- The Washington Times - Sunday, December 14, 2014

Scott Drummond, 45, is used to a busy holiday season.

A little more than a decade ago, his $1.2 million, 14,000-square-foot, newly opened Pintail Peninsula Lodge in Stuttgart, Arkansas, was full of Wall Street guests, eager to hunt mallard ducks by day and sleep in five-star luxury at night.

Dubbed the “Taj Mahal of duck hunting,” by The Wall Street Journal in 1999, Mr. Drummond’s resort played host to a wealthy clientele that flew miles to his small, rice-farming town near the convergence of the Arkansas, White and Mississippi rivers, to experience the best of the state’s 60-day duck hunting season, which begins Nov. 22.

Mr. Drummond’s lodge — which could accommodate 30 hunters in 16 rooms — generated $1 million in business during the short season, enough to keep his family comfortable year-round and to reinvest in the town’s growing industry. Stuttgart is anticipating nearly $900 million in duck-related revenue this season alone, according to KTHV, the local television news station.

But this year, instead of tending to his guests and shooting fowl, Mr. Drummond is pounding the pavement in Washington, speaking to anybody who will stop to hear how a small line in regulation code forced his growing business into bankruptcy.

Mr. Drummond, who quit his corporate job as a hydraulics engineer to pursue his dream as a small-business owner, had three duck hunting seasons under his belt when an ice storm hit on Dec. 9, 2000, cutting 20 days out of his 60-day season. He estimates he lost about $600,000 in business.

Then the unthinkable happened. Near the beginning of the following year’s season, terrorists hit the World Trade Center and the Pentagon, halting air travel and tourism and forcing Mr. Drummond to refund about $375,000 worth of canceled season deposits.

“I lost about a $1 million in nine months,” said Mr. Drummond. “I went to my banker, but being a startup, we were already maxed out on my loan-to-value ratio income.”

Mr. Drummond’s bank, however, recommended that he ask the U.S. Small Business Administration for a $300,000 disaster-assistance loan. The money would be used to keep Mr. Drummond’s marketing and operation going until the market turned. All parties thought the request was reasonable — everybody but the SBA. The loan was denied.

“I was irate. [The SBA] called my business a hobby and therefore was not eligible for disaster assistance,” Mr. Drummond recalled. “I said, ‘What do you mean? This is my livelihood.’ And the SBA said, ‘Well, we can’t find another hunting lodge that can generate $1 million in 60 days.’”

A question of coding

The reason was a little line of coding called the North American Industry Classification System — the NAICS code. Mr. Drummond’s business was assigned a code by the Internal Revenue Service when he incorporated in Arkansas. His businesses code was 713-990, defined as “all other amusement and entertainment.”

Mr. Drummond’s hunting lodge was grouped with miniature golf courses, driving ranges, nude beaches and water parks, among others — business that generated nowhere near the revenue in such a short time span as Mr. Drummond’s lodge did when averaged together.

These codes define an industry. Bankers look to them when making loan decisions, Wall Street analysts use them to help choose stocks, and the government relies on them to determine which segments of the economy are growing or declining. It’s the NAICS codes that the White House uses to analyze whether the automakers need a bailout or if the mortgage market is recovering.

Almost every trade association in Washington relies on the coding system to create an economic impact study to advocate for or to defend against proposed legislation. Right now, the outdoor trade industry is invisible, Mr. Drummond said.

“You could eliminate every single hunting, fishing and shooting season and not a single dollar would show up in an economic impact study,” said Mr. Drummond. “The entire industry could be wiped out tomorrow and not a single person could show up with the economic impact generated by the government’s own economic industry study.”

The Congressional Sportsmen’s Foundation estimates that the outdoor industry is valued at $90 billion. The number is based on the U.S. Fish and Wildlife Service, which gets information from interviews with about 11,300 people. The number may be good enough for lobbying, but it’s real-world applications are limited, Mr. Drummond said.

