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Roundup 12-7-2012

December 7, 2012

Bass Pro Shops – Punt

On Wednesday, less than a week after a new possible deal to bring a Bass Pro Shops store to Brandon was announced, the County Commission took up the issue . . . and then punted.

Bass Pro Shops will have to wait a little bit longer before getting a shot at landing a new store in Brandon.

After a lengthy and contentious discussion, Hillsborough County commissioners voted 6-1 late Wednesday afternoon to postpone until Feb. 6 the issue of $8.25 million for road improvements at a development anchored by the outdoors retailer. Commissioner Mark Sharpe voted against revisiting the plan.

While we would have preferred they just reject the deal, we will take a punt for now.  Interestingly and unusually, there was a decent amount of open opposition to the plan:

Earlier Wednesday, a couple dozen owners and employees of some sporting goods and other local businesses urged commissioners to reject the roads package.

* * *

Many of the speakers told commissioners that it was particularly galling to them that their government was considering using tax dollars to subsidize a competing out-of-town business.

And

The chance of quick passage was hurt by more than two dozen opponents, many small business owners, who showed up at the commission’s morning session. The opponents said it was unfair to use tax money to help a large, well-heeled competitor that would hurt their businesses.

Commissioners said they had heard the same concerns from small business people around their districts and in phone calls.

Also see here and here.

The delay and discussion has allowed us to present and address the arguments put forward in favor of paying taxpayer money to draw this retail establishment.

– 1. Return on investment

The most compelling, at least at first, argument for the plan is as follows:

The county’s $8.25 million investment would be used to build and improve roads around the proposed development between Interstate 75 and Falkenburg Road. Hagan insisted the money would not be a subsidy to Bass; it would be an investment in needed infrastructure that would bring a quantifiable return on investment.

And

A county financial analysis of the project suggests that Hillsborough County would see a positive return on its money starting in 2019, even after the $8.25 million subsidy. Between 2013 and 2026, the project would create new revenue for Hillsborough County currently worth about $10.5 million, when adjusted for the cost of capital.

At present, due to exemptions, the tax on the site is $750.

We get this argument.  Basically, by paying $8.25 million in subsidies to the developer, over a few years, the County expects tax revenue to cover the subsidy cost and then keep paying.  This assumes the entire project is built out and successful, but we can go with that assumption for now.

This argument also assumes that the development will not happen unless the $8.25 million in subsidies is provided.  It assumes that without the subsidy, the developer will not go forward and build on presently unproductive land a large, profitable development with a very secure anchor tenant.  Maybe, but maybe not.

Bass Pro Shops announced the intention to build the store on their website even before the County Commission meeting. (We’ll overlook the “Greater Brandon” thing) They even put it on their map. Of course, this makes sense.  Bass Pro Shops is said to not be getting the money directly (though “. . . Bass Pro Shops will own its building under the new proposed deal, where it before had proposed leasing from the developer.” So Bass Pro Shops likely will be getting an offset either directly or through the price it pays the developer for the building.).  As presented, the County money is profit for the developer.

This argument assumes that the Tampa Bay area – the 14th largest media market in the United States – cannot attract major, fancy retail establishments without subsidies. However, Ikea shows this to not be the case. (Yes, it was a brownfield but got no incentives/subsidies and was not a specific target of a plan.   Bass Pro Shops could always go to a brownfield.). Ikea paid to fix up some roads and received no incentives.

The reality is that spending nothing and getting a return is better than spending $8.25 million and getting the same amount of money back.  Moreover, that $8.25 million could be spent in the meantime on other issues, including attracting high paying jobs or international flights that will only enhance the market and make it more attractive to retailers, without paying them or their developers.  (Don’t you think the Austin $5-6 million tax rebate to Apple will bring a better return on investment?)

As to the argument that the County was getting road improvements for its money, first, it should get the improvements without spending the money.  Second, these roads were not going to be fixed up anytime soon, so someone else is losing out.

Finally, as we have noted before, this money could be used elsewhere to get a better return on investment.  This money could be used to attract high paying jobs that have a much greater effect on the economy and tax base. (For instance, see here) Those jobs will make it more likely that retailers will come to the area without subsidy.

The return on investment of the proposed subsidy should be compared to using that amount elsewhere.  This has not been done.  There may be a return, but it is the best return?  We doubt it.

– 2. Destination retail

The second argument is that Bass Pro Shops is a “destination retail” store that attracts people from far and wide, leading them to spend vast amounts of money in the area.

