Competitors say incentives don’t pay

In their zeal to land Cabela’s stores, state and local governments concede too much to the Nebraska-based sporting goods retailer, says David Ewald, a Minnesota consultant.

Next year he’ll visit Boise to urge state lawmakers to turn down a plan to reimburse Cabela’s for building a $15 million freeway interchange to serve its new Post Falls store.

He’s also critical of a state Tax Commission ruling, which says Cabela’s doesn’t have to collect sales tax on products sold to Idaho residents through its catalog or the Internet. Cabela’s has sought or received similar rulings in 19 states, costing taxpayers as much as $70 million annually in lost revenue, Ewald said.

Ewald works for a developer that builds stores for Gander Mountain, a St. Paul, Minn.-based competitor of Cabela’s. Through lobbying efforts, Ewald said, he’s trying to shed light on Cabela’s practices that promote unfair business competition and shortchange taxpayers.

Large retailers are sophisticated about locating stores, Ewald said, using marketing studies to identify potential customers and pinpoint profitable areas.

“If they’re going to build a store anyway, why do you need to pay them to come?” he asked. “Any subsidy to create jobs in the $10 [per hour] range is not a good use of money.”

Ewald is also skeptical of Cabela’s claims that its stores attract 4 million or more visitors annually, half of whom come from out of state.

In August he paid college students to count people entering the Cabela’s store in Owatana, Minn. If the store has nearly 4 million visitors annually, as Cabela’s reports, Ewald said there should have been 11,000 customers and sightseers a day during the peak summer travel season. The students counted 2,100 visitors, he said.

Their analysis of license plates was also revealing, Ewald said. Ninety-one percent of the cars were from Minnesota, he said.

Ewald said he replicated the count on a Saturday during hunting season, with similar results. “I would doubt if that store has more than 1 million visitors,” he said. Cabela’s should verify its visitor volumes through third-party audits so communities know exactly what they’re getting, Ewald said.

John Castillo, a Cabela’s spokesman, said the company uses electronic sensors to take store visitation counts. The volume of customers at the Owatana store has dropped since Cabela’s opened a second store in the St. Paul-Minneapolis market, he said.

Ewald isn’t Cabela’s only critic.

“Great company, but I think how they go about financing their business should be unacceptable to the taxpayer,” said Stu Utgaard, chairman and CEO of Sportsman’s Warehouse, a Salt Lake City-based chain that also competes with Cabela’s.

Cabela’s officials declined to respond directly. Dennis Highby, Cabela’s president and chief executive officer, said in a statement that its public-private partnerships financially benefit both the company and communities.

Post Falls officials said they’re comfortable with the level of taxpayer support Cabela’s will receive for its 125,000-square-foot store, which is scheduled to open late next year.

“The competitors’ criticism of Cabela’s mostly deals with things that we didn’t do,” said state Sen. Jim Hammond, who recently retired as Post Falls city manager.

The city turned down a standard request from Cabela’s to use public money to pay for exhibit space in the store. With taxpayer support, Cabela’s would have dedicated areas of the store as a public museum. However, “it didn’t really fit into the culture of how we do business,” Hammond said.

The city does expect to extend roads, sewer and water to the Cabela’s site through its urban renewal district. That’s standard, Hammond said. Post Falls has provided similar assistance to other companies, such as Sysco Corp., which opened a 164,000-square-foot warehouse in the city in 2005.

Urban renewal districts often pay for infrastructure that accompanies growth. Critics call the practice “corporate welfare,” noting that the improvements benefit business. Proponents point out that the public retains ownership of the infrastructure improvements, and taxpayers gain from the job growth and increases in the property tax base.

Cabela’s is the centerpiece of a planned 200-acre retail complex near the Idaho-Washington state line. Foursquare Properties of Carlsbad, Calif., is the project developer.

Len Crosby, chairman of Post Falls’ urban renewal agency, said that Foursquare Properties likely will pay for the public improvements upfront. The urban renewal agency would reimburse the developer over time from higher property tax revenues. When the 200 acres are built out, the city will collect an estimated $1.7 million annually in property taxes from the development.

The urban renewal agency is still waiting for a formal proposal from Foursquare Properties, outlining how much the infrastructure will cost, Crosby said.

Funding for an Interstate 90 exit serving Cabela’s Post Falls store would have come from a similar arrangement. Cabela’s would initially foot the bill. The company would be reimbursed over several years through a 65 percent rebate on state sales tax generated at the store.

“The taxpayers of Idaho – who have not paid one penny – will have a $15 million improvement,” said state Rep. Frank Henderson, R-Post Falls.

During the 2006 legislative session, Henderson sponsored a bill that would have set up the mechanism allowing Cabela’s to be reimbursed. It didn’t become law, partly because it was such a new concept, according to Henderson, who’s hoping for passage in 2007.

Building a new exit could also help revive Post Falls’ struggling factory outlet stores, local leaders said. “Men will go to Cabela’s to shop, and their wives will hit the outlet stores,” Hammond predicted.

In four other communities where Cabela’s built stores, sales tax collections jumped by 5 to 14 percent in the first year after the stores’ opening, according to an independent economic analysis.