Car dealers forgo $900K city subsidy

Posted on August 17, 2007 | Type: Press Release
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Scottsdale's Motor Mile auto dealerships will voluntarily forgo nearly $1 million in city-funded marketing money, saying its advertising campaign has brought in business at a rate that exceeded expectations.

The Scottsdale Motor Mile Association sent a letter to Mayor Mary Manross this week that said the results of the ad campaign for the dealerships were reached quicker than anticipated.

Two years ago, the association was awarded a controversial five-year, $1.5 million subsidy from the City Council to market and brand the cluster of 32 vehicle makes sold by 11 dealerships primarily along McDowell Road, between 64th Street and Scottsdale Road.

The dealerships had collected $600,000 from the city over the past two years that went toward launching a Web site, advertisements and community programs, but they will not collect the remaining $900,000 from the five-year agreement.

The idea behind this originally was we thought it would probably take five years to get the word out, but its doing well and we thought it was a nice thing to do, said Michael Famileti, chairman of the association and general manager of the areas Penske Automotive dealer.

The agreement was made at a time when the dealerships were seeing declining sales they attributed to a lack of revitalization in south Scottsdale and competition from newer auto malls sprouting up along East Valley freeways. In addition, many of the new auto malls in Mesa, Gilbert and Chandler were beneficiaries of municipal sales-tax incentives.

I dont know if they needed it to begin with but, nonetheless, Im glad to see them withdraw their request, said Councilman Jim Lane, who opposed the marketing subsidy.

Sales-tax receipts from the dealerships were higher during the past two years that the marketing plan was in place, according to figures released by the city.

Scottsdale collected $10.8 million from the Motor Mile dealers in 2005-06 and $10.3 in 2006-07 fiscal years. Although there was a decrease this past year according to preliminary numbers, which reflects national trends, both figures are higher than the $9.7 million in 2004-05, said Scottsdale economic vitality director Dave Roderique.

The city dollars were meant as seed money for them to get going, and they see the value of it now and will continue, Roderique said.

While sales have increased, it was reported last year that Scott Toyota was leaving the Motor Mile and relocating to Mesa Riverview at Loop 202s Red Mountain Freeway and Dobson Road.

Municipal subsidies to auto dealers and other retailers have come under fire in recent years. The state Legislature passed a law earlier this year that financially penalizes communities in Maricopa and Pima counties that provide incentives to retailers.

And last week, the Goldwater Institute, a conservative think thank, filed a lawsuit challenging Phoenixs $97.4 million incentive package to the developer of the planned CityNorth project at Loop 101 and 56th Street. The lawsuit argues that the deal violates the Arizona Constitution.

The Motor Mile association board voted in July to not accept future city funding, said Virginia Korte, president emeritus of the Scottsdale Area Chamber of Commerce. Kortes family once operated a Chevrolet dealership in the area and now leases that land to Bill Heard.

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