Outdoor goods retailer Cabela’s opened for business in Gonzales in late 2007 just ahead of competitor Bass Pro Shops in Denham Springs after both won protracted court battles over the incentives local governments used to lure them.
The incentives — sales tax-backed financing known as tax-increment financing — were rooted in the idea that the big stores would draw regional shoppers, sparking secondary commercial development and filling tax coffers for local governments and the state.
But the expected secondary development on the sites has moved at vastly different rates since the stores opened.
In Livingston Parish, the 75-acre Bass Pro commercial area at the Interstate 12/Range Avenue exit will have 24 stores and restaurants in business by late June. The site’s first “big-box” retailer besides Bass Pro, a new Sam’s Club, is expected to open by then, Denham Springs officials say.
In contrast, the development in Gonzales that surrounds Cabela’s at the Interstate 10/La. 30 exit has two fast-food restaurants, two hotels, one sit-down restaurant and plenty of empty land.
The Gonzales board that issued nearly $50 million in bonds four years ago for the government-subsidized retail development that includes Cabela’s is $16.5 million behind on its debt payments and has another big bill coming in June, city figures show.
Clay Stafford, city clerk and finance director for Gonzales, said the Gonzales Industrial Development Board, a public body, is not likely to cover all of the $4.5 million in principal and interest due next month, increasing the overall amount in arrears. The bondholders, in this case, are Cabela’s and a developer of the associated retail project. The city holds no credit risk.
Both the Cabela’s and the Bass Pro projects used tax-increment financing to pay for roads, infrastructure and other improvements. The Bass Pro deal also paid for Bass Pro’s building and its site. Also known as a TIF, the financing method uses a share of the new sales tax generated from a defined private development area to pay off the capital debt for the improvements.
Though critics charged the TIFs benefitted certain businesses and parishes over others, the subsidies were justified, proponents argued at the time, because Cabela’s and Bass Pro are “destination” retailers.
The Cabela’s and Bass Pro TIFs are two of eight TIFs backed with sales tax collections that the state approved between the mid-1990s and 2007, the Legislative Auditor reported in 2008.
Since Gov. Bobby Jindal took office in 2008, the Louisiana Department of Economic Development has recommended no more of those kinds of TIFs for approval.
Economic Development Secretary Stephen Moret said his agency has to consider carefully the investment of state sales tax collections and the return on that investment. He said most of the revenues from retail TIFs are ultimately drawn from other retailers within the state.
“So the state would be subsidizing new retail operations that primarily take retail sales from other retailers’ sales in Louisiana,” he said.
Yet Moret said retail TIFs can be important local projects for parishes, such as Ascension, Livingston or Orleans, when they are trying to attract retail development and capture more sales taxes.
“There’s no question that Cabela’s and Bass Pro have generated significant new sales taxes in Livingston and Ascension parishes,” he said. “It seems to me they have been very good additions to the economic vitality of those parishes.”
Anecdotally, business owners and developers involved with both TIF projects said they see out-of-town shoppers and believe the outdoor anchors have drawn new businesses that would not have otherwise located there.
But figures are hard to come by on what share of total sales derive from out-of-state shoppers and from Louisiana buyers who would have previously shopped with the outdoor retailers online — and probably sales tax-free.
Bass Pro’s slow start
The Bass Pro TIF did not meet early sales projections for 2010 or 2011 — and never got the Marriott Fairfield hotel initially planned for the site when those projections were made. But Bass Pro was able to weather the down economy.
The new Sam’s Club is expected to dramatically change annual sales from the site, adding another $70 million a year, according to the Livingston Economic Development Council.
Denham Springs city officials have also announced plans to pay off ahead of schedule $50 million in revenue bonds for the Bass Pro TIF.
The 30-year bonds, which have been paid down to $46.2 million and refinanced, are expected to be retired in 13 years, said L. Gordon King, financial adviser for the district that issued the Bass Pro TIF bonds.
Denham Springs Mayor Jimmy Durbin said another new strip center is planned next to the Bass Pro TIF, as well as a Holiday Inn — new business attracted by the commercial area and Bass Pro.
