Retailer Seeks End to Public Financing
By George Anderson
Like other retailers, the outdoor lifestyle chain Gander Mountain has benefited from public subsidies when it’s come to building its stores. That, its CEO Mark Baker has concluded, is just plain wrong.
Upset over public subsidies being given to competitors Bass Pro Shops and Cabela’s, Mr. Baker has hired lobbyists and met with political leaders to argue against public subsidies for any retailer.
Bass Pro Shops and Cabela’s do not share Mr. Baker’s assessment.
“If (Gander) put the dollars we put in our stores, and the uniqueness, then maybe they could get public money, too,” Larry Whiteley, a spokesperson for Bass Pro Shops, told the Minneapolis Star Tribune. “Our locations are museums, art galleries, aquariums, conservation-education centers. … And by the way, they’re retail stores.”
Mr. Baker fires back. “I think Cabela’s and Bass Pro have really interesting stores, but when you get to 30, 40 or 50 of these stores, they become less of a destination.”
Others find merit in Mr. Baker’s argument.
“It doesn’t seem to matter that this country is swimming in grossly overbuilt retail space,” said Greg LeRoy, executive director of Good Jobs First. “Retailers have become bolder with their requests (for public money).”
Moderator’s Comment: Where do you come down on this issue? Should public monies be used to attract retail businesses? Does granting tax abatements or
other enticements alter the competitive playing field? –
George Anderson – Moderator
The problem with public money is that it’s public money. It’s not meant to benefit business per se. The use of public money is best served to provide infrastructure and an environment where business is welcome. When it comes to abatements and their public intent of being a competitive attraction to business actually makes business uncompetitive. When it comes to government funding, always expect the opposite to be true.
Business is business and government is government. The more separate they become, the more efficient and effective both become.
The statement that retailers have become bolder in itself doesn’t bother me. For those of us who have children, we understand that concept. Whenever there are no firm, preset boundaries, children always test to see how far they can go. This is no different for businesspeople. If the public money is available, why not go after it? For the communities, there are offsets that make the use of public money a positive. What the governments need to do is determine how much they are willing to offer, set guidelines and stick to them. Perhaps the governments don’t realize that they have something that retailers need; namely, potential customers. So as long as the money is available, retailers should go for it.
If you say no subsidies for retailers, how do you draw the line? Is money spent to upgrade a highway in anticipation of increased traffic due to new stores being built a subsidy or is it a prudent response to keeping roads safe? Subsidies for retailers goes way beyond the destination sporting goods stores. There’s not one developer who does not crave the opportunity to dangle potential sales tax revenue out to multiple towns within a metro area as a way to get favorable zoning.
I’ll stay calm and say this: government’s purpose is simply to protect the public (in all that it means). They are not in the business of giving taxpayers’ land to business. Government does business poorly. The “museums” stated (Bass Pro Shops et al) are profit centers, unlike true museums. Healthy economics do not include “giveaway” programs as what good free enterprise system historically ever stayed strong with corporate welfare, which precludes companies from vigorous and fit practices. This kind of government tyranny should be disavowed by every decent free market enterprise.
As a society, it seems many have acquired a need or right to government meddling. We all should applaud Gander Mountain and Mr. Baker for their courage.
A great discussion today and the previous comments leave me with nothing more than a postscript to add. The answer to the question for me also falls in the “it depends” category, as well. There certainly should be value and incentive for retailers to receive some form of subsidy, e.g. tax incentives, for establishing businesses in areas which may have previously been underserved and/or underdeveloped. Maybe the discussion focus turns to how the guidelines are defined when public monies are used for retailers; when the use will be outside the areas of property acquisition and infrastructure.
What a refreshing topic.
I voted “it depends on the case,” because while I agree with the Gander Mountain folks that the subsidies given to these giant — and no-longer-unique — boxes are a form of corporate welfare, I wonder if giving subsidies to grocers to open stores in underserved poor neighborhoods is also corporate welfare. I don’t think so — any retailer who’s willing to put up with the problems associated with those kinds of areas — everything from shrink to security problems to finding trainable employees — deserves some form of public help (it doesn’t have to be in the form of tax dollars, however), because the public directly benefits. To say that hunters “benefit” from Bass or Cabela’s is absurd — they can buy guns and ammo at Sports Authority or Gander Mountain. And while I applaud Bass’s and Cabela’s educational aspects (conservation, etc.), I wouldn’t dream of comparing what they do to what a good natural history museum (which honestly deserves my tax dollars) does.
