Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

[chr5648]

Re: Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

It is a sham and it pisses me off to see my local leaders fall for these schemes.

Leaders? HA, What kind of "leaders" "lead" their constituents into these quagmires and the "crises" that most of the west is in now?

The real problem are the people who believe and put faith in these so called "leaders" and "their" system.

Put yourself in the shoes of either the business or the politician, you would probably do the exact same thing as they did.

[BadJuju]

Re: Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

Put yourself in the shoes of either the business or the politician, you would probably do the exact same thing as they did.

That assumes I have no scruples.

[chr5648]

Re: Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

That assumes I have no scruples.

The problem isn't "I" or "you", it is human nature and discounting it. When human nature is put in situations and institutions like the one above or the many other ones in every day life, the same patterns keep repeating, and it is foolish to think that we wouldn't act similarly in these situations, regardless of whether we were to be the business man or the politician.

[flintlock]

Re: Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

This is the real point. Some large landowner is utilizing the local tax base to cash out on property, which I guarantee some proceeds of which will find its way into pockets and re-election donations.

I don't know exactly which land is in question, but a quick Google Maps view shows this: a bunch of empty land with nobody around it, which has now sold for over $178K per acre:

[ATTACH=CONFIG]4418[/ATTACH]

What's the average price for land in the entire state of Virginia, much less a rural location as the above?

No kidding! We just had a new "green space" park built on the road near my subdivision. Landowner had a deal fall through during 2008 to sell at around $100k acre! Builder pulled out and he was left with next to useless land. So what does he do? Lobbies the county to purchase his land with Federal matching "green space" dollars at far higher than market value. This at a time they are laying off teachers and firefighters left and right. The "park" is a joke. The trails are overgrown and unusable. Most do nothing more than run under existing massive power lines. Not exactly a back to nature experience. The seller was a well connected local family of course. More cronyism. I drove by the parking lot yesterday at 6pm and not one single car in the lot. The county next to ours has indicted at least two commissioners on corruption. I know one was for a similar land deal.

[Sutter Cane]

Re: Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

Journalist David Cay Johnston exposed these tax break scams years ago. His book Free Lunch outlines how retailers like Cabela's and Bass Pro put local merchants who actually pay taxes to suport local infrastructure out of business, while making more money by collecting sales tax than they do from the profits on the products they are supposedly in the business of selling. There's a good interview with him from Reason:

http://reason.com/archives/2007/12/2...f-a-free-lunch

You might think that companies that get subsidies would make bigger profits than normal. But Adam Smith told us that subsidies bring in brash adventurers who often end up making no profit, and the evidence is that Cabela’s doesn’t appear to be particularly profitable. Cabela’s in fact, in its first three years as a publicly traded company, had $223 million in profit, and subsidy deals worth $293 million. I argue that they are not in the business of selling sporting goods; they are in the business of reeling in subsidies.

[charliebrown]

Re: Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

Cabella's has not been as profitable as they could have been because they got greedy. They started their own credit card company before 2008 thinking they could skim the profits of indebted customers. Well when 2008 came their 21% interest payments could not match the default rate and they took a beating.

A home depot tried to move into my neighborhood. Despite getting thumbs down from the zoning and planning board and packed village hall meetings with residents not wanting it the city council pressed doggedly forward. I'm sure there was something that
was not being said between the council and home depot, some sweetheart deal for someone.

Aren't the entertainment venue's like the Bastiat's broken window parable. Sure it brings in shoppers etc, but what would those shoppers do if they didn't spend the $100 at bass pro shops? Go out to eat, fix their leaky windows, spend the money at walmart?

[flintlock]

Re: Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

Cabella's has not been as profitable as they could have been because they got greedy. They started their own credit card company before 2008 thinking they could skim the profits of indebted customers. Well when 2008 came their 21% interest payments could not match the default rate and they took a beating.

