Fort Worth Star Telegram: Big hype yields little at Cabela's

The giant Cabela's store in far north Fort Worth is impressive by many measures. It's a retail paradise for sportsmen and a feast for the eyes for anyone who loves the outdoors. But it was supposed to be a lot more, which is why city leaders agreed to give Cabela's up to $42 million in incentives over a 20-year period. Two-and-a-half years after opening, Cabela's is falling short of projections. It's not even hitting the relatively low marks tied to its tax breaks.

Mitchell Schnurman: Big hype yields little at Cabela's

By Mitchell Schnurman
Fort Worth Star-Telegram Staff Writer

The giant Cabela's store in far north Fort Worth is impressive by many measures. It's a retail paradise for sportsmen and a feast for the eyes for anyone who loves the outdoors.

But it was supposed to be a lot more, which is why city leaders agreed to give Cabela's up to $42 million in incentives over a 20-year period. They even went to court to defend the tax breaks.

Fort Worth doesn't usually give retailers a shot at so much public money. Unlike a corporate headquarters or manufacturing facility, retail doesn't generate many high-paying jobs or attract suppliers.

But Cabela's was portrayed as an economic force by itself and a big-time catalyst. Proponents said it would pull in a hotel and more than $500 million of nearby retail and commercial development. The hype even claimed that Cabela's would rival the Alamo as a tourist attraction.

Promises, promises.

Two-and-a-half years after opening, Cabela's is falling short of projections. It's not even hitting the relatively low marks tied to its tax breaks.

As a result, the Sidney, Neb., firm has paid back more than $70,000 to the state because it didn't create the jobs it promised in Fort Worth and at a second store in Buda, south of Austin. An additional $200,000 in state funds, linked to new hires, is out of reach now, too.

Cabela's also lost out on $68,000 in tax rebates from Fort Worth last year because it didn't meet local goals. To get the full tax break, Cabela's was required to have at least 60 full-time employees from Fort Worth, including 10 from the central city, and spend $5,000 with minority- and women-owned businesses.

Those aren't exactly killer thresholds, and the shortfall gives an indication of the disappointing performance.

There's more.

In 2004, when the City Council was evaluating the elaborate incentive package for Cabela's, the staff described the scope of the project and the potential impact.

Cabela's was supposed to have about 500 employees in Fort Worth. The number last week was 340, including part-timers, a spokesman said.

It was supposed to generate $67.5 million in first-year sales; in 2006, the store did more like $41 million -- at least in taxable sales. The spokesman said Cabela's "is comfortable" with the early forecast, but city sales-tax records indicate that the total was much lower.

Cabela's arrival was projected to spur development on 125 adjacent acres, including a 234-room full-service hotel and eight restaurants. More than $573 million was forecast to be invested in that area in the next 20 years. So far, Cabela's has spent $51 million to build its store, but nobody else has stepped forward with another project.

It's still early, and Cabela's may eventually live up to the lofty expectations. For years, both the Alliance area and downtown Fort Worth seemed to have little activity after major investments were made there. Then, almost overnight, they exploded with development.

Even if Cabela's disappoints, it remains an important asset and a unique retail anchor. It adds to the momentum in the Alliance corridor, which has been a driving force behind Fort Worth's continual growth.

And it probably helped persuade J.C. Penney and Sam Moon to put stores at Alliance Town Center, a mall about three miles south.

The warning to heed from Cabela's -- and all economic-development projects -- is beware of the hype.

Last week, an Austin watchdog group, Texans for Public Justice, released a report on the incentives doled out by the Texas Enterprise Fund. About $359 million has been given to 38 recipients from the governor's "deal-closing" fund, and the report says that almost two-thirds of the grants went to companies that later announced layoffs or failed to create the jobs they promised.

The report cites Cabela's, which received $400,000 from the state in 2005. That was based on having 400 full-time employees in Texas and at least 160 in each store.

Cabela's fell short by 86 jobs that first year. In 2006, it was 126 jobs short, meaning the stores had a combined 274 full-time workers -- a far cry from the high hopes here.

The state used a clawback provision to require Cabela's to pay back $70,384, according to the watchdog report. And because Cabela's missed those numbers, it forfeits a shot at an additional $200,000 in 2009 that hinged on hiring another 200, said Phil Wilson, Texas secretary of state.

Cabela's spokesman John Castillo confirmed the clawback payment and said it was more important for the company to operate efficiently.

Shareholders won't argue with that, especially now. Cabela's stock (ticker: CAB) has fallen 40 percent since October and hit a 52-week low of $13.89 last week. Revenue and same-store sales are growing, albeit at a slower rate, but investors are most concerned about shrinking profits -- that Cabela's is growing too quickly.

It started the year with 18 stores and has since opened eight more. Next year, it plans seven new outlets with an important change: they'll be up to 40 percent smaller.

