By MICHELE HOLTKAMP-FRYE, Daily Journal of Johnson County staff writer
An outdoor retailer that was lured to Greenwood with an $18 million incentive has halted its massive project indefinitely and not yet closed on the financial deal with the city.
That means Greenwood has no legal obligation to Cabela's, the megastore retailer that had been preparing property at County Line Road and Interstate 65 for what the company calls an outdoor retail destination.
In response to a downturn in the economy, Cabela's said it is backing off a plan to build seven new stores across the United States, including one in Greenwood, this year.
What Cabela's change in plans means for other developers or businesses invested in the eastside property isn't clear.
The $30 million to $50 million investment was hailed as a tourist destination and a way to boost the slow-to-develop interchange. Since the announcement this summer, an indoor water park and at least five hotels have signed on to build in the area.
Officials with Splash Universe, the indoor water park, could not be reached Friday to explain how Cabela's announcement would affect their plans.
In January, New Albany-based Lopp Properties reached a multimillion-dollar deal to develop the other properties in the shopping area. As late as last week, engineers were working with Greenwood officials to sort out final plans for streets and infrastructure.
They offered no clue that the plans were about to be shelved, city planning director Ed Ferguson said.
On Tuesday, Cabela's released its preliminary fourth quarter and year-end financial results, which showed a 1.2 percent decline in same store sales.
"The company's fourth quarter results were primarily impacted by a challenging retail environment which negatively impacted the company's same store sales and to a lesser extent the company's direct business," a news release to Cabela's investors said. "Additionally, productivity of some new stores did not meet expectations."
In response, the company is slowing its retail expansion.
Just two of the seven planned stores will be built this year, said John Castillo, spokesman for the Nebraska-based retailer. One store is in South Dakota, he said, and the other store hasn't been determined. Two stores will open in 2009, but those properties haven't been determined, he said.
The other store that will open this year will likely be in Maine, not Greenwood, judging from information on the company's Web site about the status of construction projects, said Bruce Armstrong, a Greenwood City Council member who was opposed to the financial incentive and first discovered that the Greenwood project may be in jeopardy.
Armstrong had been monitoring the company's U.S. Securities and Exchange Commission filings since this summer and saw that the company's investment rating had been downgraded based on slowing growth.
When he researched further, he found that the company planned to open just two stores this year, and he contacted an attorney who had been working on the project with the city.
Greenwood officials have contacted Cabela's but had not heard back as of Friday afternoon.
Greenwood Mayor Charles Henderson, who worked on the Cabela's deal for months and said it would lead the city into becoming a tourism destination, was vacationing in Brown County and did not return a phone message.
Since fall, crews had been working at the site moving dirt; and because of the company's investment so far, city officials don't believe the company will walk away permanently.
"We're still optimistic and hopeful that things will develop in that 102 acres," said Stephen Watson, the attorney for the city's redevelopment commission, which helped make the financial incentive.
"We're still hopeful that Cabela's will want to see those things happen and we'll ultimately end up building a store."
The 125,000-square-foot store was scheduled to open this fall, and the company predicted 4,000 people would be waiting on the first day. More than 3 million people were expected to visit each year, according to Cabela's.
Cabela's typically seeks and receives local government incentives when it builds a store. In Greenwood, city government was to issue an $18 million bond, which would be purchased by the store's parent company, Cabela's Inc.
The money would be put into a fund administered by a trustee and used to build roads, install utilities and start construction.
Cabela's and other businesses on the site will pay an annual property tax. That money would be sent to the redevelopment commission, which oversees the tax-increment financing district, and used to pay off the $18 million debt.
The city and Cabela's were set to close on the bond in August, but the closing date had been moved back because the city's attorneys needed more information from the company.
"They have not yet provided the information needed to complete the closing preparations and closing itself," Watson said.
Greenwood officials were not concerned because Cabela's engineers, architects and others continued to work with the planning department and because earthwork was being done at the site, Watson said.
Once Cabela's did close on the bond, interest would begin accruing, so perhaps the company wanted to close on the bond as late as possible for an economic advantage, Watson said.
The fact that closing on the bond hadn't occurred was outstanding news in light of Cabela's decision, Armstrong said.
"That means the city of Greenwood is protected from having gone too far down this process," he said.
Armstrong also believes that Cabela's will eventually build a store at the site.
"But at this point it's a matter of when," he said.
Because the deal wasn't finalized, Greenwood has no legal obligation to the company, Watson said. The only expenditures so far have been for professional services, such as attorneys' fees, and time invested by the city's planning department and committees.