Certainly there are pitfalls, but I think the comments above saying public financing of private enterprise are overly simplistic. Governments (ideally) invest in the society, whether through infrastructure projects, services, or otherwise. When done right, funds used to attract commercial enterprises can transform economies, change socio-economic conditions, and increase revenues. For example: there is a town near here that does not have a single supermarket within town boundaries. It had little or no hotel space. Recent subsidies attracted a Four Seasons hotel to locate near an office park. The subsidies changes the ROI for the hotel, allowing it to believe it could be profitable more quickly. The town receives new tax revenues, employment for hundreds of residents, more money flowing from outside into the local economy from visitors, etc. It may even tip the scales and make a supermarket viable, and that would have a profoundly positive effect on the community.
Partnerships between government and business have the potential to be true win-win situations. Yes they are subject to bad politics, but that does not make them inherently bad or unfair.
It all depends on the situation but generally I am not in favor of corporate welfare. Larger retailers have more resources to grease the palms of public officials who in turn, return more money back to the retailer in tax breaks. This puts smaller retailers at a disadvantage. My opinion is that if a retail project cannot stand on its own without public financing then it should not be done. If a retailer wants a site bad enough, they will pay the city to get the location, not the other way around.
Public money should not be given to private businesses, whether it’s in the form of tax subsidies to retailers or free stadia built for sports teams.
I shall come back later today to read what others have said because I can’t immediately see any justification whatsoever for giving public funds to retailers whose reason for existence is to persuade people to give them money in exchange for goods. That should be sufficient; they don’t need to be given money for nothing or for the right to hawk their wares. Let them earn it like the rest of us.
Life should be perfect, but it isn’t. And, in a perfect world, government should stick to governing, and businesses should stick to doing business, but they don’t. In the U.S., we have at least three levels of government subsidies – federal, state, and local. The chances of those going away are zero. Countries will fight with each other till the end of time to attract big industries and businesses, just as states will fight for corporate headquarters, and local governments will fight for retail stores, all of them using subsidies as a tool. That isn’t ever going to change in any meaningful way, so any retailer (with the possible exception of Wal-Mart) that tries to change the system is just attempting to push water uphill, and distracting themselves from their real job – retailing.
We have given our state, county, and local officials free
reign on this subject.
Based on their belief, such tax breaks will help the
geographic area… jobs, and hence the trickling effect
of revenue, paycheck, spending, individuals’ tax payments; and a repeat of this cycle.
However, times have changed, and a community, metro area, etc. may have more urgent and pressing needs. As an example, Toledo, OH that begs for better schools, teachers, streets, and other infrastructural demands.
Educational institution needs, better teachers’ pay, funding of any support systems that will improve the academic standards should be the first requirement.
So the real question is: “What is more important today to improve the community?…River boat gambling, ind. retail operations, and/or a corporation that receives a twenty year tax break.
The last time that I surveyed research projects to attract:
1) corporations (‘mega’ multi jobs and hence attract other corporations); 2) the national headquarters office organizations; 3) the young educated adults to the area (or keep them from leaving);and 4) then, successful, individual retail store operations, the #1 requirement was to have an excellent educational system at all levels for the corporate
a) employees’ kids, and b) employee needs, i.e.: a strong and educated pool of talent.
All the tax breaks, and their high lost $$ amounts, will not work for the local and states’ needs unless the education system is “top notch”.
Do you think Crate and Barrel, a highly successful retail business in Chicago, would move its headquarters office to another area if the school system was poor? Don’t think so.
Same would apply to Pfizer Pharmaceutical, who would need strong research support from the university level and a pool of young, educated professional talent.
Retailers, better be high powered sales generators for tax purposes; plus, be able to start paying taxes back quickly.
Politicians at all levels have lost touch with the major needs of the state’s cities, metros, etc. In many tax paying adults’ minds, it is time to stop tax breaks, for just job purposes; and then, much later, secure revenue contributions.
Fix education, and improve the needs of the community, county, and state. Then, it will be much easier to attract jobs providing corporations, and other businesses! Hmmmmmm
Many retail stores have such old merchandise that they’re running museums, but they don’t know they could call themselves museums! Saying a retail store’s “museum” benefits the public’s education would be like a fried chicken restaurant claiming they should get a government subsidy for feeding the hungry. In areas with exceptionally high unemployment or environmental devastation, it would be understandable for the local government to use subsidies to attract businesses. I have a feeling these places would account for 15% of the country and I doubt that any of these places would be attractive to sporting goods super stores. The problem with the current situation is that if one retailer gets a subsidy in an “undeserving” locale, the retailers who don’t ask for subsidies become disadvantaged.
As usual, PR pros are caught up in their own B.S. “Corporate welfare,” “subsidies,” the implication that all politicians are 100% corrupt. This issue of “subsidizing” retail stores is just someone riding on the surf. Governments have been helping private businesses since our country started and they will continue. I voted depending [on the situation] because every case is different. Corruption and good ideas live side by side in the USA.