A home depot tried to move into my neighborhood. Despite getting thumbs down from the zoning and planning board and packed village hall meetings with residents not wanting it the city council pressed doggedly forward. I'm sure there was something that
was not being said between the council and home depot, some sweetheart deal for someone.

Aren't the entertainment venue's like the Bastiat's broken window parable. Sure it brings in shoppers etc, but what would those shoppers do if they didn't spend the $100 at bass pro shops? Go out to eat, fix their leaky windows, spend the money at walmart?

I agree with you but one reason for trying to attract a store like Cabella's is they tend to draw from a bigger area than your typical retail store. So the hope is the community will get those dollars that might be spent in the next county instead. I still don't think its the proper role of government to pick winners and losers and these type programs can cause a lot of unintended consequences to other businesses.

[charliebrown]

Re: Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

that is until the next county builds a super store and steals your shoppers. Seems like the super stores are the winners.
And then there is my county who is rolling out the red carpet to bring golfers in for the U.S. open and Ryder Cup.
All so the big wigs can have their picture taken shaking hands with Tiger.

[Sutter Cane]

Re: Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

I agree with you but one reason for trying to attract a store like Cabella's is they tend to draw from a bigger area than your typical retail store. So the hope is the community will get those dollars that might be spent in the next county instead. I still don't think its the proper role of government to pick winners and losers and these type programs can cause a lot of unintended consequences to other businesses.

Also from the same interview I quoted in an earlier post:

Stores [getting subsidies] promise that if we build a store, they will come [promising tourist and business benefit beyond the store itself]. They promise people will come driving a whole day to buy a fishing reel or hunting rifle—which you can buy out of a catalog. So an analyst for Gander Mountain and a reporter went and counted cars in parking lots for the Cabela’s that put Jim Weaknecht out of business. To have as much business as Cabela’s said [they’d attract] they’d need to be bringing in 4,100 cars a day. They found just 308 cars, and only 68 with out-of-state plates. These subsidy deals are premised on promises of all this business and money they will attract to town, but the information is not real, and there’s no follow up and in many cases no disclosure. It’s government money being given away in secret with no one checking to see if the promised performance is made.

[lektrode]

Re: Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

Did the voters in the city that ultimately took the Bass Pro Shop actually vote yes? Or did it not go to a vote there?
...
.........
For now, chalk Buda, TX up on the list of municipalities that are liable to go bankrupt in the next decade.

well... they just mightve voted for it, esp if the local 'bait shops' are still just selling nightcrawlers, beer and bugspray...

but guess they could always offer bribes to the hollywierd crowd to come make movies (like we do out here, to the tune of 100's of millions)

the underlying theme of this particular 'formula' movie is The Little Guy's baitshop is about to get run-over by the BigMoney/Bigbox 'celebrity' bassfishin' superstore, opening across the street (in Fla), which eye happened to catch the other night:



in any event - finally made it into a cabelas this past winter for the first time,
(the whole bigbox thing having happened since i came out here 20+years ago, had never even seen a walmart til 2000 and that was only after a costco in LA refused to put 2 new tires on the back axel of my chevy - would walmat? = you betcha)

the new one in SLC:
http://www.cabelas.com/retail-stores-lehi.shtml
- must say its quite an eyefull - and apparently there was some sort of 'special arrangement' - and maybe theres a right way and a wrong way to do this kind of stuff - methinks it all gets down to how tight of a leash local govs are kept on (cue broken record, but again how NH points the way - maybe UT and NV too? perhaps this is a better way to get 'new money' flowing into places that have little in the way of 'other opportunities' (would be interested to see dc's analysis of this one, in particular)

http://www.rgj.com/article/20120124/...ore-tax-breaks

There are success stories.

Lehi, Utah, about 30 miles south of Salt Lake City, let its Cabela’s, an outdoor sporting goods retailer, keep 87.5 percent of the city’s share of sales taxes to back a $9 million bond that helped pay for the 170,000 square-foot store that opened in August 2005. The city boasted in 2011 that the development had attracted hotels, restaurants and 4 million visitors to the region in 2006.


