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Tourism and Gaming
Tourism-based sales tax break stirs debate
By Richard Velotta / Staff Writer

Outdoors superstore Cabela’s in Northern Nevada will open Nov. 16.
Photo by Richard Velotta

Depending on whom you talk to, Cabela's, a huge outdoors superstore in Verdi, west of Reno, will be one of the state's biggest tourist attractions or it will be one of the worst examples of corporate welfare ever sprung on the taxpayers of Northern Nevada.

The public fallout that has occurred as a result of Cabela's being deemed eligible to finance construction with STAR bonds — Sales Tax Revenue bonds — has convinced the Nevada Tourism Commission to take a close look at the evaluation criteria.

To be eligible for STAR bonds, the developers were required to prove to the Reno City Council and the Tourism Commission that a preponderance of customers would come from out of state. Based on the track record of Cabela's stores in other states and estimates of the project's revenue and number of visitors, Cabela's convinced a majority of council members and commission members that more than half the people visiting the store would come from beyond Nevada's borders.

As a result, Cabela's will be allowed to pay off some of its bond debt with revenue that would have been paid to the local government in the form of sales tax.

That's troublesome to government entities in Northern Nevada that rely on tax revenue to pay for government services.

In a recent Tourism Commission meeting, the board agreed to look at proposed STAR bond evaluation criteria to hold developers accountable to the projections they make.

The public is so agitated by the controversy that there are people that are ripping the company. There's even a Web site called "cabellyup.com" — actually www.nevadalabor.com/cabelas/cabellyup.html — calling attention to the matter.

Unions decided to call attention to the matter because they don't think Cabela's has paid prevailing wages to construction workers on the project.

The Reno Gazette-Journal reported last month that the Reno City Council approved $35 million in STAR bonds for Cabela's. Under the deal, 75 percent of Reno's 6 percent sales tax paid over the next 20 years would be used to retire the bonds.

Controversy aside, Cabela's is expected to open a beautiful store that's a perfect fit for Northern Nevada.

The 125,000-square-foot store will open its doors Nov. 16. Cabela's, which calls itself "the world's foremost outfitter," is dedicated to hunting, fishing and outdoor gear.

It's comparable to the Bass Pro Shop attached to the Silverton casino in Las Vegas.

In addition to rows and rows of outdoor retail products, the Reno Cabela's — the company's first Nevada store — will have wildlife dioramas, an aquarium filled with freshwater fish indigenous to the region, a bronze wildlife sculpture and stuffed and mounted mountain sheep of the world. There's also a two-story "conservation mountain" with running waterfalls and displays of wild game in their habitat.

It's these special store features that the company points to when distinguishing it as a tourist attraction. The displays are museum quality and the company says a customer's average stay has been estimated at 3 1/2 hours.

But that doesn't take away from the fact that it's still a commercial venture, open to public criticism from taxpayers.

The biggest beef critics have involves the "preponderance" question. Cabela's estimated that it would be able to deliver 3 million new out-of-state visitors to the Reno area in a year. It doesn't take a tourism expert to be skeptical of the claim — the Reno-Sparks Convention and Visitors Authority said that in all of 2006, 5.2 million tourists visited the area.

Another sore point among critics is that there's no relief for taxpayers if Cabela's 3 million-new-tourists estimate isn't reached.

"In order to score a gimme of millions in corporate welfare taxpayer dollars which would otherwise go to schools, parks, roads, police, fire and other local services, Cabela's has promised the City of Reno — with no apparent penalty for failure — that its new Verdi store west of town will draw 3 million visitors a year," the cabellyup Web site says. "Everybody's got a good fish story but this one looks like a world-class whopper."

Could Cabela's draw 3 million people? Considering that there's a Bass Pro Shop and a Sportsmans' Warehouse in Reno and one each at the foot of the Sierras in eastern California, it doesn't seem too plausible.

The reason the Tourism Commission jumped into the matter is that there's another STAR bonds project involving another sporting goods store under construction in Sparks.

RED Development's Legends at Sparks Marina project is far bigger than Cabela's and includes a casino resort, a host of restaurants as well as a Scheels outdoor store.

When the Nevada Tourism Commission heard that request, it was told the development would attract 3.2 million out-of-state visitors.

If it seems a little unusual that the commission began considering evaluation criteria for STAR bonds only last month, it's because commissioners are concerned that STAR bonds and tourism improvement districts like the ones approved for Cabela's and the Legends projects could get out of hand in the same way the "green building" tax incentives got away from state lawmakers earlier this year.

"It could be so abused and so overused," said Lt. Gov. Brian Krolicki, who chairs the Commission on Tourism. "One of the things we have to be careful about is giving an advantage to new retail over existing retail."

Commissioners are considering whether an independent third party should be hired to review a company's evaluation criteria and methodology. But then, the question would become who pays for that? One consideration has been to charge it to the applicant.

Commissioners are expected to look at it again in December when the commission meets at Caesars Palace for the annual Governor's Conference on Travel and Tourism.

In other tourism news

US Airways trims Pittsburgh: In the old days of US Airways, Philadelphia; Charlotte, N.C.; and Pittsburgh were major hubs. When the airline merged with America West, Phoenix and Las Vegas joined the party.

But last week, the Phoenix-based airline, which is McCarran International Airport's No. 2 carrier, announced cuts at Pittsburgh, which has one of the East Coast's most modern airports.

The company said in January, it would reduce mainline flying from 31 to 22 daily flights and regional flying on the US Airways Express commuter partner would be reduced from 77 to 46 daily flights.

The airline's flight crew base will close, forcing 500 pilots and flight attendants to start their trips from some other US Airways location. About 450 employees will be offered jobs elsewhere in the US Airways system.

People in Pittsburgh, of course, are crying foul, but the fact is that when mergers occur, somebody's going to lose. Just ask Reno, which had a cool little airline called Reno Air which flew between 1992 and 1999 before it was gobbled up by American Airlines. It didn't take long for American to gut most of the Reno Air schedule and redeploy the aircraft to other routes.

Thankfully for local US Airways employees, it wasn't Las Vegas that took the hit, although there are never any guarantees that it won't happen here someday. Incidentally, the two round trips between Las Vegas and Pittsburgh were among those that were spared in the cutback. The biggest hit occurred between Pittsburgh and Boston, with all three round trips scrapped.

Richard N. Velotta covers tourism for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at (702) 259-4061 or by e-mail at velotta@lasvegassun.com.

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