For example, it didn’t help Mr. Drummond get his loan approved — only a NAICS code representing the economic trends of the outdoor industry could do that.

It also didn’t stop the National Marine Fishery Service from shortening the Red Snapper season in the Gulf of Mexico from 180 days in 1997 to nine days this year. The proposal was approved because state politicians, the Gulf Coast Fishery Council, the American Sports Fishing Association and the fishery service itself couldn’t generate any proven numbers to document the economic impact of the change.

Instead, the change was recommended based on one confirmed number: how many fish the commercial fishermen catch, then estimates of how many fish sportsmen catch, how many fish are in the Gulf and the number of sportsmen fishing every day.

By making a code applicable to sportsman hunting and fishing, the industry would have had an indisputable economic number to help defend against shortening the season, Mr. Drummond said.

That’s what Mr. Drummond trying to do: get the NAICS codes changed to represent what he considers an invisible industry. The Census Bureau updates the codes every five years, and the next revision is scheduled for 2017. In May, Mr. Drummond submitted his proposal to group “outdoor trade” as one NAICS subset — separated from the pingpong parlors and pool halls in his current group.

The proposal is before the Economic Classification Policy Committee, which will negotiate 2017’s proposed NAICS changes with Canada and Mexico this month. The group will publish recommendations for change in the Federal Register in January or February. Comments either supporting or declining the change will go to the White House Office of Management and Budget, which will make its final decision next year.

Seeking allies

Mr. Drummond is trying to get outdoor industry heavyweights, including the National Rifle Association, the National Shooting Sports Foundation, and the Congressional Sportsmen’s Caucus, to weigh in on behalf of his proposal.

That is easier said than done.

Mr. Drummond has conducted informational interviews with them and has briefed their lobbyists on the stakes of NAICS reform for other small outdoor businesses in the industry. An association that represents 57,000 Second Amendment-supporting companies called 2AO has come onboard to help push Mr. Drummond’s case.

Bryan Crosswhite, president of the group, said his membership is mostly small businesses that have been crushed by the weight of industry regulation, and anything that helps to support or define the impact on them will be helpful in the long run.

For the National Shooting Sports Foundation, the devil is in the details.

“Earlier this year, NSSF examined the NAICS code issue and has decided not to weigh in at this point,” Larry Keane, senior vice president of the NSSF, said in a statement to The Washington Times. “The incredible complexity of undertaking a fundamental re-alignment of the system should not be understated and efforts to do so in a short period of time raise serious concerns about possible unintended consequences for our industry.

“Considering the complexity of NAICS, our limited resources, and the fact that the existing public and proprietary economic data tools we rely on are not based on NAICS codes, we determined this issue is not a major priority for members of our industry at this time,” Mr. Keane said.

The NRA and Congressional Sportsmen’s Caucus declined to be interviewed for this article.

The apprehension from the larger associations may stem from the worry that their economic estimates may not stand up to computed figures, Mr. Crosswhite said.

“They do their own economic impact studies, but they do it all off of estimates, so these guys aren’t getting actual numbers,” said Mr. Crosswhite. “The problem is, when you start doing [an NAICS code change], the numbers that they’re projecting could be flawed. And we think they’re flawed already — we think they’re actually low.”

Mr. Drummond, who returned to his full-time job as an hydraulic engineer in Alabama after losing his lodge, remains committed to his mission. He believes change is possible, and for his industry’s sake, that he’s right.

“When Hurricane Katrina hit the Gulf, I had 60 charter boat operators call me and say: ‘FEMA has replaced our house and our truck, but they won’t replace our boats because they said our boats are a hobby. What do they mean our boat’s a hobby? That’s how we pay for our house and the truck,’” Mr. Drummond recalled. “They urged me to help them get this coding changed.

“I ended up losing everything I had, but others don’t have to,” he said. “I’m the only guy in the outdoor industry who’s figured this out, but when I found out I was right, I redoubled my efforts.”

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