Still, these types of financing mechanisms are forcing municipalities into a “race to the bottom,” which includes companies playing cities and states off one another to see who will offer the most generous deal, said Elliott Parker, the chairman of the economics department at the University of Nevada, Reno.


“They say we’ll deliver all this… but they’re not held to account, they can sell political leaders on the idea and then basically what happens is their sales taxes get to pay for their construction instead of them having to pay for it themselves,” Parker said. “It’s a no-brainer from the point of view from the private company. If it doesn’t pan out, then what the hell?”


One of the most prolific companies to receive tax breaks around the country has been Cabela’s, which spent the last decade aggressively seeking out “economic development packages” to help fuel its growth — a key business strategy, according to the Sidney, Neb.,-based company’s filings with Securities and Exchange Commission. Cabela’s declined interview requests for this story.


Amid all the growth in the last decade, which included 18 new stores built between 2003 and 2007 and amassing $818 million in property and equipment, Cabela’s also accepted about $500 million in tax subsidies from 20 communities as part of economic development packages that paid for construction and infrastructure costs, according to Good Jobs First, a Washington-based nonprofit that follows corporate subsidies. In its 2011 annual filing, the company listed about $104 million in outstanding economic development packages on its books.

Part of those incentive packages was the $35 million in STAR bonds issued by the Reno City Council in 2008 to pay for Cabela’s to come to Northern Nevada. Sparks, meanwhile, has so far issued $116 million to construct the $400 million Outlets at Legends.

Local officials often say had it not been for public financing tools like STAR bonds then the city wouldn’t be collecting any sales taxes from the likes of Cabela’s or the stores at Legends.

Because they did, they are at least getting 25 percent of the sales tax revenue generated by the developments as well as getting a boost in assessed value.


But it’s not always that simple, according to an audit of STAR bond-funded projects in Kansas that published in 2005.


“Although some have portrayed STAR bonds as an economic development tool with no cost to the State — because the sales taxes that will be generated are all new revenues that otherwise wouldn’t have existed — that’s not always true,” according to the report by the Legislative Division of Post Audit in Kansas. “To the extent that purchases are made in a redevelopment district that would have been made anyway at local retailers, the State is giving up sales revenues it otherwise would have received.”


Cabela’s usually buys the public bonds used to construct its developments, which was the case in Reno. That means if the pledged revenues used to pay off those bonds ever fall short — as they are now — the company would be forced to eat the loss in the long run, a concern Cabela’s highlighted in its 2011 annual SEC filing.


“If sufficient tax revenue is not generated by the subject properties,” the company wrote in the February 2011 report, “we will not receive the full amount of the expected payments due under the bonds, which would have an adverse impact on our cash flows and profitability.”


Jon Shipman, a deputy city attorney for Reno, said Cabela’s STAR bond was ultimately an exit strategy.


“The beauty of a bond is they can sell that at a later date so they can cash out,” Shipman said. “You have an entitlement to this revenue stream and it’s good for Cabela’s then they can get paid out and get out earlier.”

Reno City Councilman Dave Aiazzi said the issue boils down to a philosophical argument of whether or not government should subsidize business in the name of economic development. He notes the region’s bid for the 2022 Winter Olympics.
“It will require government subsidy,” Aiazzi said.


And like issuing STAR bonds for shopping destinations, “It is a philosophical issue of whether the government should or should not.”


“I think STAR bonds are just another tool that has to be used and thought about and each instance is different. Just like when we decide which streets to pave. There are a lot of decisions that you have to make based on information you have at the time.”
Winners and losers

Northern Nevada has been no stranger to a variety public financing mechanisms over the years, all of them with varied histories, uses and levels of success or failure.


There are redevelopment districts meant to clean up blighted areas of cities as well as county- and state-approved breaks on property taxes, sales taxes and modified business taxes (a recent example would be some of the distribution centers that have agreed to open locations in Storey County’s Tahoe-Reno Industrial Center).


