Case Study of Cabela’s and Bass Pro
Americans love to hunt and fish – or at least dress the part and buy the gear. That’s good news to Cabela’s Inc., a purveyor of outdoor merchandise ranging from guns and fishing rods to clothing and cabin décor. As of early 2010, the company operated 30 huge stores in 21 states and Canada, all designed as tourist destinations, attracting millions of visitor-shoppers.
The company claims that a substantial share of shoppers come from long distances, creating jobs at hotels and restaurants (including those in the stores), and generating new sales tax revenues. Cabela’s uses this model to justify its extraordinary demands for subsidies from the localities where it sites its stores. It has been so successful in obtaining taxpayer funding that subsidies are an essential part of the company’s business plan. Cabela’s made this plain in the prospectus it issued when it became a publicly traded firm in 2004:
Historically, we have been able to negotiate economic development arrangements relating to the construction of a number of our new destination retail stores, including free land, monetary grants and the recapture of incremental sales, property or other taxes through economic development bonds, with many local and state governments...We may not be able to obtain similar economic development packages in the future. The failure to [do so] could cause us to significantly alter our destination retail store strategy or format.
At least 20 communities have agreed to subsidize Cabela’s stores or distribution centers to the tune of more than $500 million. That’s a much bigger average subsidy than Wal-Mart, whose $1.2 billion in known subsidies are spread out over several hundred facilities. Here are some examples from recent years:
- MONTANA. In 2009, Cabela’s opened an 80,000-square-foot store in a special improvement district (SID) in Billings using, in part, $5.36 million in property tax-backed tax increment financing (TIF) bonds. The deal pushed the city beyond its reserve fund, and to the legal limit of its property tax rate. As a result, it was forced to sell its bonds without rating at a higher price.
- NEVADA. In 2007 Reno officials accepted Cabela’s claim that its new 125,000 square-foot store would draw three million tourists a year and granted the company $40.5 million in state Sales Tax Anticipated Revenue (STAR) bonds. STAR bonds, created in 2005, can be used if the Nevada Tourism Commission certifies that half of the project’s customers will be tourists. Despite Cabela’s usual attractions, sales plummeted in 2009, and neither Cabela’s nor another Reno project built using STAR bonds was generating anticipated amounts of tax receipts.
- NEW HAMPSHIRE. In 2007, after Cabela’s told the town of Hooksett that it would not locate there without tax increment financing, voters approved issuance of an $18 million TIF bond. The initial 150,000-square-foot store was later scaled back to 125,000. There was speculation that the company soured on the project after the town asked it to guarantee the bond. The project was postponed in the recessionary year of 2008; a 2010 opening was also postponed. As of late 2010, there is still no Cabela’s in New Hampshire.
- TEXAS Cabela’s hauled in a subsidy package of $61 million from Texas for stores in Fort Worth and the Austin suburb of Buda. Cabela’s promised a wave of nearby development, expected to total over $250 million and create 2,000 jobs according to the watchdog group Texans for Public Justice. But Cabela’s came up 400 jobs short, prompting the state to claw back $177,288 for the Buda store, and future development plans were put on hold.
- WASHINGTON. In November 2007, Cabela’s opened its largest showroom in the Northwest near Olympia featuring replica mountains with waterfalls and beaver ponds. Cabela’s received approximately $25 million for road improvements from local officials, plus a private donation of 30 acres of land.
- WEST VIRGINIA. In 2003, Cabela’s accumulated close to $150 million in public subsidies – including its own exit ramp off of Route I-70 near Wheeling, West Virginia – for a 1.1 million square-foot distribution center and a 175,000 square-foot retail store. The state provided a $35 million grant, and the county kicked in $6.5 million for land acquisition and site improvements. Then, Ohio County created a TIF; oversaw the construction and furnishing of the distribution center; and oversaw construction of the store which it then sold to Cabela’s for $1.
- WISCONSIN. After a brief rebellion, Washington County consented to $4 million in financing for a 165,000 square foot Cabela’s in Richfield, northwest of Milwaukee. The state agreed to cover $5 million in road improvements, as well. The county hoped Cabela’s would draw in further development, “But the Milwaukee-area Cabela’s has drawn few retailers since that 165,000-square-foot store opened in September 2006,” wrote the Journal Sentinel in 2010. “No hotels. No restaurants. No outlet stores.”
Cabela’s has not cornered the destination outdoor store. It’s being challenged by privately held Bass Pro, with 61 existing or planned stores in the U.S. and Canada. Like Cabela’s, Bass Pro stores are huge affairs which feature the full range of outdoor equipment, plus aquaria, dioramas, taxidermy, guns and live fish feedings. Bass Pro uses a business model similar to Cabela’s and has increasingly negotiated subsidies in exchange for location.
In 2010, the Public Accountability Initiative published a national overview of Bass Pro's record, concluding that Bass Pro-anchored projects had been given subsidies worth more than half a billion dollars.
At times, both Bass Pro and Cabela’s have demanded subsidies in the same general area. These examples show that throughout the country, states and local governments are frequently willing to underwrite gigantic sporting goods stores – without demonstrating any particular need. For instance, in 2005, two suburbs of Kansas City – Independence, Missouri and Olathe, Kansas – spent millions to land Bass Pro stores within miles of each other. Independence issued $72 million in TIF bonds for a major retail development anchored by Bass Pro. According to one analysis, “It appears that approximately $25 million was spent by the City to construct the Bass Pro store.” Olathe granted $55 million for a similar arrangement, but the Olathe store would have to compete with a nearby Cabela’s, which also received generous subsidies.
But are the subsidies ultimately worth it? There’s often no clear answer because public officials are, well, not watching the store. The Morning Call (Allentown, PA) looked at whether the $32 million in subsidies to Cabela’s in nearby Hamburg were paying off. Although state and local agencies had bragged about the benefits of the 2003 deal, no public officials could provide any specific numbers about the deal’s outcome. The state department of economic and community development said it was not tracking sales tax revenue, and Tilden Township said it had no data on local property tax revenues. So, concluded The Call, no one knows if taxpayers are breaking even.
Bill Schneider, “Cabela’s Still Fishing on Thin Ice,” New West, January 31, 2008.
Greta Cuyler, “Cabela’s in NH: No store 'til 2010,” Manchester Union Leader, February 6, 2008.
Barry Shlachter, “Watchdog group says Texas governor's job creation figures are exaggerated,” Fort Worth Star-Telegram, January 27, 2010.
Christian Hill, “Cabela’s deal in Lacey sealed; Retail giant lured by sweet terms, set to make official announcement today,” The Olympian, November 15, 2006.
Public Accountability Initiative, Fishing For Taxpayer Cash: Bass Pro’s Record of Big-League Subsidies, Failed Promises, and the Consequences for Cities Across America, July, 2010; http://public-accountability.org/reports/fishing_for_tax_cash_finalc.pdf
Sam Kennedy, “Have Cabela’s tax breaks paid off? No one can say since state does not verify claims that any business makes about creating jobs and revenue, Allentown Morning Call, October 17, 2004.