Cabela's: Perfecting the art of big box extortion

(ABOVE: Milwaukee Journal Sentinel photo by Jeffrey Phelps)

What a deal.

Cabela's - notorious for extorting local governments (and taxpayers) where they build stores - will be getting $4 million from Washington County for the favor of building their store there. The county will be taking out a loan at 5.5% to pay the subsidy; it will be in hock until 2023.

Now, understand: This is not $4 million worth of road improvements for around the store location, or $4 million worth of infrastructure enhancements surrounding the Cabela's building, or a deal for property tax abatements that total $4 million.

This is a straight cash payment of the county to a business of four million dollars.

I'm not kidding. And it gets better.

"Well," Mr. Pro-Big Box might say, "a store like Cabela's generates sales tax that the county can use to lower property taxes of its citizens, make county-wide infrastructure improvements, etc."

Wrong. The county has a plan: the tax dollars generated by Cabela's go right back to pay the loan on the extortion fee that the county agreed to. That's right; Cabela's does not contribute sales tax to the county until approximately 2023. Every penny of sales tax generated by Cabela's goes right back into their coffers.

Compounding the punishment inflicted on the county; they eat 5.5% interest on a loan - - almost another million dollars - - because Cabela's wants payment of $4 million immediately.

So, in return the county gets... "temporary ownership of 18,085 square feet" of the store? For what, exactly? And does the county swallow the property tax on that square footage (if they were due to get any in the first place)?

What a deal.

Cabela's works their magic all over the country. Texas, for example, as reported by Jim Hightower in The Austin Chronicle:

For its part, Cabela's is unabashed about its dependence on corporate socialism, even declaring in its annual report that grabbing public money is key to its business plan. But while it thrives on government giveaways, the retail chain has added a new twist to the game by demurely declaring that, as a private, for-profit company, its privacy rights would be violated if details about its public subsidy were revealed to the public. Thus, Cabela's has sued our state attorney general, claiming that it would suffer "substantial competitive harm" if the terms of its deal with the governor were publicly disclosed.

So, class, let's review: A private corporation is funded by the state to give it a leg up on its local competitors, but it declares that it must be exempt form the state's public disclosure law in order to protect its competitive advantage. Are we clear now on the new definition of "free enterprise"?

It bears repeating that Gander Mountain, which has a store here in Franklin, is actively anti-subsidy. Heck, I'll even link to a conservative website to illustrate the point.

Google "Cabela's" and "extortion," by the way, and you get 1,180 hits. And pray they don't come around here, where the current administration has never met a big box that it doesn't smother with wet, sloppy kisses.

From the Milwaukee Journal Sentinel:

Cabela's payment decided

County to temporarily 'own' part of store

By DON BEHM
dbehm@journalsentinel.com

West Bend - Washington County this spring will fulfill its September 2005 pledge to pay $4 million to Cabela's for building a store in Richfield, county attorney Kim Nass said.

In return for its subsidy payment, the county will gain temporary ownership of 18,085 square feet - encompassing the four major wildlife and fish displays - inside the 165,000-square-foot outdoor gear store, Nass said.

Documents officially describe the space as a "condominium" unit. The four displays include the towering conservation mountain with a stream at the center of the main retail floor, a walk-through freshwater fish aquarium, North Woods animal museum and an African diorama.

The county received a $4 million loan from the State Trust Fund in August 2007 to finance the subsidy, but the payment to Cabela's has been delayed as terms of the agreement continued to be negotiated, Nass said. A 5.5% interest rate will boost total payments to no more than $5.97 million.

The loan will be repaid no later than 2023 with county sales tax dollars generated by retail purchases at Cabela's, finance director Susan Haag said.

The first loan payment is due in March 2009. Washington County's ownership of the area inside the store will lapse when the loan is repaid, in 2023 or earlier.

Since the store opened in September 2006, the county has set aside the full $370,488 in taxes generated by Cabela's merchandise sales for the first loan payment, Haag said.

In 2007, the Cabela's store collected $234,262 in sales taxes for the county, or nearly 2.6% of all county sales tax collections last year.

The county's half-cent sales tax generated record revenue in 2007, Haag said.