That strip center project will not be in the city limits, but he said a second new five-suite strip center is also being planned within the TIF and the city on Bass Pro Boulevard.
“By the end of the year, we’re going to see that strip mall open as well,” he said.
Larry Whiteley, communications manager for the Springfield, Mo.-based Bass Pro, declined detailed comment on the Denham Springs store, saying the company is privately held.
“We’re pleased, and we’re doing quite well,” he said.
Cabela’s TIF is lagging
Like the city of Denham Springs, the Livingston Parish School Board and other government entities involved in the Bass Pro TIF, the city of Gonzales bears no credit risk for bonds issued for the Cabela’s TIF.
Cabela’s and one of the two project developers, Carlisle Resort LLC, hold the Cabela’s bonds, said Stafford, Gonzales’ finance director.
But without the expected retail development around Cabela’s, the new sales tax dollars pledged to pay off the bonds have not materialized to keep up with the payment schedule, Stafford explained.
Though Cabela’s has been able to annually exceed minimum employment levels called for as part of the TIF, early sales projections upon which the Cabela’s bonds were based have fallen far short.
By last year, the entire site was supposed to generate $173 million in total annual sales, $71 million of that from Cabela’s alone, according to initial projections. Sales tax collections for 2011 point to sales from the entire site that were closer to $44 million.
Those collections, however, also include sales from the 28-bed St. James Behavioral Health Hospital, which relocated from St. James Parish a little more than three years ago. Though built inside the lands designated for the Cabela’s TIF, the hospital is not part of the Cabela’s-anchored commercial center benefiting from the TIF-financed infrastructure.
The hospital is behind the commercial center and was not drawn to the site specifically because of the TIF, said Wendell Smith, the hospital’s chief executive officer.
Joe Arterburn, corporate communications manager of Cabela’s, on Thursday declined comment for this story.
But Gonzales Mayor Barney Arceneaux, who was police chief when the TIF was approved, said he believes the TIF was the right decision at the time, based on the information available.
Stafford said the city has collected $790,140 in sales taxes from the TIF since Cabela’s opened.
“That’s more than that district would have generated otherwise,” he said.
Cabela’s also makes a $352,000 annual payment in lieu of property taxes for its site, which the development board owns and leases to Cabela’s. The payment is shared among all local governing bodies that levy property taxes in that area, Stafford said.
The TIF has also provided new sales taxes to the Ascension Parish School Board and the East Ascension Drainage District, which collect sales taxes in the area but chose not to provide a share of them to pay off the TIF bonds.
In fact, of all the local governments collecting taxes in the TIFs for Bass Pro or Cabela’s, the Ascension Parish School Board has pocketed the most sales tax revenue: nearly $3.2 million through April, sales tax figures show.
Attracting out-of-town shoppers, as well as plant workers on La. 30 who also stop by Cabela’s, the outdoor store has been a great anchor for Don’s Seafood Hut, though the expected surrounding retail has not emerged yet, said Ray Stonemark, who operates the restaurant on the Cabela’s TIF site.
“It really hasn’t taken off yet, but with Cabela’s being out there, it has its perks,” said Stonemark, also a partner in the restaurant’s ownership group.
He said the Don’s Seafood next to Cabela’s did $3.3 million in sales last year.
But some competing outdoors and gun business operators who say they have felt the impact of Bass Pro and Cabela’s still object to the subsidies the two big stores got, though many added that they have adjusted and thrived.
“Honestly, do I think they are a category killer? No, I don’t,” said Jim McClain, owner of Jim’s Firearms in Baton Rouge.
Carl Singletary, former owner of Carl’s Tackle Box in Galvez and one of the two Ascension Parish businessmen who challenged the Cabela’s deal in court, said the opening of both stores put his bait shop out of business.
“I’m 12 miles from Cabela’s and 12 miles from Bass Pro, and they got me in the center,” he said.
Singletary said, however, he now has a home business fixing rods, reels and boat trolling motors and receives referrals from the staffs of the two stores.
‘Motivation,’ other factors
Cabela’s opened in late 2007 and Bass Pro in early 2008, both on the cusp of the major national downturn that would affect retailers and restaurant chains that might fill the developments.
