PELTO: "Connecticut: The State of Modern Capitalism:"

Cross post from Jon Pelto's Wait What?

The concept that Connecticut taxpayers need to pay the world's biggest hedge fund $115 million dollars to stay in Connecticut is, understandably, a hard thing to truly understand.  They managed to pay their CEO $3.9 million last year and we have to cough up $115m (or about 3 percent of that amount), or they'll move?

But of course, Bridgewater is not the only private corporation that taxpayers are subsidizing.

In fact, while cuts are being made to vital services, more and more companies are demanding what is, in essence, a ransom.  If we taxpayers don't pay the ransom, they won't relocate to Connecticut, or even worse, they'll leave and take their jobs with them.

Take, for example, the situation that occurred two months ago, when on Sunday, July 8, 2012, more than 400 people joined Governor Dannel Malloy, Mayor Bill Finch, Johnny Morris, the founder of Bass Pro Shops and a "host of outdoors celebrities from the world of fishing, bullriding and NASCAR," for a press conference at Bridgeport's Steelpointe Harbor industrial site.

The event was to announce that Pro Bass will build a 150,000 square-foot store, a store that will serve as the anchor tenant of Bridgeport's plan to develop the now vacant Steelpointe area.

According to press reports, the agreement was the product of nearly a year of negotiations between the State, the City and Bass Pro Shops.  The full subsidy package remains vague, but according to the Malloy Administration, the project "is expected to generate at least 250-300 jobs."

Governor Malloy proudly proclaimed, "This is about jobs, and its great news for the City of Bridgeport...Bass Pro will be a draw for people from throughout the region, one that will help revive the local economy."

And Mayor Bill Finch added, "Today's announcement marks a historic moment for the City of Bridgeport and Steelpointe Harbor. Bass Pro Shops' investment in Bridgeport will create hundreds of jobs, generate new tax revenues and bring economic growth to the City. They are a proven brand that will generate interest and attract customers from throughout the region. Bass Pro Shops is committed to Bridgeport and we are proud to have them as a major anchor tenant at Steelpointe Harbor."

On behalf of the business community, Joe McGee, vice president of public policy with the Business Council of Fairfield County, and a former commissioner of the Connecticut Development Authority (the state agency responsible for attracting business to the state) said, "Bass Pro is not just a Bridgeport opportunity. It's a regional opportunity. A Bass Pro competitor - Cabela's - continues to enjoy significant success at the other end of the state in East Hartford several years after opening."

For the politicians and business leaders in attendance, the day could not have gone better.

There's more below the fold
So what about the Cabela's story:

Six years ago, almost to the day, a different Connecticut governor and a different major outdoor retailer held a similar press conference.  Governor M. Jodi Rell, the Mayor of East Hartford and the corporate leadership of United Technologies Corporation and Cabela's, held a press conference at East Hartford's Rentschler Field to announce an agreement that Cabela's would build a 200,000-square-foot "superstore," its first store in New England.

The onlookers were told that Cabela's is "a significant cash generator" and the new store at Rentschler would "benefit the Hartford area."

In Cabela's situation, the Connecticut Development Authority wooed Cabela's with a $10 million incentive package for the company and another $12 million to build roads and make other infrastructure improvements on the site.  To sweeten the deal, East Hartford's Town Council approved a ten-year tax abatement plan that would save Cabela's $6.7 million in property tax payments.

As with Bridgeport's Steelpointe Harbor site, The Rentschler Field plan was looking to Cabela's to be the anchor tenant for a $2 billion development that would include stores, hotels, offices and high-tech companies. A study conducted by the University of Connecticut predicted that the Rentschler Field project would create 6,000 to 8,000 jobs and generate $40 million in state revenue and $57 million in local taxes, every year.

It wasn't long before officials had to admit that, "The presence of Cabela's, considered a retail super magnet, hasn't been enough to persuade companies and developers to invest money at Rentschler."

By the beginning of 2009, East Hartford Mayor Melody Curry was quoted as saying "I think we were expecting to see more growth and development than we've seen so far."

Now, six years after the State of Connecticut and East Hartford "invested" nearly $32 million in public funds to attract Cabela's, there is no sign of the projected $40 million, a year, in state revenue, nor is East Hartford getting its $57 million.  In fact, after letting Cabela's keep nearly $7 million in what would have been their share of local property taxes, in about 2016, Cabela's will finally start paying East Hartford about $750,000 a year in real estate taxes.  At that rate the taxpayers of East Hartford won't even recoup their investment until 2026.

The question arises, if Connecticut's taxpayers got burned in 2006, why did Governor Malloy and Mayor Finch engage in the very same strategy in 2012?

Was the 2006 experience just bad luck?

The answer can be found in an investigative report conducted by the Franklin Center for Government and Public Integrity, a non-partisan, independent watch-dog group outside of Washington D.C.

The Franklin Center found that Bass Pro shops and Cabela's "received or are promised more than $2.2 billion from American taxpayers" over the past 15 years.

The study found that, "The stores are billed as job generators by both companies when they are fishing for development dollars. But the firms' economic benefits are minimal and costs to taxpayers are great."

The researchers noted, with some irony, that, "the amount of tax dollars that have been poured into these two companies would be enough to purchase every man, woman and child in the United States their own fishing pole."

The Franklin Center report, released in August, found that:

  • "Cabela's has received $551 million in local and state assistance during the past 15 years.
  • Bass Pro Shops received $1.3 billion in local and state assistance during the same period.
  • The federal government helped ensure liquidity for Cabela's' credit card division by providing $400 million in financing for the purchase of the company's securitized debt.
  • Both firms have a history of targeting rural or smaller suburban communities and negotiating deals that involve extensive borrowing on the part of the municipality to build a store.
  • In fact, Bass Pro Shops often pays comparably little toward the construction of its own stores. While this sometimes is the case with Cabela's, its development schemes tend to involve elaborate agreements that include massive outlays for public spectacles in the midst of the retail setting."

According to the report, Stacy Mitchell, author of Big Box Swindle, said that Cabela's and Bass Pro always seek to convince elected officials that the store will be a major tourist attraction.

And even as Connecticut and Bridgeport were signing on the dotted line, it turns out the Franklin Center had discovered that, at least Cabela's, has "begun to rethink its strategy, which has reaped it hundreds of millions of dollars in incentives."  According to a top Cabela's corporate official, "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."

And as to the claim that the new Bass Pro will lead to jobs for Bridgeport residents, an investigative report by Brian Lockhart, a Connecticut reporter for the Connecticut Post and Hearst newspapers, discovered that both the Malloy Administration and the Finch Administration knew, but did not reveal, that Bass Pro was facing allegations that, "the company since at least November 2005 has denied qualified blacks and Hispanics retail positions."

As the Federal Government's lead attorney wrote, "Our investigation lasted over two years...(there was) a pattern or practice of discrimination...going on at virtually all Bass Pro stores across the country."

So, despite knowing that the promised economic nirvana that would come with helping build a Cabela's in East Hartford never occurred and that Bass Pro was facing discrimination charges for refusing to hire blanks and Hispanics, Governor Malloy and Mayor Finch told the assembled on July 8th of this year, "Bass Pro Shops' investment in Bridgeport will create hundreds of jobs, generate new tax revenues and bring economic growth to the City."

And on top of that, we still don't know what Malloy and Finch promised Bass Pro in order to get them to say they'd build a new store in Bridgeport.

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