By Scott Reeder | Watchdog.org
BOSSIER CITY, LA — When Bill Winkler opened his small archery shop, he was prepared to compete against businesses large and small, but not against a government-financed competitor.
“The day Bass Pro opened here in Bossier, the number of arrows I sold dropped off by 50 percent,” Winkler said.
A Bass Pro Shop opened in Bossier City in 2005 after city officials promised to give the retailer $38 million to pay for the construction of the 106,000-square-foot store in this Red River community.
Such deals are commonplace.
Both Bass Pro Shops and its archrival, Cabela’s sell hunting and fishing gear in cathedral-like stores featuring taxidermied wildlife, gigantic fresh-water aquarium exhibits and elaborate outdoor reproductions within the stores. The stores are billed as job generators by both companies when they are fishing for development dollars. But the firms’ economic benefits are minimal and costs to taxpayers are great.
An exhaustive investigation conducted by the Franklin Center for Government and Public Integrity found that the two competing firms together have received or are promised more than $2.2 billion from American taxpayers during the past 15 years.
“Retail is not economic development. People don’t suddenly have more money to spend on hip waders because a new Bass Pro or Cabela’s comes to town,” said Greg Leroy, executive director of Good Jobs First, a nonpartisan economic development watchdog group based in Washington, D.C. “All that happens is that money spent at local mom and pop retailers shifts to these big box retailers. When government gives these big box stores tax dollars, they are effectively picking who the winners and losers are going to be.”
Numbers don’t always tell the whole story, countered Larry Whitely, a spokesman for Bass Pro Shops, a privately held company based in Springfield, Mo. Whitley argued the stores should be viewed as an amenity being added to a community — much like one might view a park or a library.
“These aren’t just stores — they are natural history museums,” he said. “Every store is designed to reflect the unique natural environment of the area in which it is located.”
He added that often a Bass Pro store is an anchor development that attracts other retailers.
Then again, the amount of tax dollars that have been poured into these two companies would be enough to purchase every man, woman and child in the United States their own fishing pole.
Typically, these stores are financed through familiar economic development schemes like tax increment financing districts. Basically, a city borrows money by selling bonds on Wall Street and then pays off the debt with the increase in property or sales taxes generated in that TIF district.
The Franklin Center filed hundreds of state open records requests with cities, counties, economic development authorities and state governments seeking copies of development agreements both firms have entered into.
After analyzing the development agreements, state audits, bond issues, development studies and local news accounts the Franklin Center found:
- Cabela’s has received $551 million in local and state assistance during the past 15 years.
- Bass Pro Shops received $1.3 billion in local and state assistance during the same period.
- The federal government helped ensure liquidity for Cabela’s’ credit card division by providing $400 million in financing for the purchase of the company’s securitized debt.
Both firms have a history of targeting rural or smaller suburban communities and negotiating deals that involve extensive borrowing on the part of the municipality to build a store.
In fact, Bass Pro Shops often pays comparably little toward the construction of its own stores. While this sometimes is the case with Cabela’s, its development schemes tend to involve elaborate agreements that include massive outlays for public spectacles in the midst of the retail setting.
Town gets the goat
For example, state and local taxpayers borrowed $60 million to build a Cabela’s store and its supporting infrastructure in Buda, Texas. For that amount, every household in the 7,600-person community could have purchased a new 2012 Lexus CT Hybrid.
The Buda City Council even agreed to take the town’s name off its water tower and replace it with the word “Cabela’s.” But government largess didn’t end there. The Texas Parks and Wildlife Commission provided Guadalupe bass, the official state fish, for the store’s massive aquarium at no charge to the retailer.
In one of the more bizarre aspects of its agreement, an economic development corporation established by Buda owns about 20 percent of the 185,000-square-foot store and one-third of the land on which it stands. That means that a 30-foot artificial mountain, with taxidermied mountain goats and other wildlife, a 60,000-gallon, fresh-water aquarium and an exhibit of life-size African game animals all fall under the public ownership umbrella.
Reportedly, Cabela’s will save $4 million in property taxes during the next 20 years because those non-revenue generating areas of the Buda store are publicly owned. This, of course, deprives the city of potential revenue and gives the store an advantage over competitors.
This type of public ownership of store amenities is a standard part of many of the development agreements Cabela’s enters into in communities ranging from Hamburg, Pa., to Mitchell, S.D. The retailer’s stuffed animal displays and aquariums are labeled as “museums” and its showrooms for used firearms are now called “gun libraries” as a sort of legal fig leaf to justify public ownership of the retailer’s amenities.
“It’s almost like they are out to take advantage of the rubes,” said Michael Hicks, an economist at Ball State University in Muncie, Ind. “Often these small town city councils aren’t the most sophisticated in analyzing an economic development proposal.”
Convincing politicians that the store will be a tourist mecca is a critical part of Cabela’s’ and Bass Pro’s spiel, said Stacy Mitchell, author of “Big Box Swindle.”
“When they go to these city councils they want to convince them that people will travel hundreds of miles just to shop at that store. They want them to believe it’s not just a store, it’s a tourist attraction,” Mitchell said. “But just look at a map — these stores are everywhere. Why would you travel to one of these stores, if there is one in your hometown?”
Such was the argument former South Carolina Gov. Mark Sanford made first to the state’s Legislature and then to the voters in 2006. Sanford engaged in a battle with his Legislature over whether to provide incentives for Cabela’s to build a store in North Charleston. Cabela’s officials made claims of the store becoming a major tourist draw that defied credulity, he said.
