Texas Demands Refund from Retailer

Published November 1, 2006

The State of Texas is demanding that Cabela’s Inc. return $28,000 and forfeit another $200,000 from a state grant for failing to create enough jobs at a store that received economic incentives.

Kathy Walt, a spokesperson for Texas Gov. Rick Perry (R), confirmed to the Austin Business Journal on August 15 that the Cabela’s store in Buda had failed to create the promised 400 jobs.

If Cabela’s had hit its jobs target, it would have qualified for $400,000 in Texas Enterprise Fund money. The firm has to return $28,000 of a $200,000 incentive payment the state had made, as the job creation fell short of even half the promised number.

The grant was offered as an enticement for Cabela’s to build stores in Buda and Fort Worth.

Contract Upheld

“It’s unfortunate that they fell short of their job-contract goals,” Walt told the Journal, but it “shows that the state is serious about imposing the terms of the contracts under the Enterprise Fund.”

David Ewald, a consultant to Gander Mountain, a rival outdoor retailer, said the failure of the Cabela’s store to generate the expected number of jobs “shows that communities are getting overly excited about [companies’ predictions of] job creation and economic development and need to be extremely careful. Things don’t always pan out the way they promise.”

Tourism Not Verified

Cabela’s often seeks tax breaks or other government subsidies by arguing their stores are “destination retail” outlets that will draw customers from a large area. Ewald pointed out, however, “Cabela’s numbers on tourism are self-reported. Even their estimates of where tourists come from are theirs. There is no independent verification.”

Gander Mountain has been public in criticizing Cabela’s and another large outdoors retailer, Bass Pro Shops, for routinely seeking government handouts to build new stores. Gander Mountain does not seek such incentives.

“In just a few instances, Gander Mountain or the project developer has received tax assistance of limited amounts for a limited duration, typically amounting to less than $85,000 per store for a five- to seven-year period,” Ewald noted.

Spokespersons for Cabela’s did not respond to a request for comment.

Steve Stanek ([email protected]) is managing editor of Budget & Tax News.