Location Natural: Steamboat joins growing group of cities looking to grow their stake in the outdoor manufacturing industry
March 10, 2013
There's nothing modest about Outdoor Retailer's winter trade show in Salt Lake City.
For four days in January, the downtown Salt Palace Convention Center becomes a dizzying labyrinth of booths manned by the world's most famous outdoor manufacturers.
It's a place where a large SmartWool banner quickly gets lost in a vast sea of towering signs for other apparel companies, and flashy displays of skis and strange packets of highly flammable camping goo attract hundreds of spectators.
In this maze, it's hard to walk 50 feet without glancing at a high-definition TV beaming action-packed GoPro footage. It's even harder to walk another 50 feet without eyeing a jacket or a pair of ski pants labeled as having the best thermal technology in the industry.
But deep inside the convention center this year, a new, high-stakes spectacle took place.
And most spectators never saw it.
Economic developers from Steamboat Springs and a small contingent of other outdoor-oriented cities across the nation methodically waded through the booths not looking to buy skis, socks, goo or jackets. They were looking to someday bring entire companies, and their high-paying jobs, back home.
New suitors arrive
From the titans of North Face and Marmot to Steamboat's rapidly growing SmartWool, Big Agnes and Honey Stinger, members of the industry that weathered the recent recession better than most enjoy showing off at Outdoor Retailer.
A growing group of suitors thirsty for the businesses' jobs and their revenue is watching them closely. In the busy conglomeration of company booths and displays, representatives from cities that spanned Roanoke, Va., to Bend, Ore., spent their week identifying smaller companies they could entice to relocate to or expand in their hometowns.
Tired of the tax climate in California? We've got a new home for you, some said.
Jana Jones, from Boise, Idaho, came armed with her state's famous Idaho spud candy bars and guaranteed prospective companies that her hometown offers "a little bit of everything at low cost."
Work in a metro area and have quick access to a ski area, she told some smaller outdoor manufacturers on her first trip to the annual show.
Pete Eshelman, of Roanoke, highlighted his city's growing network of mountain bike trails and its proximity to a major airport that offers UPS flights.
About six years ago, he arrived at the show and found himself answering the same question over and over again: "Where the hell is Roanoke?"
No, it's definitely not a lost island off the coast of North Carolina, he would answer. It's a city quickly transforming itself into an outdoorsman's paradise, and Eshelman's efforts helped Backcountry.com open a major warehouse there.
Steamboat Springs Chamber Resort Association CEO Tom Kern brought his own pitch to this year's Outdoor Retailer: Join a small but growing contingent of outdoor manufacturers who test their gear on the slopes of Mount Werner, along the banks of the Yampa River and in the abundant backcountry wilderness surrounding Steamboat.
His mission is as ambitious as that of the other suitors.
"My vision for Steamboat is that it becomes the outdoor recreation capital of Colorado," Kern said halfway through the Steamboat Chamber's first trip to the major show. "Can that happen? I think it can happen. But it's going to take a lot of effort."
Kern said that effort starts with retaining the dozen or so growing outdoor manufacturers that already call Steamboat home.
Then, Kern said, cities like Steamboat can make a stronger push to lure small, young companies to join the city's existing hub of outdoor retailers that include bike builders, paddleboard crafters and beef jerky makers.
But the second part of Kern's mission is destined to run into many challenges, some of which are beyond Steamboat's control. Because in the world of outdoor manufacturers, Steamboat is a small piece of a vast, competitive market. And it's being heavily outgunned by a group of cities just six hours to the west.
Money, mountains, mayors
Some of the industry's most successful suitors of outdoor manufacturers have an incentive the Yampa Valley can't offer: They have easy access to a major international airport.
Some have three ski mountains within minutes of a downtown area and also shipping routes that start at major interstates.
And one especially successful suitor had a mayor with millions of dollars in his scouting war chest and cheap, vacant warehouse space to offer out of what used to be an Army depot.
In 2006, Mike Adams felt the pressure of that mayor and the small army of suitors who were chasing his city's bid for Amer Sports.
Adams, the winter sports equipment vice president and commercial director for Amer Sports, was part of the team that decided in what part of the U.S. the world's largest outdoor sporting goods equipment company would continue its growth.
When Amer announced it was looking to consolidate three of its sporting goods makers that were scattered in Oregon, California and New Hampshire, cities across the country smelled blood in the water.
The bidding for Suunto, a high-tech watch maker; Solomon, a footwear and apparel company; and Atomic, a Nordic ski company, quickly began.
Salt Lake City wanted the 230 jobs.