The tax was implemented in 1999, with the county collecting more each year: $5.48 million in 1999, $6.77 million in 2000, $7.10 million in 2001, $7.19 million in 2002, $7.53 million in 2003, $8.31 million in 2004, $8.36 million in 2005, $8.87 million in 2006 and $9.04 million last year.

For  this year, the county is planning its budgets around a conservative estimate of $8.5 million in sales tax collections.

Fully 30% of this year's collections will be diverted to debt payments and other operating costs to help reduce the county property tax levy, administrative coordinator Doug Johnson said.

The remaining 70%, along with unspent sales tax dollars from prior years, are committed to major building projects and equipment purchases.

Spending plans

Two of the largest projects involve spending $3.1 million for an addition to the Sheriff's Department offices and $2.25 million to construct classrooms and laboratories in the vacant third floor of Collins Science Hall at the University of Wisconsin-Washington County.

The County Board will be asked to award contracts on those two projects at its regular April 15 meeting, Johnson said.

At the Sheriff's Department, two floors will be constructed above the main entrance, providing additional space for training classrooms, emergency management, detectives and other personnel. After the addition is completed, remodeling of existing offices will enable the department to expand its dispatch center to accommodate a new emergency radio system.

In 2008, the county will allocate $4.7 million toward replacing aging communications equipment used by the Sheriff's Department and local police and fire departments. Full cost of the project is $14.6 million. About $4.5 million was set aside in 2007 for it and $5.4 million will be spent in 2009.

The equipment is scheduled to be installed in 2009.

Contract decision

The County Board will consider awarding a contract for the new countywide radio system at its regular meeting Tuesday.

Beginning in 2009, Washington County will use 50% of its annual sales tax collections to offset property tax dollars in the annual operating budgets.

The availability of sales tax revenue also reduces spending of property tax dollars by decreasing the amount of borrowing needed to pay for such major projects, Johnson said.

Comments

[Josh Strupp]

"Since the store opened in September 2006, the county has set aside the full $370,488 in taxes generated by Cabela's merchandise sales for the first loan payment, Haag said.

In 2007, the Cabela's store collected $234,262 in sales taxes for the county, or nearly 2.6% of all county sales tax collections last year."

$234,262? By my quick calculations that puts the county at over a $135,000 deficit to pay it's 2007 loan payment to cover it's 4 million handout to Cabela's. So Washington County taxpayers are now paying the difference between the loan and the sales tax collections out of their own pockets I assume? That would mean that this corporate welfare idea is actually being partially paid for by property tax dollars, which was precisely what the county was trying to avoid in the first place. Not to mention that sales at Cabela's will most likely decrease as more competition moves in and the buzz of a new store subsides over the years. The way I see it, that deficit will only grow in the future.

Now that I look at it, even if Washington County had the $4 million cash on hand to give out to Cabela's, that money (at no interest) would still need to generate over $260,000/year in sales tax revenues over that same 15 year period, so they would be in the red even if they had the cash to hand out. Who the hell thought this was actually a good idea up there? Wow.

[Greg Kowalski]

Hey Josh, you forgot something: the slumping economy isn't going to drive more people to buy hunting gear or fishing rods, either.

Who would've thought a Cabela's was a bad idea for the Milwaukee area?

[John Michlig]

The math on this gets bleaker and bleaker the closer you look. And remember: We can only calculate the damage based on what is PUBLICLY KNOWN. Cabela's has said loudly and clearly (see Hightower's article) that "its privacy rights would be violated if details about its public subsidy were revealed to the public."

Pathetic.

[Josh Strupp]

...so if the county owns the fish and wildlife displays, do they pay for the upkeep or does the county fork over even more money to Cabela's to maintain the displays?

Someone actually came up with this "temporary ownership" thing. Simply amazing.

[folkbum]

I keep waiting for Washington County's most prolific blogger (*cough*Owen*cough*) to voice an opinion.

Do they have crickets in the wildlife displays?

[Greg Kowalski]

Yeah, you don't usually hear the mouthpieces of big business blab about something like this!

Which actually, to use a 21-year-old phrase, sucks. We could definitely use an overheated Mark Belling screaming over the incident or someone calling Cabela's "fish breath" or something similar.

[Josh Strupp]

You're correct Greg. This type of thing should be as offensive as excesive government spending or political cronyism but it never seems to get the same coverage from people like Belling because it goes against everything that was deemed to be a good idea on paper. Unfortunately, the GOP has been hijacked by politicians that are no better than tax-and-spend liberals they loath. The taxing and spending just comes from a different place.