The Carson City Board of Supervisors last year voted to allow a shopping center on S. Carson Street to keep 70 percent of the city’s share of sales taxes so the developer could attract an Olive Garden by filling two vacant store fronts with a Big Lots and Big 5 Sporting Goods. Between 2006 and 2008, Carson City officials agreed to give about $9 million in tax incentives to keep its largest auto dealers — and largest tax generators — in the capital city amid their threats of leaving for nearby Douglas County.


Sparks City Councilwoman Julia Ratti said in the case of the Outlets at Legends, despite the fact the 148-acre STAR bond-funded project has not constructed most of its promised tourism attractions, the development has at least boosted Sparks’ assessed value, which could help the city’s redevelopment districts in the long run. The property that houses the Legends, for example, has a taxable value of $170 million, up from $42 million five years ago, according to the Washoe County assessor...

....

theres quite a bit more to this one (before and after this piece of it):

http://www.rgj.com/article/20120124/...ore-tax-breaks

and altho FIre's influence/hold in UT and NV appears to be still quite strong, SLC in particular, as they are still in 'build-out' mode, but with favorable demographics, a transport (hiway,rail,air) and mining hub (copper, gold, silver, coal,oil&gas etc), with a still fast growing hi-tech industrial/manufacturing base (you remember, the 'productive' economy?)

and... aheghhm... not a typical bluestate over-lorded by the political aristocracy and over-run with their 'footsoldiers' (aka pub sector unions, et al)

just sayin....

whats dc think about this?

[lektrode]

Re: Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

foolish indeed; and further foolish if you thought you could succeed in getting the government to grant more "subsidies" by "investing" some of your profits in lobbying efforts .... and didn't do it.
This rational self-interest is a primary reason why government should be relatively small with power limited IMO.

+1
and the way to help KEEP it that way, has been the way NH has been doing it, quite successfully now, for OVER 300 YEARS and still with No sales tax and NO income tax = NO 'broadbased taxes' that the political class uses as their own personal slushfunds to scatter upon those who will, naturally, vote for whomever promises the best 'free lunch'

[dcarrigg]

Re: Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

http://www.cabelas.com/retail-stores-lehi.shtml
- must say its quite an eyefull - and apparently there was some sort of 'special arrangement' - and maybe theres a right way and a wrong way to do this kind of stuff - methinks it all gets down to how tight of a leash local govs are kept on (cue broken record, but again how NH points the way - maybe UT and NV too? perhaps this is a better way to get 'new money' flowing into places that have little in the way of 'other opportunities' (would be interested to see dc's analysis of this one, in particular)

http://www.rgj.com/article/20120124/...ore-tax-breaks



and altho FIre's influence/hold in UT and NV appears to be still quite strong, SLC in particular, as they are still in 'build-out' mode, but with favorable demographics, a transport (hiway,rail,air) and mining hub (copper, gold, silver, coal,oil&gas etc), with a still fast growing hi-tech industrial/manufacturing base (you remember, the 'productive' economy?)

and... aheghhm... not a typical bluestate over-lorded by the political aristocracy and over-run with their 'footsoldiers' (aka pub sector unions, et al)

just sayin....

whats dc think about this?

Economic development is hard.

I'll say that straight out.
But take this for example.

Buda, TX had 7,295 people in the last census.
They paid $8,000 per capita on a Carbella's.

Salt Lake City is 189,989 in the last census.
They paid $316 per capita for the same thing.

That's a mill rate raise of probably nothing for SLC. It' probably double for Buda.

Personally? I don't trust these economic development deals ever.

If you want a big box store to move in, then build the infrastructure to make it pad-ready with public money and make them bid for the spot.

Even better, if you want real economic development, take a survey of what your region is missing, and work towards it.

Do you have a law school? Do you have a technical college? A business college? Venture capital? Reasonable rent? Cheap workspace for entrepreneurs? Short commutes? Etc. etc.

