A Colorado Springs proposal to funnel millions of dollars to outdoor retailer Scheels All Sports has put a renewed focus on a familiar debate about the use of government incentives for private businesses.
The use of tax breaks and other incentives by cities and states to woo employers has been around for decades. Critics, however, complain incentives are little more than giveaways that allow government to pick corporate winners and losers.
In the case of Scheels, the Colorado Springs City Council last week approved creation of a funding tool that would a authorize $16.2 million tax incentive for the North Dakota-based retailer. In exchange, Scheels plans to build a mammoth, $84 million store in the busy InterQuest commercial area northeast of Interstate 25 and InterQuest Parkway on the Springs’ north side.
A City Council vote on whether to approve an agreement between the city and Scheels, which spells out details of the incentive, is scheduled Feb. 26.
With 27 stores in a dozen states, Scheels combines sales of outdoor clothing, footwear, hunting and fishing gear and sports equipment with Ferris wheels, aquariums, candy stores and other amenities. Customers come from several cities away and turn their shopping trips into family outings.
"It’s fancier, it’s newer, it’s prettier. Got you covered, guys," Murray told colleagues. "But it doesn’t even need this ‘incentivization’ to move into an area that has the demographics to make them incredibly profitable. This just adds to the profit and not to the benefit of what we need to run our city."
Their back-and-forth highlights the kind of disagreements over incentives that play out in cities such as Colorado Springs or even on the national stage for high-profile projects like Amazon’s second headquarters. Amazon abandoned plans last week for locating a portion of its new headquarters and 25,000 jobs in New York after politicians and activists complained that nearly $3 billion in promised tax breaks were too lucrative for the wealthy online retail giant.
Local and state governments often use incentives to woo so-called primary employers — businesses which attract wealth and investment to a community, but who sell their goods and services outside the area. An example is manufacturers which spend huge sums on equipping factories and buying machinery and seek to offset those hefty capital costs.
Colorado’s incentive toolbox includes income tax credits to promote job creation, attract aviation-related manufacturers and maintenance companies near airports and encourage businesses to locate in economically distressed areas, including portions of Colorado Springs and El Paso County. Incentives are performance-based and typically tied to the number of jobs added and how long employees are on a payroll.
In 2011, Lowe’s Home Improvement Warehouse sought and received a $250,000, five-year tax break — tied to its sales — in exchange for building a store at Citadel Crossing, southeast of Academy Boulevard and Galley Road in Colorado Springs. The city anted up willingly; the post-Great Recession economy needed a boost and city officials had identified Central and South Academy as deteriorating areas.