Portland, Ore., wanted to hold onto its existing share of them.
But a small town about 30 minutes north of the Salt Palace Convention Center offered more than even the biggest of suitors could put on the table.
"It all came down to the money, the mountains and the mayor," Adams said in Solomon's booth at Outdoor Retailer, referring to the $12.1 million in incentives his company received to move to Ogden, Utah, the nearby Snowbasin Resort and Mayor Matthew Godfrey. "Mayor Godfrey was a great salesman, and I think he had a compelling story that Ogden presented a good opportunity for us to grow."
Ogden was offering companies like Amer tax incentives that let them keep part of the increased property tax they generated when they moved their businesses into a piece of real estate.
It also had a strong prospective workforce being fed by Weber State University and a small technical college.
Adams said Ogden quickly felt like home, and Mayor Godfrey's vision of attracting multiple outdoor retailers to the area, and his promise of lucrative incentives, sealed the deal.
And to people like Adams, who have navigated the high-stakes bidding matches between cities for outdoor manufacturers, Steamboat is but a very small fish in a very big sea.
Adams was skeptical of the Yampa Valley's ability to attract any new large or midsize manufacturers in the same way Ogden has.
"You need big incentives," he said before he quickly ticked off the things Steamboat doesn't have.
International airport. Interstates. Quick access to multiple ski mountains.
But even those things don't win every time.
An outdoor manufacturer based near Denver, a city that could place a check in all of those boxes, couldn't resist the allure of Ogden.
Building a hub
From Amer to Voile, there are more than 1,000 outdoor manufacturing companies working in Utah.
Utah's Office of Economic Development, which provided $7.9 million worth of the incentives and tax credits for Amer, projected in 2007 that the company would spur $26.4 million in new revenue for the state.
It was hailed as a big get for Ogden, a city that not long before was better known for its railroad history and status as a bedroom community to Salt Lake.
The companies were given the incentive money when they reached certain milestones, such as signing leases for their new headquarters and maintaining for a certain number of years the jobs they brought to the community.
Before Amer, there were other big gets.
Winter clothing manufacturer Descente relocated its North America headquarters from Englewood to Ogden in 2004. Company officials said Englewood, part of the Denver-Aurora metro area and within 60 miles of several ski resorts, still was too far from ski venues.
A year later, ski manufacturer Goode Industries uprooted its corporate headquarters in Waterford, Mich., and settled in Ogden. Goode supplied 34 percent of ski poles in the U.S. at the time of the move.
More companies followed suit.
Kahuna Creations. Nidecker Snowboards. Peregine Outfitters. Scott USA.
They all set up shop in Ogden, and many received tax incentives from the state and the city to do so.
At the same time, nearby Park City was adding to its roster of outdoor manufacturers.
The success stories coming out of Utah continue to worry some business leaders in Steamboat.
Pressure to the west
Ogden's rise in Utah spurred Kern to issue a warning in Steamboat's Centennial Hall earlier this year.
Steamboat's existing outdoor manufacturers face tremendous pressure to relocate to places like Ogden, Park City and Portland, Kern told the Steamboat Springs City Council. Their incentives are enticing, and they shouldn't be overlooked.
At the time, the council was weighing whether to offer local outdoor retailers BAP, Big Agnes and Honey Stinger the city's downtown emergency services building at a price some considered a significant discount from its market value.
City officials labeled the sale as an economic development deal as well as a chance to help a business that quickly has grown to nearly 80 employees.
In an industry where companies have been offered millions of dollars' worth of incentives in recent years, the deal for 840 Yampa St. was but a small example of a city offering a carrot to a growing business and hoping that carrot would create something much bigger for everyone.
For city officials, the payoff was an additional workforce downtown as well as a spark to a growing movement to revitalize Yampa Street.
But after months of planning, the deal fell apart in January after the city learned its plan to temporarily move its police force out of the existing public safety building would cost about $900,000 more than anticipated.
The city and Big Agnes, Honey Stinger and BAP moved on.
"We know there will be plenty of other options down the road," BAP owner Bill Gamber said two days after the sale was scrapped.
He said he would love for his company to continue to grow in Steamboat, but he said he couldn't guarantee that would happen.
Every so often, he said, cities call with the same type of pitch Kern brought to Outdoor Retailer.
"We're not actively trying to move out of town," Gamber told the Steamboat Today in February. "But as we grow and build, if it makes sense to do something out of town, it has to be part of the equation."
Neck and neck
Colorado and Utah are neck and neck in the outdoor industry's national jobs race.