Cabela's does not break out sales by store. But the Fort Worth store's city sales taxes are public information, because they're the basis for the tax-rebate incentive. In 2006, Cabela's collected $406,000 in city sales taxes (excluding the T and crime-district levies), said Tom Higgins, economic-development director. That translates into taxable sales of $40.6 million, but Castillo says that total sales were much higher.

More than half of Cabela's $42 million in potential incentives is projected to come from a tax-increment finance district. If hotels, stores and restaurants are developed on adjacent land, their property taxes will be passed on to Cabela's to offset the costs of its store.

If development doesn't happen there, Cabela's doesn't get the money. Ditto for the sales-tax rebate; it's based on sales that Cabela's generates and how it meets goals.

On that score, Fort Worth structured the deal wisely, because Cabela's has to deliver before it collects public funds. But that's scant satisfaction over the long term. The bigger problem is that leaders are too willing to believe the big claims of big projects, and that usually leads to giving away too much.

Dallas Morning News: Some Texas Enterprise Fund recipients cut jobs, miss goals

The governor's office, through the 4-year-old Texas Enterprise Fund, has awarded $360 million in grants to companies to encourage them to locate or expand their operations in the state. But a study by the nonprofit Texans for Public Justice showed that eight of the 38 companies given grants have had layoffs in Texas or nationwide while three others have failed to meet thresholds for employment growth. Read the article at the Dallas Morning News

Some Texas Enterprise Fund recipients cut jobs, miss goals

By CHRISTY HOPPE / The Dallas Morning News
December 19, 2007

AUSTIN - Almost one out of every three companies that has received state incentive money to create jobs has announced layoffs or been penalized for failing to meet employment goals, according to a study released Tuesday.

The governor's office, through the 4-year-old Texas Enterprise Fund, has awarded $360 million in grants to companies to encourage them to locate or expand their operations in the state.

But a study by the nonprofit Texans for Public Justice showed that eight of the 38 companies given grants have had layoffs in Texas or nationwide while three others have failed to meet thresholds for employment growth.

The total grants to those 11 troubled companies amount to $233 million - including $20 million to Countrywide Financial and $15 million to Washington Mutual, which have been hobbled by subprime lending practices.

Last month, Countrywide announced that it would fulfill its commitment to Texas to create 7,500 jobs even as it announced worldwide workforce reductions of 10,000 to 12,000 this year.

The Texans for Public Justice report also mentions $50 million that went to Texas Instruments Inc. but did not have a specific job goal. TI completed a $3 billion computer chip manufacturing plant in Richardson as promised, but the building has sat empty for 19 months waiting for market demand to justify filling the plant with equipment and employees.

In the interim, TI has announced about 500 layoffs in the Dallas area.

The study concluded that the close ties between the governor's office and the program present a conflict with its duty to "safeguard the funds and penalize lackluster performance."

Allison Castle, a spokeswoman for Gov. Rick Perry, said the TPJ study is flawed and untrustworthy because it is spearheaded by "a liberal group without any credibility."

She cited inclusion of TI as an example of the report's shortcomings because the TI contract did not call for a specific employment target.

And while not all of the companies have met their job creation goals, those given the grants have made capital investments worth almost $15 billion, she said.

"Texas is one of the best business climates - if not the best - in the nation according to numerous magazines, such as Forbes and Site Selection," Ms. Castle said. "The Enterprise Fund has helped close the deal."

Legislators have allocated more than $500 million for the governor's office to award through the Texas Enterprise Fund and its new sister, the Emerging Technology Fund.

Recently, NanoCoolers Inc., which received $3 million from the Technology Fund, declared bankruptcy.

Because of concerns over the state investment, House leaders have asked the chamber's Economic Development Committee to study the funds and how they are managed.

"I've got a lot of concerns," said Rep. Solomon Ortiz Jr., a committee member.

Among problems are provisions that mandate a return of state money if goals aren't met. "There's really no real teeth in those provisions for the state," he said. In addition, the governor works with an advisory committee, but has almost exclusive say over where the dollars flow.

"Everything is political by nature," said Mr. Ortiz, D-Corpus Christi. "As a legislator, we've got to do everything we can do to make sure that these funds that are taxpayers' dollars are properly allocated. It's not an easy fix."

State Development Fund Rewards Hype: Incentives Great, Penalties Few For Companies That Overstate Their Benefits

The Enterprise Fund has awarded $233 million - almost two-thirds of its total grants - to companies that have publicly announced layoffs or have failed to meet job requirements of their agreements with the state. Companies with layoffs or meager job growth are often protected from facing penalties. The three companies that have been required to return a portion of their grants for failing to meet job targets have collectively returned less than one percent of their total grants.

