Friday, June 14, 2019

Scheels: Will annual sales be $60 million or a third that amount?

Posted By on Fri, Jun 14, 2019 at 5:28 PM

  • Courtesy City of Colorado Springs Power Point briefing
Back on February 11, city staff briefed City Council on a proposal to grant Scheels All Sports, a mega sports store that will feature a Ferris wheel, the biggest tax incentive for a retailer in the city's history.

The proposal called for giving Scheels $16.2 million over 25 years via reducing the city general fund sales tax by half, and allowing Scheels to collect 1 percent on sales for a Public Improvement Fee and pocket that money. Read the details here.

In that presentation, city Economic Development Officer Bob Cope noted Scheels, to be located in the Interquest Business Improvement District in north Colorado Springs, would bring the city $53 million in net new revenue over 25 years.

He also presented a slide that showed several economic data points, including that the retailer would rack up $60 million in estimated annual sales.

But now, it appears that Scheels may only bring in around $20 million in annual sales — one-third of the quote given to Council — based on the retailer's own estimates. Initially a higher estimate wowed Council, making an incentive package look like a good deal. This lower estimate, however, comes at a time when the Scheels developer is looking to back out of an obligation that grows with its profits.

click to enlarge One slide from a Power Point presentation to City Council on Feb. 11, 2019. - COURTESY CITY OF COLORADO SPRINGS
  • Courtesy city of Colorado Springs
  • One slide from a Power Point presentation to City Council on Feb. 11, 2019.

Back on February 26, Council saw the package as a good deal and approved it on a vote of 7-2 with Councilors Andy Pico and Bill Murray dissenting.

Clicking forward to May 28, Council learned that Nor'wood Development Group, which owns the land where Scheels will be built, requested that Council exclude Scheels from the Interquest North Business Improvement District (BID), which is controlled by Nor'wood through board seats.

Council wasn't told, however, that at least two businesses located in the BID opposed the exclusion, because that would mean one less business to contribute toward paying the debt incurred to install public infrastructure, such as sidewalks. Read about that request here. The BID is supported by a 51-mill property tax and by a Public Improvement Fee of 1.25 percent on sales.

Although Council was slated to vote on the exclusion request on June 11, Nor'wood requested a delay until June 25 after the Independent reported on the opposition.

In support of the exclusion, Nor'wood submitted several documents, among them this one-pager showing tax computations based on "Scheel's [sic] Estimates." (AV is assessed value; PIF is Public Improvement Fee charged by the BID, and Gross PPTx revenue is property tax revenue for the BID.)
click to enlarge screen_shot_2019-06-14_at_3.41.04_pm.png

Notice the $20.4 million annual sales figure.

We asked Cope about that. In an email, Cope says he's "very comfortable" with the city's $60 million estimate, and notes he hadn't seen the BID document cited above until the Indy provided it to him.

"It is my understanding that the $20.4 million annual sales projection was an extremely conservative estimate for the purposes of that particular document," Cope writes.

It's impossible to know why Nor'wood chose such an estimate for Scheels' annual sales figure, because Nor'wood president Chris Jenkins hasn't gotten back in response to two emails from the Indy over the last nine days.

But based on Nor'wood's computation, other members of the BID would lose out on $448,800 in revenue ($193,800 in property tax and $255,000 in PIF tax) each year to help pay off the BID's $11.3 million debt.

If the PIF total is computed based on the $60 million figure, it would amount to $750,000, bringing the total not collected by the BID from Scheels to $943,800 a year if the retailer is excluded from the BID.

Councilor Murray says this in an email regarding the Scheels situation:

The city over estimates its value to the city and caveats it with the threat they would move to Fountain, and the developer underestimates in order to minimize its effect on the BID (which everyone else would be required to pay in the district).
(1) the city’s estimates came directly from Scheels (this included over 50% out of area sales).
(2) Jenkins’ figures are being used to sway Council, in favor, of a reduction in Scheels' exposure to the Bid.
(3) The Council’s conundrum is that we have no method of verifying any of these figures but can only trust those given by the various parties.
(4) It's rare that we get to compare and contrast. In this case, they are asking for two separate incentive packages, which demonstrated the need to vary the figures to support each position. 

The Indy also reached out to Scheels to clarify what figure is most accurate and haven't heard back. We'll update if and when we hear something.

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