“I think it’s a rare opportunity for our community to be able to establish a destination and entertainment complex that creates an immediate economic generator,” said commission Chairman Ken Hagan, who helped negotiate the deal.

Bass Pro Shops of Springfield, Mo., is known for its massive stores that sometimes include indoor fishing ponds for testing poles and reels. The chain considers itself a “destination retailer” that can draw customers from several surrounding counties.

We are dubious of the “destination” idea.  First, the store is not likely to draw people from that far away. There are nine Bass Pro Shops already in Florida – with one in Orlando and one in Ft. Myers. According to Google Maps, the Orlando store is 1 hour and 6 minutes drive from the proposed location, and the Ft. Myers store is a 2 hours and 1 minute drive. From Gainesville, the Orlando store is 1 hour and 44 minutes, while the proposed Tampa store is 1 hour 55 minutes. (We also wonder what Orlando gave Bass Pro Shops to open there.)

In other words, for most people in central Florida, there will be a Bass Pro Shop within and hour and a half from their house. (Ikea realized this) For some others, it will be about 2 hours drive – that is a day trip (as any Gator football fan can tell you).  The draw may be from surrounding counties, but it is still basically from the Tampa Bay area media market, like any other retailer. (We know people who have gone to Sarasota just to go to Trader Joe’s.  Is that also a destination retailer?) The other major markets around us are closer to other stores.

As Bass Pro’s major competitor, Cabela’s, has found:

Cabela’s’ own data indicates the customer base of its stores primarily is people living in the communities where the stores are located.

When the issue came up in South Carolina, the Governor (who had other issues, but was right on this) said:

. . . Cabela’s officials made claims of the store becoming a major tourist draw that defied credulity, he says.

* * *

“It was completely unrealistic given the number of existing stores that are out there,” Sanford says.

Exactly.

We are also dubious that Bass Pro Shops will bring that much business to nearby businesses. To see an example, we don’t have to look that far.  Just look at our own Ikea.  About Ikea, we were told this:

At the store’s groundbreaking ceremony in 2008, Mayor Pam Iorio said, “I can’t help but think that a sizable group of people who spend the day shopping at Ikea will also then want to experience the wonders of our great historical district.” 

But:

While the Swedish superstore brought jobs and had a noticeable social impact on Tampa, it hasn’t generated the business growth that many expected.

It didn’t flood surrounding Ybor City cigar shops and Greek, Italian and Latin restaurants with spillover business, as the mayor and others had hoped.

* * *

But some had hoped the store would help turn the nighttime entertainment district into a daytime destination by attracting new businesses and bringing in shoppers from all over the region.

Instead, Ikea has become a destination all by itself.

Not surprising.  That is the point of a superstore – to keep customers in the store. Bass Pro Shops would be essentially the same, though maybe some people will eat at a local restaurant.

The entire “destination” concept does not seem relevant.

– 3. Don’t Put Your Eggs in One Basket

Like the first argument, the final argument also has some initial logic:

Some of those who spoke also echoed comments reported earlier by the Tampa Bay Business Journal, questioning the use of tax dollars for incentives for retail projects, as opposed to technology and other targeted industries.

“While biotechnology and high tech are targeted industries, you never want to put all your eggs in one basket,” Merrill said.

As a general statement, we agree.

However, in this context, the comment missed the point.  The reality is that the proposed deal is exactly the type of deal where the County has put its eggs for decades – absolving developers of paying for transportation upgrades while they profit form sprawling development that creates low wage, low return jobs and focusing on real estate rather than building the quality of the workforce and diverse economy. Our problem is a lack of high paying jobs.

There has been little support (a little but it is rare) to create an urban environment and proper transportation that attracts high paying jobs, as our competitors have.  If the County really believes that we should not put all our eggs in one basket, it should work to diversify the economy and leave behind the failed policy of the past. Giving $8.25 million to a developer is just leaving our eggs in same old, ineffective basket.

As we have noted our, area is the 14th largest media market in the United States (We prefer that number for this analysis because it more accurately reflects retail drawing power).  Bass Pro Shops wants to be here.  If this developer can’t build the project profitably without taxpayer money, another one can – probably quite nearby.

We understand that not everyone is a computer programmer or scientist, and we think the “targeted industries” are too targeted – we’ll take other types of high paying jobs. But those are kind of high paying jobs that will create the greatest number of new sales and new jobs in construction, retail, and services.  They will provide customers for new homes, new stores, and new businesses. And they will draw other high paying jobs.  Moreover, the facilities used by companies with high paying jobs also require other services that add other jobs. That is real return on investment and where taxpayer money should go.

