Mesa eyes bonanza from future auto malls The Mesa Tribune | The Hometown Newspaper for the city of Mesa, AZ

Mesa eyes bonanza from future auto malls

Mesa eyes bonanza from future auto malls

By Jim Walsh
Tribune Staff Writer

A planned auto mall in southeast Mesa represents a potential sales tax bonanza for a revenue-starved city without a property tax, recouping millions lost from the exodus of dealerships a decade or more ago.

One by one, major dealerships for such brands as Toyota, Honda, Nissan and Chevrolet left their locations along Broadway Road and Main Street for auto malls in Tempe, Chandler and Gilbert at the behest of manufacturers – who wanted locations along freeways to maximize marketing.

But now southeast Mesa has the new Gateway Freeway, or Arizona 24, beginning construction this fall.

The development boom it is spawning in one of Mesa’s last frontiers includes the new Destination Gateway auto mall, planned near Williams Field and Signal Butte roads.

“The whole region was coming to Mesa to buy cars,’’ before many dealerships relocated to malls with access to the Loop 202 freeway in Chandler and Gilbert, Mesa Mayor John Giles noted.

“As we lost these dealerships, we created a revenue shortfall in the city of Mesa’’ that still exists today with Mesa ranking “dead last’’ in per capita sales tax revenue, Giles said.

“I think it’s important that we recapture that revenue,’’ he said.

A study determined this dusty desert outpost east of Phoenix-Mesa Gateway Airport is the only location suitable for a new auto mall in Mesa, while a heat map showed that the city’s largest sales tax generators are the auto dealerships that ring the city already near freeways.

“This is absolutely the result of the city looking for ways to bring car dealerships to Mesa,’’ Giles said. “We did look at the potential for car dealerships on this stretch of new freeways.’’

Not surprisingly, the Mesa City Council embraced plans for the auto mall’s development, using a sales tax rebate to build roads that will be deeded to the city, while reaping many times the incentive in sales tax revenues.

In essence, the dealerships would be carving out a new territory for future growth because a state law bars same make of new car dealerships from being within 10 miles of each other, according to a Mesa City Council report.

A chart attached to a power point presentation outlines Mesa’s financial windfall.

If there is one dealership built by the end of 2026, the city would give back $3.9 million in sales tax rebates by 2034 in return for $9.3 million in sales tax revenues.

If there are at least two dealerships built, as anticipated, the cost of sales tax incentives would increase to $6 million while the anticipated revenues would soar to $18.9 million.

The strategic location allows for all but a Chrysler, Dodge, Jeep and Ram dealership, according to the presentation.

City Manager Chris Brady said the incentives are required because the current roads in the area are substandard, with the developer essentially starting from scratch.

Sean Lake, the zoning attorney handling the proposal, said the Berge Auto Group is planning to buy the entire 90-acre site. He said the Horne Auto Group has purchased land nearby.

“They are very interested. They are very hopeful of getting as many dealerships as possible,’’ Lake said, alluding to the Berge project. “We love this location and we love the opportunity to work with Mesa.’’

He said Horne has purchased land at the southwest corner of Signal Butte and Arizona 24 and their project would be separate from Berge.

“They like to cluster together to create synergy,’’ Lake said.

Berge has a lineup of eight dealerships in Mesa, Phoenix and Tucson.

Berge’s brands include heavyweights such as Ford, Toyota, Lexus, Mazda, Lincoln and Volkswagen.

Brady said many car dealers have expressed interest in the new auto mall and it’s conceivable the city could end up with more than two new dealerships.

A development agreement outlining the tax incentive refers to at least three dealerships. The incentive deal and zoning changes are scheduled to come before the council for approval on July 8.

Giles said he does not consider the tax incentives to be a true giveaway because the new roads eventually will be deeded back to the city as the “raw land’’ turns into an auto mall.

He said the incentives amount to 50 percent of sales taxes that would have gone to the General Fund and that the developers don’t get the deal unless they generate millions in sales tax revenue for the city.

“If they are making money, we are making money,’’ Giles said.

The agreement calls for Mesa to finish the construction of Signal Butte Road to the new Arizona 24 by 2022, which was part of Mesa’s plans anyway, with a $100 million transportation bond issue scheduled to go before voters in November. 

Because regional projects are scheduled first, Mesa will receive another $62 million in reimbursements from Proposition 400 through the Maricopa County Association of Governments to include more projects, said R.J. Zeder, Mesa’s transportation manager. 

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