabela's request for the tax break because, they say, it would be unfair to other Maine companies that collect sales taxes on online sales.


"States could easily say no," said Michael Mazerov, senior fellow with the Washington, D.C.-based Center on Budget and Policy Priorities, a nonpartisan organization that monitors tax policy and how it affects low-income families. "But you never know when a big economic development deal comes forward how much pressure will be bought to bear to get a ruling like this."

Mazerov said it's a "murky" area of the law and, if tested, he believes the Supreme Court would uphold a state's right to require companies like Cabela's to collect sales taxes.


Idaho's sales tax collection policies are based on a 1992 U.S. Supreme Court ruling in Quill Corp. v. North Dakota. North Dakota wanted the Quill office-products company to collect state sales taxes from its customers despite having no presence in the state.

The Supreme Court ruled that the company must have a nexus before the company can be required to collect sales taxes.

Cracks in Cabela's strategy


Cabela's declined to comment for this story. The company said in its annual report with the U.S. Securities and Exchange Commission that it would challenge any efforts to deny the sales tax exemption in states where Cabela's has no online nexus but conceded that it might not prevail.

California denied a similar exemption for Borders Books and Music, which maintained that its online operation was separate and had no presence in California. Borders appealed, but the denial was upheld by the state's court of appeals. The court ruled in June 2005 that Borders retail and Borders online were not separate companies and couldn't be exempt from collecting sales tax for online purchases. The court cited Borders practices such as allowing customers to return online items to retail stores, imprinting its receipts with the company's online address, referring retail customers to its online site, and using similar logos and shared market and financial data between online and retail.


A similar case against Cabela's is now pending in Texas. Gander Mountain Co., a competing sporting goods company based in Minnesota, alleges that actions by Cabela's do not support the company's contention that its retail operations are separate from online and catalog operations.

The lawsuit alleges that online and catalog customers can return items to a retail store, that catalogs are distributed at retail stores, that retail store employees assist customers in placing catalog orders at the store, and that Cabela's retail stores promote and advertise the Cabela's Web site in the stores. Gander Mountain also alleges that the company's Web site provides information about its retail stores.

Mazerov said the allegations clearly show that Cabela's retail sales representatives are acting as representatives of the Web site.
"To me that should be a no-brainer for nexus," he said.

Changing the laws


Although the Idaho Tax Commission ruled in favor of Cabela's, the commission is supporting changes that would no longer allow Cabela's and others to qualify for an exemption.

As a member of the Interstate Tax Commission, Idaho last month voted in favor of a model statute for states to clarify what actions establish a nexus. The Sales Tax Nexus Provision would conclude that an out-of-state company with no physical presence in a state would still be considered to have a nexus in the state if an online company is related to a retail store within that state for tax and financial purposes. The two also would have to share a similar name, trade name or trademark.

The provision didn't pass but could be brought up again.


Idaho has also been monitoring the Streamlined Sales Tax project, which asks states to simplify sales-tax collection procedures to make it easier for online and catalog sellers to collect the tax. Twenty states have passed legislation to accomplish that, but Idaho hasn't yet pursued legislation. A bill in the U.S. House would make streamlining sales tax procedures a nationwide requirement, but few people believe it will pass this session.

The Streamlined Sales Tax project indirectly addresses the nexus question, but proponents hope that by streamlining sales tax collection, online and catalog companies will be more receptive to collecting the taxes. Many of the larger retailers, including Wal-Mart, Target and Best Buy, support the Streamlined Sales Tax project and already collect sales taxes in states where they have a presence.