Tax incentives for destination retail?

[Jen]

Here we have a destination retailer that feels entitled to ask for tax incentives. Is Cabela's that unique in its merchandise and displays that it really thinks it will be a sustained shopping adventure for the outdoorsy types?

Maybe it will be a draw to convention visitors or a stop for people trucking their way north to the real michigan wilderness?

See what has happened since tax incentives became the game to play in attracting industry! Officials think it will be a good thing for the local economy, in what way? Besides the little chain fish that will spawn in the surrounding environs, how does it benefit a non cabela's shopper who lives in the region?

Will Michigan take Cabela's bait?

[ssnyderjr]

Yes, Michigan will take the bait. I have heard that the one in Dundee is the largest attraction Michigan has going for it. Also heard that the average time spent there by a shopper is 3.5 hrs. Have you seen Dundee's growth since Cabelas opened???

The better question is how much the ones (Bass Pro Shops/Cabelas) planned for Grand Rapids and Rossford, OH (Just outside Toledo) will pull consumers away from each other and to what extent.
I know I have driven to Dundee (about 150 miles) 3 times or so, just because of their selection. However, if/when Rossford's goes in, I will no longer patronize Dundee. BUN may have something to say, as that is his neck of the woods.

[Jen]

I dont think Dundee's growth can be attributed soley to Cabela's . That community had a vision for its future long before Cabela's saw their location as a good fit for the region.

And with Michigan facing staggering budget deficits is it good policy to be giving a handout to an out of state retail corporation. How many fishing lures and tents will they have to sell to make up for that handout in sales taxes?

And unless they have museum quality displays they change every year how does Cabelas maintain the magic for visitors? The same products are in the catalog and if one has already been to the indoor mountain what's the big deal about seeing the same display next time?

is it a regional attraction or just a big store with lots of merchandise attractively displayed? Should Whole Foods and Trader Joes should be next in line for their handouts as well, I would shop those stores, as would others in the region.

Where does it all end?

And I must take exception that Cabela's is the largest attraction michigan has going for it! that cannot be true

[ssnyderjr]

Oh, it's true:
http://www.dundeeonline.com/articles/17.6.html

http://mybaycity.mmcctech.net/script...NewspaperID=54

6 million visitors per year (over 206,000 in its opening weekend) to Cabelas www.dundeeonline.com/articles/36.2.html

3 million to Frankenmuth (the whole town)

1 million to the Henry Ford Museum

So, according to these numbers (even with shared business with the other 2 opening nearby - theoretically splitting this number in a third), the residual taxes (increased property values nearby, retail at other stores/restaurants/bed tax - hotels) would still make it a viable attraction.

[Jen]

You know I keep seeing that 6 million visitor tag in a lot of articles but I never see any cites for that outside the company, from the LA Daily news

In some states, Cabela's is the largest tourist attraction, according to one consultant who works with the company and asked not to be named. Its standard market areas can cover more than a 100-mile radius. And Cabela's is known for driving hard incentive bargains in cities where it plans to locate, Brotzman said.

so the unnamed company consultant says Cabela's is the #1 tourist attraction? It may be amazing with dead critter exhibits but why should the taxpayers subsidize the construction of a dead zoo that just happens to be surrounded by outdoor gear for sale?

They dont charge admission do they, oh yeah they do, 15 million to get in the door!

[ssnyderjr]

I don't know the details of the tax breaks (aka incentives) that Cabela's asks for, but if your city is in good enough shape to do without all of the residual business, traffic, increased property values (and taxes) and inevitably sales and bed tax dollars, good for you guys.
I know we would bend over backwards to get them here. They gotta be better than sprawl-mart, that leaves empty buildings in their wake as they "remodel" and make Super Wal's at new locations.

[Cardinal]

Oh, it's true:
http://www.dundeeonline.com/articles/17.6.html
...6 million visitors per year (over 206,000 in its opening weekend) to Cabelas www.dundeeonline.com/articles/36.2.html

3 million to Frankenmuth (the whole town)...

Similar statistics for Mitchell, SD. Three million visitors to Cabela's, and I think 50,000 to the Corn Palace. I have it written down somewhere.

[Jen]

Ok, so anyone who walks in the door is a tourist? What if I just want to get some columbia shorts on sale, am I tourist?

[SW MI Planner]

Ok, so anyone who walks in the door is a tourist? What if I just want to get some columbia shorts on sale, am I tourist?

That was what I was going to say - shoppers don't equal tourists, and their numbers are being used as a marketing ploy to try and make it out more than just a store.

