Cabela's incentive questioned by retail rival

By MICHELE HOLTKAMP-FRYE
Staff writer

June 16, 2007

A Greenwood outdoor retailer is calling the city's $18 million incentive for Cabela's unfair and unnecessary and wants city officials to take more time before giving the OK.

A consulting company and Gander Mountain officials have requested a meeting with the mayor, sent letters to the city council and plan to attend the Greenwood City Council meeting Monday to tell officials why they shouldn't approve the bond.

Initially, they'll ask city government to slow the process and take more time to consider it.

Gander Mountain's largest Indiana store is just across Interstate 65 from the property slated for Cabela's and is a taxpaying business that was constructed and is operated without any public subsidy.

"If they (Cabela's) want a store there, then it will make them money," said David Ewald, president of Ewald Consulting. "They can do it anyway without the tax help."

Ewald Consulting was hired nearly two years ago by the company that develops Gander Mountain properties and has worked in about 20 states to try to stop public subsidies from being given to Cabela's, Bass Pro Shops or other retailers of outdoor goods.

In a letter to the city council, Gander Mountain chief executive officer Mark Baker wrote: "Gander Mountain has been a good business for the city of Greenwood, and we would like to remind you that the economic commission's own mission statement says that its first responsibility is to those businesses already located in the community.

"If you provide tax breaks to competitors, what kind of signal does that send to those of us who have invested in the community and have done so with out asking for public subsidies?"

Greenwood Mayor Charles Henderson said this week that he was not concerned about what impact the store might have on the city's two nearby existing outdoor retailers for two reasons: shoppers who come to Cabela's might not find what they want right away and will flow over to the other stores and because Gander Mountain will draw shoppers from the next-door Wal-Mart, which the mayor said is a great attraction on its own.

He related the competition to how fast-food restaurants and pharmacies build near competition and survive.

"So, no, not a bit," the mayor said about his concern for the existing stores.

A Dick's Sporting Goods is located at Greenwood Park Mall, but corporate officials were not available for comment late Friday.

'Offering a partnership'

Cabela's, which says it will build a store in Greenwood that will serve as a destination and economic engine, has negotiated with the city an $18 million incentive package.

The store needs local government help to put in infrastructure on the entire site, such as road and utilities, retail spokesman James Powell said.

"We are offering a partnership, not just another big box retailer," Powell said. Cabela's stores have proved that they bring in new jobs, property and sales tax dollars, increased visitors and tourism, he said.

"If Gander Mountain spent as much time worrying about their own company and successes than ours, they'd be much more successful themselves," Powell said.

Greenwood will borrow the money and give it to Cabela's to pay for infrastructure and construction on the 100-acre site. Property taxes from Cabela's, the Splash Universe indoor water park resort and other stores or restaurants on the site will be used to pay back the entire debt.

Cabela's, as a for-profit, publicly traded company, has to pay property taxes anyway, so the deal in essence keeps the company from having to pay back the debt.

The city council, economic development commission and redevelopment commission must approve the incentive, and those meetings are scheduled to be concluded by the end of the month.

The 100-acres of farmland, when fully developed into a Cabela's store, water park and additional stores and restaurants, will be valued on the property tax rolls at an estimated $102 million, according to Cabela's, a financial analysis and attorneys hired by the city.

Typically, when a taxing district, such as a school, city government or library, gets a huge increase in the total worth of all properties, known as assessed valuation, the tax burden to fund those governments is shared among more taxpayers, sometimes lowering or holding steady each taxpayer's responsibility while governments increase services and build more schools.

But the Cabela's property is in a special tax district that funnels all property taxes from new development to pay for infrastructure improvements, such as the expansion of Emerson Avenue, the new fire station or the planned expansion of Graham Road. That means Clark-Pleasant schools doesn't receive any of the tax money.

The city is proposing to carve out another district inside that district, where the tax revenue will go only to pay back the Cabela's bond for about the next 20 years.

"We would love to have the tax base, the assessed value, that's going to offset what our residents, farmers and other business folks pay to run the school district," Clark-Pleasant Superintendent J.T. Coopman said.

He said he can understand the city's perspective of wanting to put together an incentive package to attract a business that will spur economic development.

"To have someone with that big of a national presence come in and essentially pay nothing is frustrating to our taxpayers," Coopman said.

He hopes Cabela's will truly be an anchor store that will bring developments that will pay property taxes to Clark-Pleasant schools.

Ewald wants residents and government officials to think of the $18 million incentive in this way: That's enough money to send 344 local high school students to Indiana University for four years.

Strategy questioned

Cabela's strategy is to get about 30 percent of the construction costs paid for by the public, Ewald said.

"This is part of their strategy which, we think, is not appropriate for a local government or a state government to partner with a retail company to help them have a cost advantage over their competition," Ewald said.

The issue isn't over the new Cabela's store being built close to the Gander Mountain. Gander Mountain doesn't want Cabela's to have an unfair advantage through the incentive from the city, Ewald said.

Cabela's has gone ahead and opened stores in locations where local or state governments didn't award all the subsidies that were requested, Ewald said. The company is building a store in Hammond even though the state didn't agree to a sales tax incentive plan, Ewald said. Indiana did award $3 million for road improvements.

Greenwood asked for Cabela's to promise not to build another store within 100 miles as part of the agreement. Cabela's would commit to only a 50-mile radius.

"They'll tell you they're a destination retailer," Ewald said.

But he points out there are already stores in Michigan, Illinois, and Missouri, and the company is looking to open stores in Kentucky and Ohio, besides the store under construction in Hammond.

"I believe 100 percent it won't be a destination," Ewald said.

"When there is one Grand Canyon or there is one Disney World, you have a destination," he said. "When there's 100 stores, those are not destination stores."

He said cities don't do enough independent research to know if the stores are truly destinations or attract as many people as Cabela's says they do.

"Nobody checks. They get all excited. 'We're going to get a Cabela's, we're going to get a hotel and all this spin-off development,' and nobody checks. And they are just happy to open up the checkbook," Ewald said of local governments.

Powell said Cabela's is accustomed to Gander Mountain's complaints, but the two companies have big differences and to compare the two from a competition perspective isn't appropriate.

"They aren't a destination retailer. Their stores are much smaller and carry a much smaller variety of products," he said.

Shoppers will drive farther and spend more time in Cabela's compared to Gander Mountain. And Cabela's spurs further economic development, Powell said.

"We think of ourselves as an economic engine," he said. "It's a good investment for a community that has the foresight to partner with us."