Public records in Broken Arrow, Okla., are shedding some light on the operations of privately held Bass Pro Shops.
For one, the numbers recently dug up by Tulsa World reveal that Bass Pro’s sales in the suburban Tulsa store have not followed economic trends. The outdoor gear retailer has grown sales there in three of the last four years, according to Tulsa World’s coverage of Bass Pro’s lease payments to Broken Arrow. Apparently, even during widespread economic hardships, fishermen, hunters, campers and golfers still spend on their hobbies. Maybe, it’s because of the recession they keep spending – as a form of an outlet.
City officials in Broken Arrow need to see the hobby spending as they pay down a controversial $24 million loan that financed construction of the $20 million Bass Pro store, which opened in late 2005, and road infrastructure in the Stone Wood Hills development it anchors. Under terms of the development agreement, Springfield-based Bass Pro remits to the city 2 percent of annual store sales and cuts another check, if necessary, to cover the balance. According to Tulsa World and city records, Bass Pro has met its $850,000 lease payment each year since 2006 – but it has had to make balloon payments of at least $100,000 annually to cover the rent.
For instance, in 2010, the store’s highest-grossing sales year, Bass Pro paid Broken Arrow $747,247, or 2 percent of store sales, plus $102,753 to cover the balance. That means Bass Pro rang up nearly $37.5 million in 2010 sales in Broken Arrow. Extrapolating that sales figure across its 57 stores, Bass Pro would tally more than $2.1 billion in annual sales. Forbes data, however, would suggest the Broken Arrow store is on the lower to middle end of revenue generators for Bass Pro. In the magazine’s list of the largest private companies in America, Forbes estimated 2010 sales of $3.65 billion, ranking Bass Pro No. 96 on 7 percent annual revenue growth. Forbes also included revenues from other Bass Pro holdings Tracker Marine and Big Cedar Lodge.
At the time the deal was structured with Broken Arrow and developer Phil Roland, Bass Pro’s store was expected to generate between $30 million and $50 million in annual sales. The city’s annual debt obligation was roughly $1.95 million.
Such is the Bass Pro business model sent to municipalities and developers around the country during the last decade: “Build it and Bass Pro will come.”
While city officials in Broken Arrow are shouldering the burden of the store’s construction loan, they say they’re in a comfortable position and expect the 20-year loan to be paid off in 15 years. They say the outdoor store is partly responsible for spurring additional developments – and new sales taxes – pointing to a dozen restaurants, two hotels, a shopping center, cinema and Target.
Taxpayers have viewed the deal differently, filing suit against the city asserting officials violated Oklahoma’s open meetings law and were “duped” into paying the construction costs. In 2006, a Tulsa, Okla., judge dismissed the suit, ruling the deal was legal and in good faith.
As its store count has surged in recent years to now approach 60, Bass Pro has structured with communities and developers similar front-loaded lease models – an average of $29 million in taxpayer subsidies per project, according to a critical report by N.Y.-based Public Accountability Initiative.
The weight of such a deal was too heavy for the city of Leeds, Ala., which last week restructured its debt related to the development of a 150,000-square-foot Bass Pro store that opened in 2008.
The move releases the city from a large part of $24.3 million in general obligation debt, according to The Birmingham News. Leeds Mayor Eric Patterson called the original Bass Pro deal “a monumental burden that would prevent future development for this city for years, maybe decades.”
Under the new agreement, Birmingham News reported that Regions Bank and J.P. Morgan will guarantee Bass Pro’s payment of the bond debt.
With many of these deals signed in the last five years, we’re now at a point to see just how well they float. The question is whether other cities will squirm out like Leeds or hold the line like Broken Arrow.
Springfield Business Journal Editor Eric Olson can be reached at eolson@sbj.net.[[In-content Ad]]