I think it is great that Maine held out and say no incentives, and lo and behold, they still constructed their facility!

With the state of the economy, I don't see that Michigan can afford to offer incentives to retailers. We have a Wal-Mart distribution and they didn't get any assistance from the State. The City extended utilities to the site, but that was about it.

[Gotta Speakup]

What is the size of the stores' parking lots?

They can claim millions of visitors, but I bet when it comes time for building the lot, they estimate a lot fewer (or maybe they claim each car has a lot of people in it).

[DetroitPlanner]

I'd agree that shoppers to do not equal tourists. If you add up all of the folks who go to every store in Frankenmuth and called each a tourist you would have an unrealistic number. Frankenmuth probably uses chicken dinners ordered or some other measure. The Dundee Cabella's has a draw for those living locally or travelling N into Michigan from southern states such as Ohio. It does not draw business from much of the Detroit market who would rather shop at smaller stores such as Gander Mountain, Dunhams, or Bass Pro Shops (which is not really all that small, but smaller than Cabelas).

I'd have to say the Dundee's growth is not really strictly the Cabelas. The store has had little spin off business. Dundee had fared better from economic spinoffs created recently by the construction of two large engine plants that were built to service Chrysler assembly plants in Detroit and Toledo.

I can't see why Gander Mountain should have a complaint. Gander Mountain, are located in strip malls and while selling some of the same stuff, are tiny when compared to a stand alone Cabela's store. I'd be more concerned about the impact of this store on smaller family run sport and tackle shops throughout the state (such as Jay's in Clare and Gaylord, or Frank's in Linwood). These sort of businesses will feel a major decline with the opening of a store like this. Where will the next one be located? N Oakland County?

I find is bizare that Cabelas would ask for all of that, you would think that getting into a market like Michigan would be something that they would be more than whilling to jump through hoops to do. I smell something fishy here, and it ain't from the bait section!

[Cardinal]

Perhaps the question of whether Cabela's visitors are tourists is dependent upon where the store is located. In Sidney, Nebraska and Mitchell, South Dakota, the people who visit are predominantly tourists. These stores have spun off several hotels, restaurants, and other shops catering to visitors, who find the town a good place to stop for Cabela's, and then spend the night during their vacation.

[Hink]

Does anyone have an idea of what a Cabelas or Bass Pro Shops invests in a community? I mean basic investment, not long term or other deals.

I have heard between $50-200 million. Are these numbers even close? Anyone with experience dealing with IKEA or any other of these HUGE stores have some rough numbers?

[Jen]

Interesting question but I can't say what they invest in a community. Here it's been two years and all we have left of the still proposed 400million Cabela's project are abandoned houses.

[Linda_D]

Does anyone have an idea of what a Cabelas or Bass Pro Shops invests in a community? I mean basic investment, not long term or other deals.

I have heard between $50-200 million. Are these numbers even close? Anyone with experience dealing with IKEA or any other of these HUGE stores have some rough numbers?

I can't speak for Cabela's but I doubt that Bass Pro invests anything in a community. It appears that BP expects the host communities to build them a store and give them free rent for as long as BP chooses to stay.

The BP that was supposed to come to downtown Buffalo about 4 or 5 years ago is a no-show since apparently NYS and Buffalo couldn't come up with enough incentive $$$ to get the BP people to sign on the dotted line, even though the public contribution for this project was around $66 million to BP's $25 million IIRC.

The same thing apparently happened in Pittsburgh where a proposed BP near Washington PA (south of Pittsburgh) was supposed to developed. That, too, is apparently a no-go as well after 3 or 4 years.

[Cardinal]

Bass Pro and Cabela's are both major draws. That means that they can often cut a good deal when pursued by a community or a developer. Both have been given nearly-free land and buildings to anchor a mall or a district. At other times they have had to foot the bill just like anywhere else.

Their investment is difficult to quantify. For stores they own it is simply the cost of construction, which may be around $30 million (more or less depending on where the store is located). They are likely to attract other development around them, but you should ask whether that development might occur regardless, and if that development might locate somewhere else if not for their store. The total investment might be comparable to cases in which a single developer puts up a center anchored by one of these stores.

[Hink]

For stores they own it is simply the cost of construction, which may be around $30 million (more or less depending on where the store is located). They are likely to attract other development around them, but you should ask whether that development might occur regardless, and if that development might locate somewhere else if not for their store. The total investment might be comparable to cases in which a single developer puts up a center anchored by one of these stores.

That is really what I was trying to get at. Are most of these stores looking at free land and cost of construction, or are they investing in upgrades and improvements. It seems to me that from what I have been told and read on here that they are going to be expecting to be given everything and not be giving anything back.