– 4. Conclusion

We conclude that the arguments for the deal do not support using taxpayer money in this case.  We would love to see Bass Pro Shops in this area, but we are not willing to subsidize them or the developer.  And the reality is, while we would love to have them here, we can live without them.  (We would also be happy with an anti-subsidy Gander Mountain or a Cabela’s, which is apparently moving away from subsidies. ) As Cabela’s said regarding their rethink of incentives:

“We have come to the conclusion that the places that are most likely to offer incentives are the places we are least likely to want to build,” Castor says. “People want to come to your stores for excellent customer service and quality merchandise. The taxidermy displays may attract them the first couple times but they will keep coming back for the other.”

This issue highlights the question of what the Tampa Bay area really wants to be going forward – is it just a really big, insecure, “small town” or a modern city that is working to be on the global stage?

For all those reasons, the County Commission should reject the deal.

What Is a Start-Up City?

Normally we would put an item like this at the end of the Roundup, but given the Bass Pro Shops item, we felt it belonged here.

There was an interesting article in the Guardian about Berlin, one of the top 20 start-up cities.   As a start-up city, it was relatively poor but still has success.  Why?

Berlin is poor, but sexy – Mayor Klaus Wowereit’s decade-old slogan still describes Germany’s capital very well. Unemployment is high compared with other German cities and businessmen in proper suits and ties are a rare sight. But something in Berlin’s attitude towards business is changing. Startups are sprouting all over the capital.

Some people are already speaking of Berlin as the Silicon Valley of Europe.

What conditions led to success in becoming a start-up center? Here are a few items from the article:

“Berlin is punk meeting tech,” says Swedish-born Eric Wahlforss, one of the founders of SoundCloud. According to Wahlforss, Berlin is creative, cheap and full of talented people. And the talents are starting to cluster.

What could be more “punk meeting tech” than the business and political culture of the Tampa Bay area?  When people think Tampa Bay they always think “punk meets tech.”

With an eye to the bohemian lifestyle of urban web workers, Factory plans to offer open space offices, restaurants, a gym, a barbecue pit, basketball court and roof garden with auditorium.

Two more words that are always applied to the Tampa Bay area – bohemian and urban. . .

These are qualities that attract young professionals and entrepreneurs and the creative class (and that we lack). Having these qualities leads to another condition for being a start-up city:

“Berlin is like a magnet for talented people. If you can not find people from Berlin, you often find people who are willing to move to Berlin. . .”

If this area is serious about changing the economy, it takes more than just incentives.  It has to change its culture.  At least we have this going for us:

One major advantage of Berlin is the low cost of living.

At least there is that (most of the time, unless you need home owners insurance and transportation).

Read the article and wonder why we are spending time talking about giving developers millions for a retail outlet.  There is much work to do.

CAMLS

The Tribune ran an interesting article on CAMLS in downtown Tampa.  We have refrained from discussing this for a variety of reasons, but the Tribune had one thing relevant here. The reality is that, while it is a fine facility, local leaders have overhyped it (like so much else):

One of the biggest challenges CAMLS may face is competition for dollars. Phrampus said the number of universities and hospital groups opening high-tech robotics and surgical simulation centers is expanding “prolifically.”

In Celebration, the Florida Hospital chain has opened a new 50,000-square-foot facility called the Nicholson Center. Other centers can be found at Vanderbilt University, the University of Toronto and McGill University in Canada and in Taiwan and Singapore, Phrampus said. Sutherland knows of other competitors in Miami, Chicago and Las Vegas.

One thing CAMLS has going for it is sheer size, Phrampus said. It’s bigger than just about every other competitor out there and is the talk of the close-knit surgical simulation world.

We have toured the facility and, from the beginning, it was obvious that competitors will be built.

Additionally, look at the location of the competitors.  They are all tourist draws or major urban areas.  To draw people to CAMLS, the area around it needs not just a nice facility but to be a fully developed city.  Doctors have a choice of where to train – they can do it in Miami, Chicago, Vegas, Orlando or Tampa.  During the CAMLS tour they even point out that doctors like to bring their families on training trips. The families need something to do.  Like attracting other high paying jobs and innovative people, this is just another instance where our poor development patterns and willingness to settle lead to a competitive disadvantage. (see item above)

As we said, it is a fine facility, but it will only come close to reaching its full potential if it is aggressively pushed and surrounded by quality.  There can be no settling or complacency.

Encore Moves Forward

On the bright side, after a delay, the Encore development in downtown Tampa is moving forward.

