Colorado Springs City Council is set to offer up millions in tax incentives to retailer Scheels All Sports in a vote next week.
The North Dakota-based retailer would receive more than $16 million in tax incentives over 25 years under the plan being considered by the City Council.
Tax incentives for major corporations have been in the news recently since Amazon last week scrapped a plan to open a headquarters in New York after progressives criticized the plan for offering around $3 billion in tax breaks.
Scheels announced plans to open a second Colorado store in October 2018, but the public was made aware of the tax incentive plan only one day before its first reading on Feb. 12. Scheels opened a location in Johnstown in 2017.
A Colorado Springs city official claimed the store would create 545 permanent jobs and contribute $1.5 billion to the economy over the next 25 years. The store is estimated to have $60 million a year in sales, and the proposed building would be 220,000 square feet and cost $84 million to build.
Bob Cope, the city’s economic development officer, said in a presentation that the store would generate $2.1 million a year in tax revenue for the city, and that 40 to 50 percent of sales would come from outside of Colorado Springs.
The city council last week approved an ordinance to provide temporary city sales tax reductions from 2 percent to 1 percent in the specific location, a move to pave the way for a deal with Scheels in the coming weeks.
The ordinance allows the city council to offer a similar incentive to other qualifying companies. The approved ordinance means Scheels could collect a “public improvement fee” of 1 percent and keep the revenue, which is estimated to be $16.2 million over 25 years.
“My concern is that we’re putting these guys on an unfair competitive advantage because it’s a one-off,” said Councilman Andres Pico, District 6, who voted against the ordinance along with Councilman Bill Murray.
Murray criticized the deal’s lack of transparency in a Feb. 12 meeting. Murray said he requested documents and proof from Cope that 40 to 50 percent of sales would come from outside the city. Murray said Cope had yet to offer the documentation.
Other council members worried Scheels would open a store in a nearby location outside of Colorado Springs if tax incentives weren’t offered.
“One way or the other, this company is going to build this facility in our area and the question is whether we are going to incentivize it being in Colorado Springs or being outside of Colorado Springs. I like the control of having it in Colorado Springs,” Councilman David Geislinger, District 2, said.
City council will vote on the incentive agreement with Scheels on Feb. 26.
The Colorado Springs Chamber declined to comment on the incentive plan in an email and referred questions to Cope.
John Mozena, president of the Center for Economic Accountability, a non-profit that opposes economic development incentives, said there’s little evidence subsidies to attract businesses actually work.
“In an industry full of really bad ideas, subsidizing retailers at the local level stands out as being an especially dumb thing to do. Companies overwhelmingly make decisions on what to build, where to build it, who to hire, based on business factors. They look at where their customers are going to be, where their suppliers are, where are the potential employees that they’ll need, what’s the local infrastructure like,” he said. “And then having factored all of that in, they usually make a decision and then ask for a subsidy because they can, because they’re usually available.”
“These subsidies overwhelmingly don’t actually change business behavior and the entire reason for doing them is so that politicians can take credit for having created jobs even though the jobs are going to be created anyway,” Mozena added.
Mozena cited a research paper by Timothy J. Bartik of the W.E. Upjohn Institute for Employment Research, which found that “for at least 75 percent of incented firms, the firm would have made a similar decision location/expansion/retention decision without the incentive.”