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A boxful of Ross Reels, which are known for their smooth drag. —Photo courtesy of Cat Mayer/CompanyWeek Media

A Fishy Deal?

Ross Reels sought subsidies to stay in Montrose, but are the payouts smart investments in the city’s future—or corporate bribes? 

By |

Before it becomes a lacy spool for fishing line, every Ross reel starts out as a palm-size puck of solid aluminum that’s stout enough to serve as a doorstop. “We bore 25,000 of those a year,” says David Dragoo, president of Mayfly Outdoors, the holding company that owns Ross Reels and two other brands of fly-fishing reels, Abel and Charlton. Gripping the inch-thick silver disk that had been propping open the entrance to Ross Reels’ factory in Montrose, it’s difficult to believe clever manufacturing can transform this hunk of metal into a delicate mechanism. But that’s been Ross Reels’ trademark ever since 1973, when aerospace engineer Ross Hauck pioneered a way to mass-produce reels out of dense pieces of aluminum bar stock.

Durable and smooth, thanks to precise machining, Ross’ reels enjoyed a sterling reputation—and a market share between 35 and 45 percent in 2008 and 2009—when the 3M Company purchased the business in 2010. But the reel maker languished under conglomerate control, and by the time Dragoo bought it in 2014, the company hadn’t released a new model since 2011 and its market share had plummeted to 10 percent. Dragoo, an avid fly-fisherman who was born in Colorado Springs, saw an opportunity to rescue Ross Reels from stagnation while expanding his share of the fly-fishing market. “I like the old-school stuff,” says Dragoo, who dresses up his Carhartt work pants with crisp button-downs and stitched-sole leather hiking boots.

Ross Reels definitely seemed like an artifact. Although the fly-fishing business as a whole has enjoyed a recent spike in popularity, Ross Reels had failed to keep pace with industry advancements. Its designs looked stodgy and were too heavy to pair compatibly with the latest crop of ultralight fly rods.

So Dragoo began his crusade to return Ross Reels to relevance. He introduced several new models, such as the Colorado LT: a lighter reel with a handle made of a cotton-resin composite that looks like traditional cork but has better grip when wet. He created a VP position for Craig Baker, a rising star with a Harvard MBA who left Polaris Industries to grow the farm-league underdog because of his passion for fly-fishing. And in a move that affronted some free-market purists, Dragoo decided to bolster his reinvention of Ross Reels by seeking economic development incentives—aka government subsidies.

Since 1983, Ross Reels has proudly advertised the fact that its product is manufactured in Montrose. But in 2014, Dragoo phoned local officials to announce the company was considering relocation proposals from cities in Arizona, Texas, and Utah. If Montrose could offer an attractive retention package, Dragoo suggested during City Council hearings, he might keep the company’s 22 employees on the Western Slope—and maybe even add jobs by bringing California-based Abel Reels to the Centennial State. Local representatives initiated talks with Colorado’s Office of Economic Development and International Trade (OEDIT), which invited Mayfly to apply for state incentives. Within a week, OEDIT approved a $280,000 package to reward Ross Reels for creating new manufacturing jobs in Montrose. Instead of simply meeting the state’s requirement for matching local support, the city and county of Montrose went further and nearly doubled it: In January 2016, the Montrose City Council approved a deal granting Ross Reels $5,000 for every new hire and $50,000 in marketing and advertising funds. The deal also includes a $20,000 loan at one percent interest and $16,500 in abatements for sales tax, use tax, building permits, and water tap fees if Mayfly builds a new factory in Montrose.

Ross Reels
Ross Reels are built in Montrose and tested on Colorado rivers. Photo courtesy of Ross Reels

“We are proud to have Mayfly Outdoors as part of the Montrose community, and we are excited to work together to expand their local operations into something even bigger and better,” says Rex Swanson, Montrose’s mayor. Mayfly representatives also applauded the partnership. Although Mayfly hasn’t yet received any cash payouts for the jobs it has created, “It’s really about making a mutual commitment,” Baker says. “We wanted [to be in] a community that was really going to work with us. Montrose has proven that it’s pro-business, and for us, it feels great.” But not everyone was as thrilled about the city’s play to keep Ross Reels. In fact, some residents were incensed.

“Mayfly held the city hostage, and the city paid the ransom,” says Scott Riba, an independent insurance agent and 15-year Montrose resident, who explains he is pro-business and pro-growth but opposes giving taxpayer dollars to private companies. “Not once has the city come to me and made me an offer of free money to grow my business and keep jobs in Montrose.” When Montrose upgraded its citywide internet service, local businesses had to foot the bill for conversions within their buildings, but Ross Reels received a $5,000 stipend to cover the costs. “If it’s available to one, it should be available to all,” says Riba, who was not the only outspoken detractor at public hearings held on the issue. Several others—including business owners Dennis Mitchell, Dee Laird, and Yvonne Meek—were equally frustrated, saying their businesses could also benefit from public support and questioning the justice of funneling taxpayer dollars into private coffers. Indeed, a group of Ohio and Michigan taxpayers sued DaimlerChrysler (which received $280 million in incentives from Ohio and the city of Toledo), claiming it was unfair for one taxpayer to be given a break at the expense of all others. A 2006 Supreme Court ruling, however, determined the plaintiffs did not have the legal standing to challenge Ohio’s actions.