The Boulder-based Outdoor Industry Association estimated this year that Colorado fosters 125,000 jobs in the industry. Utah claims 122,000.
The association also calculated consumers in the Rocky Mountain state spent $13.2 billion on outdoor products last year, while residents of the Beehive state tallied a close $12 billion.
Digging deeper into the economic data available on the industry, it's plain to see why Kern and officials from other cities are starting to make the annual trek to Outdoor Retailer.
Yampa Valley Data Partners estimated last year that employees of Northwest Colorado's outdoor retailers were taking home an average salary of $55,000, about $13,000 more than the median income of $42,000 in Routt County.
The industry already employs more than 200 people locally.
SmartWool, Steamboat's biggest representative at Outdoor Retailer, has annual sales that exceed $120 million.
And while the construction, retail and hospitality industries here were bleeding jobs during the Great Recession, some outdoor retailers were adding to their payrolls.
"If you look at where there has been job growth in Steamboat Springs since the start of the financial recession, there's only one sector that has added jobs of any significance, and that's the outdoor manufacturing industry," Kern said before setting off for Salt Lake. "SmartWool has grown. Eriksen (Cycles) has grown. BAP has grown."
A renovation project to SmartWool's current facility at the city's airport terminal will add 7,957 square feet of space.
Mark Satkiewicz, the company's president, told Kern he projects the company will add as many as 40 employees during the next five years, bringing its local workforce to more than 100.
But places like Steamboat, Ogden and Park City harbor only a small piece of this vast industry.
The Outdoor Industry Association, using data from the Bureau of Labor Statistics and the American Petroleum Institute, estimated that with 6.1 million jobs in 2011, the outdoor recreation industry employed more people than the construction and oil and gas industries. It also outnumbered educators.
Asked why they think their industry, and their companies in Steamboat, continued to grow as others suffered during the recession, many company officials gave a similar response.
"It's not suffering as bad because going camping and going on a bike ride is a cheaper alternative than spending a whole lot of money on an expensive vacation," Honey Stinger's Nate Bird said at his booth at Outdoor Retailer. "People also are learning to lead more fit and more active lifestyles, and they believe in our products."
But the growth of outdoor manufacturers back in Steamboat hasn't come without some challenges.
An outdoor enthusiast could walk in the Salt Palace Convention Center for more than an hour without stumbling upon the BAP, Big Agnes and Honey Stinger booths.
Nestled deep inside the trade show, the company's young employees marketed new down jackets, tents and sleeping bags.
"It's been an exciting ride," Bird said as a long line of people sampled his company's latest offerings.
Years ago, their booth was much smaller. And Bird wore many hats, sometimes unloading products from all three companies in a single day.
As their booth space has grown, BAP, Big Agnes and Honey Stinger have found it hard to keep up with their rapid growth back home.
They outgrew the "little red house" on Oak Street and have been putting employees in satellite locations across town ever since.
Walking through the companies' warehouses in the Copper Ridge industrial area in February, Director of Operations Chris Tamucci pointed out some of the growing pains.
Doors had to be cut in existing warehouse walls to accommodate the growth. A new mail system was implemented to cut back on the exorbitant amount of time it took to collect and distribute mail to company employees who now are scattered across four locations in Steamboat. Trucks hauling company products have to slowly navigate the treacherous ice dams that form outside the warehouses each winter.
But the efficiencies of doing business in a bigger city haven't been enough to entice outdoor retailers here to pack up and move away.
"We could easily have our warehousing in Denver," Bird said at the trade show. "It is cheaper, and it's more efficient, but there's a certain backing by the owners, who want to be in our small town with that street cred. It is way costlier than being in a city, but being able to live in Steamboat has intrinsic value that you can't quantify, but it's there."
As strong as that intrinsic value is, many of Steamboat's outdoor manufacturers agree the city can do more to retain the companies it already has.
Like Kern acknowledges, they know a Marmot or a North Face never will move to Steamboat. But they're encouraged by Kern's new push to support existing businesses and his effort to find smaller startups that could be interested in moving to town.
"Outdoor manufacturers love being with other outdoor manufacturers," Kern said.
He said with SmartWool announcing its potential to double by 2017, it likely will outgrow the airport terminal.
"If we've got a plan put together for a building they can move into, it's more likely they'll continue that growth here," Kern said. "If we can start creating a strong cluster base of companies like SmartWool, the potential to attract other ones is a lot stronger."
States regularly tout their incentive programs and the number of jobs they help to create each year.
In Utah, incentive spending is on the rise.
According to figures from the Governor's Office of Economic Development, the state has awarded $467 million in tax rebates to companies during the past seven years and through those rebates incentivized the creation of 37,442 jobs.