Plans to transform a blighted neighborhood on the outskirts of downtown took a step forward Tuesday, as housing and city officials broke ground on The Trio, a 141-unit apartment complex.

Trio
From the Encore website – click on picture for website

Not featured in this rendering is the big surface parking lot you can see in this video.   Hopefully, this has been removed in a redesign. (ULI noted surface lots as a problem to be removed with development.  See here @ pg 24, 30. If the City did nothing in this case, it raises questions about whether it will ignore other planning, too).

And, on Dec. 18, there will be a groundbreaking for The Reed, a second senior apartment building.

The Reed
From the Encore website – click on picture for webpage

As we said a while ago, we have some issues with what we have seen of the design of this project, but overall, we like it.  We are happy that two more buildings are moving forward. Even better:

Within 60 days, Ryans hopes to announce construction plans for a grocery store.

The grocery store can only help downtown become more urban (unless it has a huge parking lot facing the street).

We hope this development fills out completely – though we would like it to have more density, and we do not like the surface parking.  That being said, overall, the project will add some needed life downtown.  We hope the City learns from any mistakes, in planning or design, in this project when they are working on West Tampa.

TIA

The Tribune had an interesting write up on the TIA Airport Director. It does not really break new ground, but is worth a read.  One thing pointed out is the Director’s efforts to bring new international service to TIA, with one inaccuracy:

Perhaps no initiative will shine the spotlight more brightly on Lopano than his efforts to increase the number of international flights. Previous airport director Louis Miller, who opposed most incentives to recruit flights, did not add as many international routes as some in the community and on the new board wanted, which created tension between Miller and the board.

A more accurate statement would say that at one point TIA had flights to London, Amsterdam, Frankfurt, and under the previous director only the London flights did not get cancelled.  However, that is the past.

Now we have a Director devoted to bringing more international flights. To that end, we were happy to read that while on a trade mission to Colombia, the Mayor of Tampa took some time to meet with Avianca http://www.bizjournals.com/tampabay/blog/morning-edition/2012/12/colombia-dispatches-mayor-buckhorn.html?ana=e_tbay_rdup&s=newsletter&ed=2012-12-05  (which is part of the Avianca/TACA group – one of the major airline systems in Latin America, the other being LATAM).

Buckhorn’s team also visited Avianca Airlines to start discussions about establishing daily flights from Tampa to Colombia. “It’s a critical issue for Tampa if we are to become the gateway to the Americas,” he said.

This month, Avianca said it is expanding its fleet, adding three 787 Dreamliners to an existing order from Boeing, bringing the airline’s total 787 order count to 15 Dreamliners, which includes the 12 787s ordered in 2007, the website Breaking Travel News reported. The new order is valued at approximately $620 million.

Among the team are:

THEDC president Rick Homans is accompanying the mayor, as are representatives of the Port of Tampa, Tampa International Airport and the University of South Florida’s Small Business Development Center.

Apparently the County Commission is not so interested in developing international trade.

In any event, we hope for success.

TIA-HART

In another idea the airport director has proposed:

In his never-ending quest to boost Tampa International Airport, CEO Joe Lopano has proposed an idea to make things easier for business travelers: How about creating a nonstop express bus route from the airport straight to downtown Tampa?

* * *

The bus route would be “just another option for our citizens,” Lopano said. “I think we should take a look at all other opportunities.

“This is not a new idea. This happens every day in other cities.”

Sounds reasonable.  Of course, it involves HART so:

But which entity — the airport or HART — would pay for the bus route? Both face institutional hurdles.

Federal guidelines determine what the airport can spend money on. It’s unclear if the airport could fund a bus route. HART funds bus routes based on ridership and demand. How much demand would there be for a downtown-airport bus?

There’s already a bus that connects the airport to downtown — but it’s not a ride visitors are likely to enjoy. It’s a regular route that starts in Westchase and has repeated stops, including the airport and downtown, along the way.

In other words, HART does not know potential ridership.  Apparently they never thought to check, even though the MPO has proposed BRT from downtown to TIA. (We hope the MPO figured out how many trips there are between TIA and downtown). At least HART is open to the idea:

“We’re willing to work with any one of our partners to offer these types of services,” Mejia said. “We just have to develop a funding strategy to do so.”

Then develop a funding strategy.  This year, HART gave back “$9 million in tax money to Hillsborough County. . .”  That was for capital improvements, but money is fungible.  Work it out.

List of the Week

Sorry, but we did not find a good list this week.

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