Good to know. Thanks all!

[MazerRackham]

I've never been a fan of retail incentives. If it's a good location that will make them money, they'll eventually build there anyway. If they actually need incentives to make the deal work, it isn't a good location. I say keep your incentives. I find it very hard to believe that any community would ever break even on a $66 million investment...even considering multiplier effects.

[Brocktoon]

I've never been a fan of retail incentives. If it's a good location that will make them money, they'll eventually build there anyway. If they actually need incentives to make the deal work, it isn't a good location. I say keep your incentives. I find it very hard to believe that any community would ever break even on a $66 million investment...even considering multiplier effects.

Although I agree with you that incentivizing retail is a bad idea I will challenge your notion that communities will not break even. In Arizona both Capella's and BP received sales tax rebates of 50%. So if either on of these companies gets $66 million from a rebate then the city got $66 million as well. The BP in Mesa is struggling and has not generated nearly the activity the city promised. They did get free land but I think BP paid for the construction.

Another reason cities give retail incentives is if they do not then the retailer will locate in the neighboring community so your city loses the sale tax. Ideally no one would offer them and compete on the merits of their community but you could say the same thing on industrial and HQ competition between cities and states at the national level. The Arizona legislature banned "incentives" to retail within the Phoenix MSA. This happened as the economy tanked so no one is sure what will happen but with 2 million sq ft of vacant retail and another 1 million sq ft coming on line there will probably be little incentives offered.

Then again, if the AZ Supreme Court rules that incentives violate the "gift clause" in the state constitution then Arizona will not be offering incentives of any type...further hindering the ability to attract and retain high paying jobs.

[Cardinal]

I've never been a fan of retail incentives. If it's a good location that will make them money, they'll eventually build there anyway. If they actually need incentives to make the deal work, it isn't a good location. I say keep your incentives. I find it very hard to believe that any community would ever break even on a $66 million investment...even considering multiplier effects.

I agree with you. The challenge is that in some environments, neighboring communities get into battles to land retailers like Cabela's, or even Walmart. It is the same with manufacturing or other activities. Although I am an economic developer, or perhaps because I am, I believe that there should be a prohibition on local governments offering incentives to businesses, except in very limited circumstances.

There is no reason why a well-off suburb needs to create a TIF to give free land to businesses in order to get them to locate there. I would love to see incentives limited only to locations that meet established criteria for economic distress. With that in mind, I do not have a problem with Buffalo offering incentives to bring Bass Pro into their downtown. The district is certainly struggling, and a powerful anchor like that can draw customers to support many other businesses in the area.

A few years ago I read an article defending Alabama's incentive package for Toyota. Curious, I decided to do a little investigating. They projected something like 6000 new jobs. There were fewer people unemployed in the surrounding counties. Perhaps they wanted to create a work force shortage to hurt existing businesses? But in fact, Toyota only promised about a third of the jobs the state claimed. The incentives came out to something like $60,000 per job, which was more than the jobs would pay in a year. I am sure they would talk of the compounding effects of income as it is spent and respent in the local economy. But a starting point would be to say that the income taxes collected off of the jobs created would take three decades to pay back the incentives the state provided. That assumes there would never be a reduction in the work force, as has happened.

[MazerRackham]

There is no reason why a well-off suburb needs to create a TIF to give free land to businesses in order to get them to locate there. I would love to see incentives limited only to locations that meet established criteria for economic distress. With that in mind, I do not have a problem with Buffalo offering incentives to bring Bass Pro into their downtown. The district is certainly struggling, and a powerful anchor like that can draw customers to support many other businesses in the area.

I would agree that if a destination retailer is looking at a city, it might make sense to sweeten the deal to get them downtown instead of in the burbs.

Let me also say that I understand that there are factors to consider other than a direct payback. The key to knowing when to offer incentives is having a very strong pragmatic analysis that clearly demonstrates likely economic impacts (positive and negative). You also need to have the political willpower to stand your ground. Too many cities openly offer silly incentive packages without regard to knowing potential impacts.

I also think it is fair to say that these types of retailers don't really offer "high paying" jobs. Having gone to school in the birthplace of Bass Pro, I have first hand knowledge of this. Yes, there are a few decent paying management jobs. Other than that, the majority of employees are college students.

We had the Bass Pro discussion here several years ago. After many negotiations they pulled out of the deal. We got Gander Mountain instead. It is a poor substitute and not really in the same league. Yet, they got a similar deal that Bass Pro would have gotten. Needless to say, performance has been drastically less than projections.