Subsidy to dealers may be worth it - East Valley Tribune: Opinion

Subsidy to dealers may be worth it

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Posted: Wednesday, January 12, 2005 4:59 am | Updated: 9:15 am, Fri Oct 7, 2011.

Auto dealers in south Scottsdale are preparing to ask city officials for a sizable chunk of corporate welfare — $2.5 million over five years.

They won’t call it that, of course. They’ll call it a strategic investment, a public-private partnership, economic accessories or something.

By any name, however, it will be corporate welfare. The idea might be worth a test drive.

At the moment, 12 dealerships are clustered near Scottsdale and McDowell roads, a stretch the dealers have called Scottsdale Motor Mile for decades.

Together, they offer 32 car brands, making it one of the largest groups of auto dealerships in the state.

But over the years, the city’s wealth went north and the new freeways went east and further south into Tempe. Business declined and pressure to relocate increased, said Michael Famileti, area vice president of United Auto Group, which operates several dealerships.

Other East Valley cities are offering developers millions of dollars to lure auto dealers, which are lucrative tax generators.

“We have developers from Mesa and Gilbert and Chandler going, ‘Hey, I don’t care if you have a 20-year lease. I’ll buy the lease out,’ ” Famileti said.

Motor Mile almost surely would have sputtered to a halt if not for two factors:

1. The city’s new deal with Arizona State University to develop a technology center at the old Los Arcos Mall site on the southeast corner of Scottsdale and McDowell roads.

2. New luxury condominiums under development in downtown, just north of the area.

New residents and wealth are headed back to the area, though maybe not for three to five years. So during the summer, the dealers formed a nonprofit group, the Scottsdale Motor Mile Association, to market the strip until then.

The self-imposed fees: $5,000 a month for single dealerships and $10,000 a month for multidealerships. The total contribution of $960,000 a year will be administered by the Scottsdale Area Chamber of Commerce.

“What we decided to do — at the risk of sounding like a New Yorker — we wanted to take our neighborhood back,” Famileti said.

The dealers envision hanging banners on 89 light poles in the area, other streetscaping projects and creating crowd-attracting special events.

The campaign is in addition to each dealership’s regular ad budgets and capital investments, said Famileti, president of the association.

Over the past five years, even with declining business, the Motor Mile dealerships contributed $40 million in tax revenue to the city. So the deal is $2.5 million corporate welfare package to retain $40 million in tax collections. Car dealers have made worse offers.

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