Furthermore, where is the public outrage in Washington County and, more specifically, Richfield over this disaster? Judging by the tone of this article (where it appears that even the journalist writing the article is clueless to the problem he accidently uncovered) this issue just doesn't seem like a big deal up there. Pretty sad.

[Greg Kowalski]

Well I don't know Josh. I think Washington County, and possibly Richfield, is going through a development moment like Franklin had with Target.

Whenever controversy hit the building, you would hear the usual suspects and Mayor Taylor:

"All the people I talk to WANT a Target!"

mhm..

So, in Washington County and Richfield...let's hear it from the politicians:

"All the people I talk to WANTED a Cabela's!"

[John Michlig]

"All the people I talk to WANT a Target!"
"All the people I talk to WANTED a Cabela's!"

That's just ONE of the problems with an Old Boys network like the one we have right here in Franklin. Not a contrary voice in the lot of them; all mortally afraid of appearing "anti-development" in front of the lead dogs.

Again, though I have nothing against the guy beyond his "go along with the lead dogs" style, my district's alderman may be in for a big surprise come election day.

[Greg Kowalski]

It's almost like these politicians have a boogieman under their beds, and if they say the wrong words then...and ONLY then...will the boogieman come out and terrorize them.

[John Michlig]

Another of the many reasons that political campaigns should be publicly funded.

You don't have to be a politician long - Democrat OR Republican - before you're bought and paid for. "Wal-Mart? LOVE YA!"

Even the most wide-eyed idealist is susceptible.
... Much like you saw in the film CITIZEN KANE. You HAVE seen CITIZEN KANE, right :)

[Greg Kowalski]

Crap.

I knew I forgot to do something over the weekend!

[Josh Strupp]

Greg, you should consider blogging about this topic as well. Seems right up your alley. Not to mention that this sort of thing needs to reach as many Franklin residents as possible, considering the current state of development in this city. Just a thought.

[Greg Kowalski]

I'll definitely be looking into the issue for a future entry.

However Josh, did you read my recent entry about development?

It's kinda long, but I think it serves a good purpose!

Click my name if you'd like to read it.

[Josh Strupp]

"Kind of long"? Why would I want to read something kind of long? I'm a big believer in reading only slogans, memos, and talking points. "Kind of long" material might work contrary to my convictions and beliefs.

Sorry about that bout of sarcism. Not sure where it came from.

Seriously though, I haven't had the opportunity to read it Greg but I will.

[Bryan Maersch]

One thing you all missed out on, CABELA'S PRICES SUCK.

Even as a hubungus box store, I have priced items that I purchase at other local Sporting Goods stores and they are much higher.

will support non-extortion stores like Gander Mountain or Dunhams for my purchases.

Cabela's is all flash!

[John Michlig]

"One thing you all missed out on, CABELA'S PRICES SUCK."

Ah, but Cabela's is a "destination" - - they claim that just being there is worth the extra dough for a pair of thermal socks.

Not to mention THEY DON'T HAVE TO COMPETE IN A REAL MARKETPLACE!

Indeed - Gander Mountain or Sherper's are the places to go.

[james wigderson]

I realize that Mr. Bullock has a hard time reading, but Owen's position is quite clear from the record:
http://www.bootsandsabers.com/index.php/search/results/09a78aef7997ab11ca1eada5ed55c4bb/

I know Bullock has a history of misrepresenting what other bloggers write, but this is mind-boggling.

[Marcus Aurelius]

The Link James provides does not work, however go to Boots and Sabres and initiate a new search on "cabela" you will see a number of posts about this story.

[Bryan Maersch]

Looks like Kowalski and Strupp got dissed by Wigderson on their comments:

"Now I'm going to guess that Kowalski and Strupp are just intellectually lazy and didn't feel like checking into the huge firestorm (by Washington County standards) that occurred when the board passed the subsidy and then later tried to back out in the face of public pressure. And given Mark Belling's past opposition to some subsidies they might want to actually check before making a blanket statement. But that's not as much fun, is it?"

http://wigdersonlibrarypub.blogspot.com/2008/03/can-jay-bullock-read.html