But the developers behind the projects, local economic-development officials, city leaders and others pointed to variety of differences that, when looked at collectively, suggest the Bass Pro project in Denham Springs was better geared to withstand the economic downturn and to more quickly establish a retail beachhead.
Reasons cited include population density, traffic counts, the structure of the TIF deals, greater pent-up retail demand in Livingston Parish than in Ascension, and the marketing efforts by some of the developers who were willing to lower land prices.
Jacob FaKouri, the developer who owned the land sold for Bass Pro and other commercial projects inside the Bass Pro TIF, said he did not have the cash reserves to sit on property as his competitors marketing the Cabela’s site might have.
“Again my motivation was if it didn’t sell, it needed to sell, for Jacob. I’m the only guy there. I’m the group,” FaKouri said.
Current and former Gonzales city officials, including former Mayor and current Gonzales state Rep. Johnny Berthelot, also pointed to differences in the individual deals for the two TIFs.
The Bass Pro TIF has twice as much sales tax pledged to pay off the bonds as the Cabela’s deal does, with about the same amount of debt.
The Bass Pro TIF receives a share of sales taxes from six different entities, including the state of Louisiana. Six of the 10 cents in sales taxes collected from the TIF site go to pay off the TIF bonds. The state’s contribution is 2 cents in sales tax and is limited to $1.5 million a year for 20 years.
The Cabela’s TIF receives a share of sales taxes from the city of Gonzales and the state. Three of the 8.5 cents collected from the TIF site are used to pay off the TIF bonds. The state’s contribution is 1.5 cents in sales tax and is capped at $10.5 million total.
People, prices and traffic
Population densities and traffic also are factors, some said.
I-12 had about a quarter more traffic between 2009 and 2010 at the Denham Springs Range Road exit than did the I-10/La. 30 exit in Gonzales, state data show.
More than twice as many people live within 15 miles of Bass Pro compared with Cabela’s: about 584,000 versus about 229,000, according to Entergy Corp.’s Louisiana Site Selection online database.
Mike Eades, president and chief executive officer of Ascension Economic Development Corp., said the number of rooftops around the two sites could be a factor.
Eades said he used to work in the retail location business and said there are few rooftops south of I-10.
He said the rooftops near the Cabela’s TIF site hardly compare with those around the Bass Pro TIF site at I-12, “where they’ve got dense population around that interchange on all sides.”
Jim Ryan, financial adviser to both parishes, said Ascension’s retail market is more developed than Livingston’s, meaning there may have been less room for additional retail in Ascension than in Livingston.
He noted that Cabela’s is closer than Bass Pro is to the Mall of Louisiana in East Baton Rouge Parish.
The developers of Cabela’s pointed to a combination of the poor economy, which dried up prospects under contract and made lending tougher for new retail prospects, and their own pricing strategies.
Nick FaKouri, one of developers of land around Cabela’s and the brother of Bass Pro developer Jacob FaKouri, said he was asking more than $20 per square foot for land around Cabela’s, following the lead of the site’s other developer, Carlisle Resort LLC. Nick FaKouri said he should have backed off that price sooner.
“In my honest opinion, we got too aggressive on the prices,” said Nick FaKouri, who is principal of Tower Capital Corp., the landowner. “I did not realize it was going to be this bad this long.”
Brent Rhodes, who is developing another portion of the Cabela’s site for Carlisle Resort, pointed more to the economy.
“I lost nine contracts between when economy kind of tanked in 2008 and through 2010, so that alone would have built out most of my site if the economy would not have taken a hit,” Rhodes said.
He added that Carlisle Resort, which holds $7.5 million in bonds for the Cabela’s TIF, owned land outright and was not as aggressive in trying to sell at a lower price point.
Rhodes and Nick FaKouri said they’ve lowered prices, recently begun to get new projects under contract and expect new development to occur around Cabela’s this year.
Although Bass Pro is ahead of the game so far, Rhodes said, “We’ll be right behind them and be able to pay those bonds off.
“We own a portion of those bonds,” Rhodes added. “We are very sensitive in regard to what is going on out there.”