The incentives do come with a price, however.
The Salt Lake Tribune last year reported that the tax breaks will cost Utah an average of more than $17,000 per job.
"It's well worth it to pay a little bit back on the money that the company is paying into the state," Office of Economic Developement Executive Director Spencer Eccles told the Tribune as he outlined the merits of the incentive program. "You are reducing the total (tax revenue), but at the same time, were it not for the incentive, you would basically have no revenue."
Eccles and officials at the Office of Economic Development and International Trade here in Colorado say there are a series of safeguards in place in their incentive programs to ensure abatements are not paid out before companies make good on their promises.
For example, that means companies receive funding only after they create a certain number of jobs or sign a certificate of occupancy if they are receiving an incentive to establish a new headquarters.
"We deliberately structure our incentive program to where you don't get anything until you earn it," said Jeff Kraft, the director of Business Funding and Incentives for Colorado's Office of Economic Development.
Colorado isn't the state with the biggest pot of incentive money, Kraft said, but it is able to easily leverage many benefits that include connectivity to Denver International Airport, copious recreation opportunities and the title of fittest and healthiest state in the nation.
"Incentives are something you have to have, and we make it a part of the conversation, but it's not ultimately what drives a lot of business decisions," Kraft said.
He said his office tracks its expenditures, how many jobs they create and whether they resulted in any unexpected losses, among other things.
But a recent Pew study concluded many states, including Colorado and Utah, aren't doing nearly enough to quantify the payoff or the results of the millions in incentives they dole out each year.
Grading the gifts
A study conducted last year by The Pew Center on the States started off with a simple enough mission: Have a group of economists and researchers survey all 50 states and find at least one recent example of how each state has tracked the effectiveness of its tax incentives.
Carl Davis, a senior policy analyst for the Institute of Taxation and Economic Policy based in Washington, D.C., said it was easier said than done.
"In the case of Colorado and Utah, we couldn't find a single example of the state checking to see if its tax incentive was doing what it was created to do," Davis said Wednesday. "It's just pretty incredible how many billions are being spent in the U.S. on tax incentives and how little effort is being put in to figure out if those dollars are of any benefit to the states."
Davis said although it's easy for some states to point to the number of jobs they've incentivized, it's hard for an observer to weigh whether the incentive was worth the investment.
"The biggest downside by far is there are always going to be companies that benefit for doing things they would have done anyway," Davis said. "No incentive can be perfectly targeted. A state or a city can't read a business owner's mind and know if they would have hired those additional employees and relocated that corporate headquarters without the incentives."
Davis added that incentives to lure in new businesses also could squeeze out existing companies.
"If you're giving an incentive for one particular restaurant chain, sure, it may expand in your state, but another restaurant chain will suffer," he said. "Are you then just picking winners and losers?"
Davis pointed to states like Oregon and Washington as leaders in the effort to track the worth of incentive programs.
He said a new Oregon law has tax credits sunset after six years unless lawmakers choose to extend them. And in Washington, a group of nonpartisan analysts and a group of citizens evaluate certain tax-incentive programs annually and recommend to the state whether any changes should be made.
A 5 p.m. reception on the second to last day of Outdoor Retailer showed how far Steamboat has to grow its stake in the outdoor manufacturing industry, with or without tax incentives.
The reception, hosted by Kern and the newly formed Western Slope Outdoor Recreation Alliance — which includes representatives from Vail, Grand Junction and Durango — was supposed to attract a healthy crowd of Western Slope outdoor manufacturers and foster conversation as to how the new group of economic developers could help foster the growing businesses.
Instead, the reception was a quiet affair in a conference room hidden from the bustle outside in the main halls of the convention center.
A tub of Colorado beers went mostly untouched.
"Next year, we'll take the party outside and have it at one of our manufacturers booths," Kern said before the first of about five guests arrived during the hour.
Kern seemed unfazed by the low attendance and ready to learn from his mistakes.
Besides, he was going back to the Yampa Valley with a few prospects and the realization that the mission will be a long one.
He said out of the hundreds of people he met with at the show, he'll follow up with three small startup-level companies that could be interested in relocating to the Yampa Valley.
"Where I see us in the next three to five years is to help establish the businesses already in Steamboat to make sure they're strong, that they're financially prosperous and they grow," Kern said. "And there are going to be some challenges."
The magnitude of Outdoor Retailer is enough to overwhelm a first-time visitor, Kern said. But he's eager to go back.
"This is really kind of a get-your-feet-wet experience for all of us for the first time," he said.