Outdoor retailer expects to open store in 2015

It was only 10 years ago that the city of Round Rock could count on tax dollars from the sale of Dell computers to fund the majority of the city's budget. The city's leadership, however, recognized the risk of dependency on the Round Rock–based company and has been aggressively campaigning in recent years to diversify the city's revenue streams.

On Aug. 22, the city's government and economic development officials believe they took a major step toward tapping into new income sources when City Council approved an incentive agreement with Bass Pro Shops to build a 104,000-square-foot Outdoor World store. The retailer is expected to open in 2015 and will add another significant tax generator to the city's rapidly developing University Boulevard corridor, an area that already includes IKEA and the Round Rock Premium Outlets and is scheduled to add an H-E-B Plus and Central Texas' first In-N-Out Burger before the end of 2013.

"I think this clarifies that Round Rock is the destination retail location for Central Texas," said Ben White, vice president of economic development for the Round Rock Chamber of Commerce/Economic Development Partnership. "There is nowhere in Austin that has an IKEA, an outlet mall and a Bass Pro Shops all in one—we are the only one."

From a fiscal perspective, the new Bass Pro Shops location is expected to garner nearly $400 million in taxable sales during its first decade of operation—both within the store and at surrounding businesses. The net benefit for Round Rock, according to the city, could total more than $5 million during the same period.

"We've obviously had a concerted effort to focus on what you would call destination retailers ... to diversify the sales tax revenue and all of the tax revenue in the city," Round Rock Mayor Alan McGraw said. "That is why you saw a deal done with IKEA, that's why you saw a deal with the outlet mall and that is why you see a deal with Bass Pro, because those are the destination retailers that actually import sales tax dollars into the community from outside of it."

The right catch

Securing a Bass Pro Shops location has been high on the wish list of Round Rock's leaders for at least a decade. Along with Cabela's, Bass Pro Shops is one of the largest and most successful outdoor sports and hunting supply retailers in the nation. Its stores commonly encompass hundreds of thousands of square feet, housing boat showrooms, fish aquariums, wildlife exhibits, shooting ranges, restaurants and even bowling alleys. The stores, in other words, are designed to offer something for avid hunters and fishers and their families as well.

"This concept has proved to be wildly successful and popular," said Katie Mitchell, Bass Pro Shops communications manager, regarding the retailer's expansion beyond being soley a hunting and fishing supply outfitter. "It is a really fun entity."

Mitchell said Bass Pro Shops is undergoing an aggressive expansion phase to identify and build stores in underserved areas with concentrations of outdoor enthusiasts.

"We will look at areas, and we are approached by areas constantly," she said. "Location is everything, and this particular site is hopping. [Round Rock] is booming—it has incredible growth."

The city of Grapevine, located approximately midway between Dallas and Fort Worth, has featured a Bass Pro Shops location since 1998. Grapevine Economic Development Manager Dan Truex said the city's initial investment of $3 million in incentives used to attract Bass Pro Shops has been repaid easily by the revenue, tourism and development the store has spurred.

"I think a lot of cachet goes with having them in the community," Truex said. "They draw a lot of tourists. We love having them here."

Weighing incentives

Approximately 10 years ago, prior to the development of the Round Rock Premium Outlets and IKEA, the city of Round Rock entered into preliminary discussions with Bass Pro Shops about developing a location near the I-35 and University Boulevard intersection, McGraw said. The talks stalled, he said, when the discussion turned to incentives.

"The deals that [Bass Pro Shops] have been successful with on an incentive basis have been very, very rich," McGraw said. "Their business model has been, 'We are going to be the first ones here and there will be a bunch of development to follow us, so we need a bunch of incentives to come in.'"

Mitchell declined to comment on Bass Pro Shops' negotiations or incentive discussions with Round Rock or any other city. She did confirm, however, that the company's retail locations often attract further development into the same areas.

The latest incarnation of discussions between Bass Pro Shops and Round Rock were the result of interests expressed by Simon Property Group, developer of the Round Rock Premium Outlets. Although Simon representatives declined to comment regarding the discussions involved to reach the agreement, city and Bass Pro Shops representatives confirmed Simon will act as the developer for the site.

