Half percent occupation tax at Cabela's raises $850K in 7 years

A half percent occupation tax charged on purchases at the Cabela’s retail store in Sidney has raised nearly $850,000 since it was first instituted in 2008. The money is earmarked for walking trails and storm water management.

The tax – voluntarily charged by Cabela’s – is permitted under a Sidney city ordinance passed in July 2008 and is in addition to the 7.5 percent state and local sales tax.

Cabela’s Chief Financial Officer Ralph Castner said the company began charging the occupation tax in October 2008.

“Statistics show that 26 percent of sales at our Sidney store come from customers living within 30 minutes of the store; the majority, the remaining 74 percent of sales, come from customers living 30-plus minutes from the store,” he wrote in an email. “Therefore, this [occupation] tax provides opportunity for non-residents to help fund projects in our area.”

The majority of other taxes collected in the community are paid for by people who live here, he added.

“This half percent [occupation] tax, largely funded by non-residents, adds to development of our community,” Castner said.

After the Nebraska Legislature passed a statute in 2007 allowing cities and villages to establish enhanced employment areas within which a half percent occupation tax could be charged, the city drafted its ordinance.

The retail occupation tax is limited to funding the expenses of redevelopment projects in the enhanced employment area that the business is located, according to the ordinance.

Currently, there is only one such area in Sidney – encompassing the Cabela’s complex near Interstate 80 – and the Cabela’s retail store is the only business in Sidney voluntarily charging the additional tax.

A lodging occupation tax – 2 percent – is charged for hotel rooms within city limits, but a 1 percent restaurant occupation tax was repealed two years ago.

Sidney City Manager Gary Person said the agreement with Cabela’s was initially intended to help make up a gap in funding for the expansion of walking and biking trails. A few years ago, the agreement was amended to also allow funds to be used for storm water management.

The current expansion of the Sidney Deadwood Walking Trail has been in the works for a decade, Person said. Throughout the process, setbacks required rerouting and additional environmental impact studies – which led to an increasingly higher price tag.

When it appeared the city would face a shortfall to keep the joint municipal-, state- and federally-funded project on track, Cabela’s offered to help.

“Cabela’s stepped forward and said, ‘We think this is critically important for our community, we’d like to be able to help out,’” Person explained. “So we came up with them the ability to do the half percent occupation tax on the retail store to help public trail systems.”

Ultimately, additional state and federal funding was made available for the trail expansion project, freeing up some of the money already collected by Cabela’s through the occupation retail tax. But because trail construction is still ongoing, Cabela’s is maintaining its pledge to provide $200,000 for the project if needed.

In the meantime, $314,000 of the occupational retail tax has been spent on other initiatives.

During fiscal year 2010-’11, more than $230,000 of the funds were used for the construction of a walking path around the Cabela’s campus that will connect with the city’s trail expansion.

“We’ve expanded the trail system around the growing Cabela’s corporate campus,” Castner said. “To date, we’ve built trails around the store and pond, and, in the future, we plan to continue the trail across the corporate campus to the west and connect with the under-construction trail at Old Post Road and 11th Avenue, providing an expanded trail system connecting the interstate business area with the rest of the city.”

The money has also been used for storm water management on the company’s property that will ultimately save the city money.

A $4 million proposed plan to address storm water issues in East Sidney has been cut in half because of development initiatives undertaken by Cabela’s, Person said.

“By just what Cabela’s has done as part of their development projects and our storm water ordinance and those kinds of things, it’s going to save us over $2 million,” Person said.

While $80,000 of the occupation tax charged by Cabela’s was reimbursed back to the business for storm water projects, Person said that only represents a small fraction of what Cabela’s spent to install storm water retention ponds and other upgrades.

“That’s the kind of cost it saves for us to do it,” he said. “It’s a real beneficial thing for the community, and it’s a voluntary thing on behalf of the company to do this, which shows the unique public-private partnerships that we’ve had. It’s been very useful for us.”

The retail occupation tax charged by Cabela’s helps support development within the city, Person added.

“What this is doing is saving the taxpayers,” the city manager said. “If we’re going to spend local dollars to build storm water projects and to also do trail connectivity – if you wanted to do the same thing, we’d have to find the dollars through our other resources to do that. And maybe, the projects don’t get done at all.”

Although Cabela’s is currently the only retailer collecting the optional tax, it has been used in Sidney before.

Another enhanced employment area was designated in 2008, encompassing businesses near the interstate area. Money raised from those retailers was used to help fund the rebuilding of East Old Post Road.

Person said it’s always a possibility that other enhanced employment areas could be established in the future – but also that it’s complicated.

He added he’s been asked three times to conduct workshops for the Nebraska League of Municipalities on the process and that other communities in the state are also using the enhanced employment areas.

“It’s a complicated thing, but we try to analyze every tool that becomes available to us,” he said. “When they get adopted, we try to be proactive when we feel it’s good for the community. And ultimately, it’s up for the citizens to decide.”