In order to believe Cabela’s claims, one has to accept that people would bypass similar Bass Pro stores in places like Myrtle Beach, S.C., Savannah, Ga.,Lawrenceville, Ga., and Concord, N.C., to travel to North Charleston to shop at the proposed store.
“It was completely unrealistic given the number of existing stores that are out there,” Sanford said.
In 2006, Sanford vetoed legislation passed by the South Carolina Legislature that gave Cabela’s a 50-percent break on sales and income taxes. But the Legislature overrode Sanford’s veto. At that point, Sanford led a grassroots campaign against the Cabela’s subsidies.
“We don’t think it makes sense for the any number of family-owned and smaller businesses that have been paying taxes in South Carolina for a long time to now be called on to subsidize a loss in their sales,” Sanford wrote in a letter to dozens of outdoor sporting goods stores. “I would appreciate you making your voice heard if you think this proposal should not stand.”
Sanford also sent letters with a similar message to the Cabela’s CEO. Eventually, the retailer backed away from building in South Carolina.
Under the gun
So why are politicians so willing to subsidize Cabela’s or Bass Pro Shops?
The appeal appears to be cultural and political as well as economic.
“This is a God-fearing, gun-loving part of the country,” Sanford said. “People here feel passionately about the Second Amendment. The message I have is that we have an even more important tradition in this country called free enterprise. We need to fight to preserve it.”
Art Rolnick, former chief economist for the Minneapolis Federal Reserve Bank, compares small-town efforts to attract these retailers to that of major cities building stadiums and arenas for professional sports teams. Often it is done as a matter of civic pride or for bragging rights rather than as a matter of sound economic policy, he said.
In fact, Ball State economist Hicks studied the economic impact of seven Cabela’s stores that opened between 1998 and 2003 and found that despite millions of dollars in economic development incentives given to the retailer, there had been no net gain in jobs detected in the communities one year after the stores opened.
“It’s not like folks suddenly have more money to spend on hip waders once a Cabela’s opens up. What generally happens is that instead of buying those hip waders from an independent business, they go to big box store,” said Leroy of Good Jobs First.
Both Cabela’s and Bass Pro have become extraordinarily adept at getting taxpayers to pay not only for the bricks and mortar of their stores but some esoteric related attractions:
- An 18-acre lake — with a waterfall — was paid for with part of the $70.6 million in taxpayer subsidies provided for a Bass Pro development in Independence, Mo.
- An indoors cypress swamp will be created in Memphis as part of the $215 million taxpayers are contributing toward the renovation of the Pyramid Arena into a Bass Pro Shop. This includes money the city plans to spend to provide supporting infrastructure for the building.
- A boardwalk, a town square and street improvements were part of the $150 million in tax dollars used for a development in Branson, Mo., where a Bass Pro is the anchor tenant.
- Stuffed animals have been purchased with millions of dollars in public funds to adorn numerous Cabela’s stores in communities ranging from Lehi, Utah, to Buda, Texas, to Hamburg, Pa.
These development deals are not without risks to the communities that enter into them. Bass Pro defaulted on its bonds for its development in Olathe, Kan. In Independence, Mo., the city even guaranteed the bonds and Bass Pro defaulted anyway, leaving the city to shell out $3.5 million lat year to cover a payment on the project.
In both of those communities, the bond payments were tied to sales taxes generated by the Bass Pro Shop stores. When sales fell below the projected levels, there wasn’t enough money to pay off the bonds.
Paul Woodall is a Birmingham, Ala., lawyer who specializes in economic development and who was hired by the city of Leeds, Ala., to redraft a development agreement for a Bass Pro project. The city of Leeds, he said, was left vulnerable by the way the original development agreement was drafted because the bonds were backed by the full faith and credit of the city.
Bass Pro is more covetous of municipal subsidies than other retailers, Woodall said.
“These stores come into rural and suburban communities that don’t have a lot going for them and convince them that they can put them on the map. Many retailers who enter development agreements want to share sales tax revenues. But in the case of Bass Pro, they want it all,” he said.
Cabela’s Chief Financial Officer Ralph Castner said the construction of one of its “destination retail” stores can cause people to change their shopping habits by getting them to cross a city line or even a state border.
He noted that Cabela’s’ store in Wheeling, W.Va., attracts customers from Pennsylvania and Ohio. But the city of Wheeling abuts the Ohio border and is only 11 miles from the Pennsylvania state line.
Castner conceded that it is a matter of debate whether municipal or state retail subsidies benefit the U.S. economy as a whole.
Cabela’s’ own data indicates the customer base of its stores primarily is people living in the communities where the stores are located. The firm’s Reno store is its most successful at being a true destination retailer. Two-thirds of that store’s customers come from a two-hour radius of Reno, Castner said.
“I think part of it is that California has really tough gun laws but Reno is nearby so people go there to shop,” he said.
Cabela’s has begun to rethink its strategy, which has reaped it hundreds of millions of dollars in incentives from small towns across the nation. Castner said Cabela’s has not ruled out accepting more local subsidies — if a good deal were presented to them by a community. But the company’s leadership has reconsidered the wisdom of accepting incentives.
“We have come to the conclusion that the places that are most likely to offer incentives are the places we are least likely to want to build,” Castner said. “People want to come to your stores for excellent customer service and quality merchandise. The taxidermy displays may attract them the first couple times but they will keep coming back for the other.”