Sandy Head, a Montrose native and the executive director of a nonprofit collaborative called the Montrose Economic Development Corporation, says the city must cultivate industry—or wither. She remembers when her hometown relied solely on farming and how it suffered when the Holly Sugar beet processing plant shut down in 1977. Fortunately, Head recalls, Russell Stover had just opened a production facility in Montrose, and by taking jobs there, some beet farmers managed to supplement their incomes and keep making their mortgage payments. “It’s been very healthy for us to have the diversity we have,” says Head, naming Scott Fly Rod Company, Colorado Yurt Company, the 3M Company, Gordon Composites, and Western Skyways as some of the Montrose employers who hire skilled workers and pay well for their expertise.

Such jobs, argues Head, are economic multipliers. Whereas jobs in retail pay about $20,000 per year, the positions Ross Reels will create offer annual salaries of about $46,000. That’s well above Montrose County’s average wage of $35,464. “That salary gets spent in our community,” Head says. Thus, Montrose captures outside dollars—unless, of course, companies like Ross Reels succumb to the temptation to relocate.

Across the United States, thousands of economic development organizations (representing states, regions, and municipalities) are attempting to court businesses—and not just by encouraging new enterprises (which are risky), but by capturing established companies with proven success.

Montrose companies have been approached with offers like five years’ free rent in a 100,000-square-foot building in Texas, Head says. Such wooing puts Colorado representatives on guard. “We can’t take it for granted companies will stay because Colorado’s a great place,” says Luis Benitez, director of the Colorado Outdoor Recreation Industry Office, which advocates for those who rely on the outdoor-recreation industry. “We’re going to have to convince them.”

Scott Fly Rod says it’s received no relocation bids, and Gordon Composites reports that although it has received offers in the past, such inquiries have dwindled in recent years. Yet wooing does happen, and when local ameliorations fall flat, companies do leave. To wit: Magpul Industries, which manufactured gun accessories in Erie, moved its manufacturing to Wyoming and its headquarters to Texas after both states offered alluring incentive packages in 2012 (only afterward did it claim that newly enacted gun-control laws in Colorado had prompted the move).

The game really intensifies when skilled-labor employers also happen to align with Colorado’s outdoorsy identity. “The fact that we’re able to build [the reels] here and use them here is phenomenal,” says Sam Bailey, OEDIT’s senior manager for global business development. “It’s a win for Colorado.”

And it could help Montrose secure something beyond jobs: The city is hoping to ride a cadre of outdoor-recreation companies’ coattails into outdoor legitimacy. Occupying a crossroads near Telluride and Gunnison, Montrose has always been the place travelers drive through on their way to somewhere else. But the 19,132-person city wants to become an outdoor destination in its own right. It recently turned its stretch of the Uncompahgre River into one of the state’s largest white-water parks, and it hopes every Ross Reel buyer will notice the “Made in Montrose” label. “That’s huge advertising for us,” Head says. “People will Google it and say, ‘Wow, Montrose looks nice,’ and maybe they’ll come here.”

That optimism may seem like a build-it-and-they-will-come pipe dream, but Osprey Packs performs the same consciousness-raising service for Cortez, where the backpack company has been headquartered since 1994. Tom Barney, Osprey’s former CEO, says he believes in the symbiotic relationship: “Our logo depicts the osprey petroglyph that you find in the canyons around Cortez. Being in Cortez does contribute to our brand identity, and it matters, we think, to Osprey customers.”

The state of Colorado wants to keep it that way. In 2014, the state approved $164,000 in job-creation incentives for Osprey, and in late 2015, Cortez gifted it four acres of land in exchange for the creation of 45 new full-time jobs by 2021. This past July, the company broke ground on a $7 million, 27,000-square-foot facility to house its leadership, sales, marketing, and IT staff. (The packs are made in Vietnam and distributed from Ogden, Utah.)

Brand integrity is notoriously difficult to quantify, and neither Osprey nor the state of Colorado has any figures to prove that a company’s location improves its reputation—or profits. Yet Ross Reels remains committed to authenticating its brand by advertising the fact that its engineers test and develop products on the Gunnison and Uncompahgre rivers. “We’re not building surfboards in Kansas,” says Mayfly’s Baker.

In the end, Ross Reels and Montrose lend one another credibility, and that mutual dependency may make this incentive package a better bet than the deals offered to corporations such as General Motors Corporation (which took city and state payouts only to close up shop later). As that and other examples prove, companies can chase dollars anywhere—but Ross Reels says it wants the street cred it gets from being rooted in Montrose. Montrose, meanwhile, needs the exposure to outdoor enthusiasts. In that sense, the Mayfly incentive agreement has a lot in common with athletic sponsorships: Just as the North Face boosts its legitimacy by sponsoring ultramarathoner Dean Karnazes and other outdoor heroes, Montrose can raise its brand profile by backing Ross Reels.

“Companies sponsor champion-level teams and athletes because that association builds valuable brand recognition,” says sports marketing analyst Eric Wright of Joyce Julius and Associates, a Michigan firm that evaluates corporate sponsorships and product placement. Consequently, he believes the incentives granted to Mayfly could be beneficial to both sides. “There’s a lot to be said for being affiliated with a winner,” Wright says. Small businesses like Riba’s—which only employs two or three people—can’t launch Montrose into the limelight. The city needs to sponsor superstars. And with its partnership with Ross Reels, Montrose has, it believes, hitched a ride on a reborn luminary.

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