Can Walker Snag Cabelas

December 8, 2006
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WALKER — What will it take to put a Cabela's in the 240-acre OrchardPark development in Walker? Cabela's says it will take a $15 million tax incentive package to fund public infrastructure for the mixed-use project. Now the question is where those incentives might come from.

As City Planner Frank Wash sees it, it all comes down to a topic that's ripe for debate: How can you subsidize one business and not another? Farming, industrial operations and professional sports arenas — the entire system is lined with subsidies, he said. Is it time for Michigan to get more creative and expand its definition of economic development?

"It's no surprise to me that a heavy-hitting retailer/tourism operation like Cabela's comes in and says it needs special treatment," Wash remarked. "I think it's just the reality of economics, and the reality of a heavy hitter swinging a big stick."

Cabela's is the nation's largest specialty retailer of hunting, fishing, camping and related outdoor merchandise. It had revenues of $1.8 billion in fiscal 2005. The chain has 18 stores across the country and expects to open eight more in 2007. The only Cabela's in Michigan is in Dundee, just southwest of Detroit. It is purported to be the No. 1 tourist attraction in Michigan, with more than 5 million visitors a year.

Cabela's is only one part of a very big project. The developer plans to create five distinct districts within OrchardPark. Cabela's would be situated in a 62-acre village center among an eclectic mix of projects, including entertainment venues, restaurants, shops, residential units, public gathering space and, likely, a theater. The development would also include an 18-acre residential townhouse district; a 12-acre commercial, office and residential district; and a 24-acre commercial, office and residential district.

The Walker City Commission has made it clear from the beginning that the city cannot help with any funding. The only tools the city has at its disposal are the brownfield program and Local Development Finance Authority process, Wash said. The brownfield program provides developers with special financial incentives to acquire and develop contaminated and blighted sites. If Cabela's wants to use the brownfield tool, the city has to have proof that there is a legitimate environmental problem at the site, he said.

An LDFA establishes a legal basis and procedure for the capture and expenditure of tax increment revenues to support projects that spur new economic growth and create employment opportunities. The tax capture has to be applied to infrastructure improvements in the LDFA district. Both the brownfield and LDFA processes take time.

Cabela's isn't a typical retailer, Wash pointed out. A Cabela's attracts several million visitors a year, brings a lot of money into a state and creates jobs. In fact, Wash said, the jobs at Cabela's are of the same pay rate and have potentially better benefits than a lot of the industrial jobs that the state creates through tax abatements. Cabela's told the city that the average starting wage for a worker on the floor would be $11 to $11.50 an hour and that it plans to hire 118 full-time and 145 part-time employees. The annual payroll is estimated at $6.58 million.

Cabela's indicated that a Walker location would likely attract about 3.5 million visitors annually and generate $3.1 million in state sales tax. According to the city, the store would generate more than $600,000 in city income tax and about $254,000 in property taxes for Walker

As Wash recalls it, "Cabela's said this is the only site they're looking at in Michigan at this time, and if we can make the economics work, we will be here. If we can't make the economics work, we're just not going to build in Michigan; we'll go put it in another state."

Outgoing Senate Majority Leader Ken Sikkema, R-Wyoming, fully supports finding a way to bring Cabela's to Walker and wants the state Legislature's help, said Ari Adler, Sikkema's spokesman. Adler explained that the Legislature could address some kind of tax incentives, or do something funding-wise in terms of infrastructure improvements. Most likely, the Legislature would get involved in writing some tax code that would help Cabela's, much like it does for manufacturers and others that come to the state and ask for help, he said. Cabela's is talking about 263 full- and part-time jobs, and Michigan is not in a position to turn its nose up at jobs, Adler added.

"The governor often comes to the Legislature for help when there are manufacturing jobs they want to bring into the state, and we help them out," Adler remarked. "We're asking for the same treatment for West Michigan."

Adler pointed out that many of the manufacturing incentive deals that get approved only happen because the Legislature passes a bill that makes them happen. The Legislature often passes bills having to do with tax incentives of some kind and they're written very specifically — for a specific company, a specific location and a specific reason, he said, so there's no reason the Legislature couldn't do that in Cabela's situation.

Cabela's approached the Michigan Economic Development Corp. for some assistance but the MEDC typically doesn't provide tax incentives for retail ventures, said MichaelShore, MEDC's vice president of communications. Although state tax incentives are provided primarily to manufacturers interested in locating in Michigan, the MEDC did provide incentives to Quicken Loans when it created 500 new jobs in its mortgage sales department in Troy, and to Google in Ann Arbor, which will employ some 1,000 people.  Shore said the legal requirement is that a project create good-paying jobs and represent a significant investment on the part of the company. He said "good-paying" is typically defined as a job that pays two times the minimum wage. Google's average annual salary, for example, is $47,000.

"The other piece that is vital to understand in this circumstance is that we don't provide incentives to companies that have every intention of locating in a particular spot," Shore added.

He said the MEDC talked with Cabela's and offered to show them brownfield redevelopment opportunities in the region where they could receive tax incentives for locating. In Shore's estimation, Cabela's has a particular spot in mind, and the company is intent on asking for incentives for something it plans to do anyway.

The MEDC's failure to provide incentives will not kill the chances of Cabela's locating in Walker, because it's going to happen anyway, Shore said. If the MEDC were to provide tax incentives for Cabela's, it would have to do it for every Meijer, every Wal-Mart, every shoe store, every gas station and every other retailer that asks for consideration, he pointed out.

"I think it's significant and notable that the city of Walker is also unwilling to provide any incentives," Shore said. "The fundamental piece is that this is the location that Cabela's wants; this is where it wants to be."

The MEDC released a written statement Wednesday welcoming Cabela's to the area and promising that the MEDC and The Right Place Inc. will work with the company and Walker to make Cabela's entry into this market as seamless as possible in regard to its site plan review and permit approvals. The MEDC also offered assistance with any regulatory issues that might come up.

George Erickcek, senior regional analyst for the W.J. Upjohn Institute, said the jobs created by Cabela's would create some additional jobs indirectly. He estimates each Cabela's job would generate another 1.5 to 1.7 jobs, mostly in retail, but also some new jobs in service sectors such as accounting, security, landscaping and building maintenance.

In Erickcek's opinion, a Cabela's would have a smaller multiplier than manufacturing, primarily because it would not have a very large supplier base. On the other hand, new jobs in the furniture and automotive industries have a higher multiplier because there are suppliers to both of those industries in Grand Rapids.

"A key difference between a Cabela's and a Meijer or a Wal-Mart is that people do travel quite a ways to these stores," Erickcek said. "Insofar as these stores do bring in dollars from outside the greater Grand Rapids area, it will have a multiplier effect, and it will have economic impact."

The challenge, Erickcek said, is that since Cabela's would compete with outdoor retailers already in the area, some of those dollars will be just local dollars. If customers choose to shop at Cabela's instead of the existing outdoor retailers they have patronized, employment levels at existing stores could go down as the dollars go to Cabela's, he noted.    

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