I think many places would be better off to recognize what they are missing and work towards building it with economic development dollars rather than investing them on one-off deals or film industries (free press).

Otherwise, you may pick some winners, or you may end up with this.

Plus, the Carbella's relies on sales tax revenue to repay the muni. That ain't happening in New England. Sales tax goes to the state here. The munis will never get it back.

Regardless, retail will move in if it sees profit. If not, there are General Obligation (property tax) bonds that the public can vote on, particularly to build infrastructure, such as sewer, electric, water, and zoning for a new commercial plaza.

If they have to lie to the people and float a revenue bond (not voted on, based on notoriously unreliable sales tax revenues) for a specific company to build a store when it is baked in the cake that if the revenue fails, the property tax payer takes the damage on, then it's a bad deal by definition (if you like democracy).

Here's my point. If you want retail and new jobs, build the infrastructure. Then let companies bid to get subsidized spots on ready-built land. Don't go into it knowing the company you work with. That's borderline illegal. And it's also how many local officials land themselves in jail. Moreover, it's fundamentally unfair to the local guys, who just might have a slim chance, given a bid.

[Slimprofits]

Re: Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

Connecticut Selling Bonds to Help Retailer Bass Pro Shops ---- http://www.bloomberg.com/news/2014-0...pro-shops.html

Connecticut will offer $22 million in municipal bonds to help finance a new store for outdoor retailer Bass Pro Shops in Bridgeport, its most populous city.

The sale of the general-obligation bonds through Connecticut Innovations Inc. is expected the week of May 5, according to Moody’s Investors Service. The state’s financing arm for companies would use the proceeds for a grant toward the construction of the 140,000-square-foot facility, Moody’s said.

[Slimprofits]

Re: Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

http://www.basspro.com/webapp/wcs/st...=94&storeID=80

Bass Pro Shops...has signed a Letter of Intent (LOI) to be the anchor tenant for the new 50-acre Steelpointe Harbor development located off Interstate 95. Mayor Bill Finch and Robert Christoph Sr., of Bridgeport Landing Development, the developers of Steelpointe Harbor, today announced that a letter of intent has been signed between the developer, the City and Bass Pro Shops.

http://www.ctpost.com/local/article/...15-4690963.php

It could be argued Bass Pro does not need taxpayer money. In June, Bloomberg reported the company is worth at least $2.6 billion.

The City of Bridgeport owns the land. ---- http://www.thefreelibrary.com/$1.2b+harbor+redevelopment+okayed.-a0211362408

The approval was for an Amended and Restated Development and Acquisition Agreement with the City of Bridgeport, which owns the land. The $1.2 billion project is to be situated on the 52-acre Steel Pointe peninsula and is expected to take approximately 15 years to complete.

[dcarrigg]

Re: Bass Pro Shop: A Case in Crony Capitalism and Predatory Businesses

Connecticut Selling Bonds to Help Retailer Bass Pro Shops ---- http://www.bloomberg.com/news/2014-0...pro-shops.html

Bridgeport filed for bankruptcy back in 1991. It has the highest crime in New England. It's economically depressed as all hell. It's officially a 'distressed municipality' as it is. This would just bump it up the list were it like the Texas case where they were floating the bonds.

But, like you said, it turns out the State's giving up the money not the municipality. And it's taking Bass an extra few years to actually get open. And it's only 1/3rd the size of 38 studios in a state three times as big as its ill-fated neighbor.

Still, how much economic development could be done by either, 1) spreading that money around to several small businesses and entrepreneurs in a given geographical area, 2) tear down blight, make pad-ready sites, or otherwise update the ancient Northeast infrastructure, or 3) using the $22mm to deal with how high crime in the city has become.

You at least might want to get the city out of the national "Top 10 cities with the highest violent crime" lists.

It's not like they're running out of bait and tackle shops over in the nutmeg state.

But this is Bass' game. They always find a way to suck money out of suckers. Good catch.