According to White, Simon representatives approached Bass Pro Shops and the city in 2012 about working out a deal to build a store adjacent to the outlet mall—albeit with far less incentives than Bass had previously sought. A handshake agreement was made at a retailers convention in Las Vegas in May, all but ensuring Round Rock would soon host the first Bass Pro Shops location in the Austin area.

"I can honestly tell you this was the most productive conference I ever attended," White said. "I was there for 48 hours and came back with this."

'It is all plus'

The deal the city signed with Bass Pro Shops is modeled after the performance agreements it previously established with IKEA and the Premium Outlets.

Essentially, the city agreed to refund Bass Pro Shops half of the 2 percent local sales tax rate collected at the store for 10 years or when the total reaches $4 million, whichever comes first. The deal also calls for Round Rock to fund up to $500,000 in utility infrastructure improvements at the future site—the majority of which the city believes has already been completed.

In exchange, Bass Pro Shops agreed to spend a minimum of $20 million on its new store and hire at least 175 employees.

The city will begin receiving property taxes from the store immediately, and at the end of the agreement it will be entitled to all of the local sales tax revenue collected.

"We are not putting any cash out. It was really a slam dunk," White said. "The payback [to Bass Pro Shops] is zero—it is all plus."

The closest comparable retailer to the Bass Pro Shops store planned for Round Rock is a 185,000-square-foot Cabela's located in Buda. The deal Buda officials agreed to, however, included a significantly larger amount of cash and future earnings than the deal Round Rock secured.

According to a 2004 economic development deal, Buda officials agreed to provide Cabela's with $36 million in borrowed financing to help build the store. According to the agreement, the city also designated nearly 35,000 square feet of the store's taxidermied wildlife exhibits as "public museum facilities." By adding the museum tag to the property, the city essentially eliminated one-fifth of Cabela's property tax burden—a deal that is expected to save Cabela's $4 million over the 25-year life of the deal. In addition, the city, Hays County and the Buda Economic Development Corp. all agreed to refund significant portions of the sales taxes collected at the store to Cabela's.

As perhaps the most publicly recognizable aspect of the deal, the city promised to provide Cabela's with free advertising—an agreement that resulted in the city adding the name "Cabela's" to its water tower.

Buda Mayor Todd Ruge said the store's presence has helped draw additional retailers and expand the city's tax base. Ruge, however, declined to say whether the payback the city has received was worth the incentives it surrendered to land Cabela's.

"I will say this: When the deal was struck there was a job component to it where [Cabela's] had to employ [225] people for [the first five] years, and they never once met that mark," he said.

As evident by their failure to reach a deal with Bass Pro Shops years earlier, Round Rock officials said they were simply unwilling to go the lengths that Buda was in order to draw Bass Pro Shops, or any other retailer.

"Historically, we are not in the incentive game to the level some other cities are," Round Rock City Manager Steve Norwood said. "Part of it is we have a great story to tell, and the retailers know it. I think they want to be here because they know they are going to be successful here. So I think it put us in a stronger position on those negotiations."

Traffic concerns

Round Rock's Transportation Department is rapidly trying to keep pace with all of the new developments along the University Boulevard corridor. Already on tap to open in 2013 within the same area as Bass Pro Shops is a new H-E-B Plus and the first In-N-Out Burger location in Central Texas. Farther east on University Boulevard, new housing developments continue to spring up, and talks are also underway to expand the Austin Community College and Texas State University campuses.

It all adds up to a logistical challenge for an area already overburdened by traffic, Round Rock Transportation Director Gary Hudder said.

"We are all excited [Bass Pro Shops] is coming, but of course we are not ignorant to the fact that it has its own challenges, and we are already working on those," Hudder said. "Right now we are in the 30,000–35,000 [range of] cars per day in the area. ... We think that could as much as double with all of this development."

To meet the challenge, the city has enlisted the help of the Texas Department of Transportation, the city of Georgetown and Williamson County to help fund improvements not only to University Boulevard, but also its arterial connectors.

"When we rolled out the initial five-year [master transportation] plan two years ago, University [Boulevard] wasn't even talked about—it wasn't even on the list," Hudder said. "Now, not only is it on the list, but it has just jumped up to the top."