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Cabela’s baits the hook, and states are biting

SUNDAY, SEPT. 10, 2006

Cabela’s knows fishing, and not just in the wild.

The Nebraska-based purveyor of all things outdoorsy has become adept at trolling state capitols and city halls for tax relief and other assistance that might induce the company to build a store. Cabela’s gets a strike almost every time.

The lure for government officials is the prospect of 300-odd in-store jobs, plus additional development often associated with construction of a Cabela’s. In Maine, for example, a proposed Cabela’s would anchor a $75 million complex with offices, a bank, a hotel and restaurants.

Cabela’s says its mammoth stores, with waterfalls, wildlife displays and restaurants featuring venison and other game, rapidly become tourist attractions more powerful than the Liberty Bell in Pennsylvania or the Alamo in Texas. Opening-day crowds would fill a good-sized stadium, and company officials say communities lucky enough to get a Cabela’s might expect more than one million visitors a year.

For government and economic development officials, that kind of business appeals like a fat dry fly to a hungry cutthroat. Now, Idaho and Washington could be on the hook.

Washington lawmakers this spring passed legislation that would finance construction of roads or other infrastructure needed for a new store with bonds that would be repaid with sales tax revenues. The city of Liberty Lake would add a new I-90 interchange to handle additional traffic generated by a Cabela’s.

Although that appeared to give that city an advantage over Post Falls in a cross-border Cabela’s fishing derby, the company recently negotiated a package with Idaho Gov. Jim Risch that, if approved by the Legislature next year, will likely land a store on that side of the border.

Like many other states, Idaho will also allow Cabela’s to omit sales tax on catalog items sold in-state despite the presence of a store. Washington officials have said they are prepared to provide the same relief. Only congressional action can stop that nonsense.

Other businesses have played Washington and Idaho off against each other in the past, often to Idaho’s advantage. And given the proximity of Buck Knives and its showroom, and the Silverwood Theme and RV Park, it makes a lot of sense for Cabela’s to choose Post Falls.

What sets Cabela’s apart from other businesses is the way it has wrapped its whole approach to brick-and-mortar retailing around its ability to get site concessions. Until a few years ago, Cabela’s was predominantly a catalog- and Internet-based operation, and an extremely successful one at that. The company has its own bank to handle credit card transactions, and runs a highly respected outfitting subsidiary.

Its aggressive expansion into retailing corresponds with a 2004 public stock offering. In the prospectus, and in subsequent financial reports, Cabela’s has been candid about the importance of government cooperation to its retail strategy.

In its most recent annual report, Cabela’s says this: “Our failure to obtain or negotiate economic development packages with local and state governments could cause us to significantly alter our destination retail store strategy or format … and could adversely affect our revenue, cash flows and profitability.”

And the company, to switch sports metaphors, is willing to play hardball.

Construction of the Maine store has been stalled by vehement opposition from beloved home-state retailer L.L. Bean, which collects sales taxes on all its catalog and Web transactions. Bean, insisting its competitor not get an advantage, has counterattacked with a request it be exempted from a new tax on business inventory. With the possibility the state could lose a major development if Cabela’s walks away, the Maine State Chamber of Commerce has intervened in search of a compromise.

Meanwhile, in Texas, the state asked Cabela’s to return $28,000, and forego another $200,000 payment from a fund used to encourage business expansion or relocation, because employment has fallen short of projections. The company also received substantial tax increment financing assistance for stores there.

The challenge by Bean raises legitimate questions for Idaho and Washington officials hot to net a Cabela’s. How are home-grown competitors like REI or Mountain Gear, not to mention mom-and-pop operations, going to be put at a disadvantage if Cabela’s gets the concessions it seeks? Are retail jobs so valuable government should extend special tax consideration? And what if stores become just stores, not tourist meccas, as Cabela’s adds locations that compete with each other? Remember Minnesota?

Cabela’s is a company with a great story. The Inland Northwest would be perfect habitat. But let’s not forget the native species.


 

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