Read the report

Houston Chronicle: Spending of campaign cash veiled

With their war chests swelling and challengers nowhere to be found, the five members of Harris County Commissioners Court have spent more than $2.3 million in campaign cash the past two years on everything from charitable donations to clothing and rare books. In doing so, some may have run afoul of state laws designed to make their campaign spending transparent to their constituents, according to experts and a Houston Chronicle review of Texas Ethics Commission complaints since 1992.

Spending of campaign cash veiled

Harris County commissioners may be violating disclosure laws, documents show

By CHASE DAVIS
Copyright 2007 Houston Chronicle
Dec. 2, 2007

With their war chests swelling and challengers nowhere to be found, the five members of Harris County Commissioners Court have spent more than $2.3 million in campaign cash the past two years on everything from charitable donations to clothing and rare books.

In doing so, some may have run afoul of state laws designed to make their campaign spending transparent to their constituents, according to experts and a Houston Chronicle review of Texas Ethics Commission complaints since 1992.

In filings dating to January 2006, several commissioners, most notably Steve Radack and Jerry Eversole, disclosed some campaign expenses in ways similar to those that have led to fines for other Texas politicians. For example:

• Hundreds of campaign expenses, particularly Eversole's, were labeled with vague descriptions such as "public relations" and "misc."--sweeping designations that encompass everything from meals to purchases at boutique gift shops and typically offer little clues as to what was purchased or who benefited from those purchases.
  
  
• Dozens of reimbursements made to office workers from several commissioners' campaigns, most frequently Radack's, did not detail the purpose of those payments.
  
  
• Radack, commissioner of Precinct 3, omitted the addresses of hundreds of expense payees until mid-2006. He has begun including that information on recent filings, but his old reports still do not include addresses, which are required by law.
  

When Texas politicians report campaign expenses, they are expected to follow regulations intended to show the public who the money was given to and what goods or services were received in return.

The Texas Ethics Commission enforces those rules but only acts when it receives a sworn complaint. No Harris County commissioner has faced a substantiated complaint while in office in at least 15 years, according to records.

"The disclosure laws in Texas are built largely on transparency," said Tim Sorrells, deputy general counsel for the ethics commission. "They're designed so people can look at the reports and be able to ascertain what's going on."

Trip under investigation
Precinct 4 Commissioner Jerry Eversole, who has by far outspent the other commissioners over the past two years, has used vague classifications most often. Among the expenses he has labeled as "public relations" or "misc.": scores of trips to coffee shops and restaurants; several expenses to gunmaker Beretta USA Corp.; and $292 spent at Foot Locker.

Also among his "public relations" expenses is a $6,850 trip to Florida. District Attorney Chuck Rosenthal said earlier this week that his office is investigating the Florida trip.

The ethics commission has found in several cases that similarly obscure classifications violated state disclosure laws. A ruling against state Sen. Mario Gallegos in June, for example, found that descriptions such as "contract services," "services and expenses" and "services" were insufficiently clear. He faced $8,600 in fines for those and other violations.

Eversole, who said he has "never looked at one of my campaign reports," said he does not believe his filings have to specify the items purchased with campaign cash. Many expenditures fit under the rubric "public relations," he said, so that's how his bookkeepers classify them.

"When the law says we have to state what an expense went for, I'll follow the letter of the law," he said.

In addition to vague disclosure, several commissioners have reported reimbursements to their campaign workers without specifying what those repayments were for--omissions experts say could be used to hide the true purpose of campaign spending.

Radack has left out reimbursement details the most often, regularly repaying thousands of dollars to staff members and not describing what the money was used to buy.

"That's contrary to law and ought to be prohibited," said Craig McDonald, executive director of Austin-based Texans for Public Justice, which studies Texas campaigns. "Those (expenses) should be broken down and itemized."

Radack said he did not realize his reimbursements were reported incorrectly, calling the state's ethics laws and disclosure requirements confusing. "No one has ever pointed out that there's a problem doing it that way. It is certainly my intent to follow the law."

Like vague expense descriptions, the misreporting of staff reimbursements is not uncommon. The ethics commission has fined numerous other politicians for similar violations, including Houston City Council member Carol Alvarado. She was fined $500 for those and other violations in 2006.

Confusion in reporting
Eversole and Radack said their omissions were unintentional, and that they meant to comply with the law. Such oversights are common, particularly in local government, said Tom "Smitty" Smith, head of the Texas office of Public Citizen, a government watchdog group.

"A lot of times, they just don't keep track," he said. "Local officials just aren't as used to reporting as (state officials) might have been."

Critics say obscuring campaign expenses is just part of the political game, sometimes designed to keep opponents in the dark or to wrap potentially questionable expenses in broad and defensible justifications in case they are ever challenged.

Still, McDonald said disclosure statewide has been improving, in part due to the efforts of citizens who file complaints.

But, he added, "There are still a lot of gray areas where a citizen can't tell what the expenditures are for."