San Marcos Mercury | Local News from San Marcos and Hays County, Texas

September 12th, 2011
San Marcos declines Tanger Outlets plea for more advertising funds

by SEAN BATURA

For the first time, the city of San Marcos officials won’t grant money for Premium Outlets via a joint advertising program and has slashed Tanger Outlets’ share of funds, saying the money is better spent promoting tourism in the city as a whole.

Since Tanger Outlets opened in 1989, opening a new era of lucrative sales tax gains for the city, the municipal government has put up funds to pay for an advertising program for the retail Mecca. The city council agreed to fund only $100 of Tanger’s $275,000 request this year. Premium Outlets, formerly Prime Outlets (pictured here), did not request funds for the first time. COURTESY PHOTO

The council declined to fund $175,000 of Tanger Outlets’ $275,000 request for the long-running advertising program and gave most of the difference to the San Marcos Convention and Visitor Bureau after representatives from both entities argued their cases before the council Tuesday night.

“We have a $169,000 budget and they have a $1 million (advertising) budget,” said Rebecca Ybarra-Ramirez, executive director of the San Marcos Convention and Visitor Bureau. “So we have to promote the entire community with $169,000, and Tanger promotes Tanger with $1 million.”

Since Tanger Outlets Center opened in 1989 along what was then an empty stretch of interstate — Prime Outlets opened a few years later — the malls have pooled money with the city each year to market the stores, which together generated 20 percent of general fund revenue this budget year. For first time since the partnership began, Premium Outlets did not request funding for the partnership for next budget year.

Tanger General Manager Juan Carlos Linares told council members that advertising funds from the city have a “direct impact” on the mall’s sales revenues, and are “crucial” for advertising campaigns in places including Dallas, Houston, and Mexico.

“We’ve been part of this community for many years,” said Tanger Assistant General Manager John Lairsen. “We donate money to the police and fire department, we provide a substation for the police, we have a scholarship we fund at Texas State. I could go on-and-on-and-on about all the things we do. We’re not here for the short-term. We are not a greedy company. We strongly feel that we can take this additional money and do a fantastic job with it, because that’s what we do for a living — drive people into those outlet centers as well as drive people into the city of San Marcos.”

Tanger committed to $1 million for advertising plus 100 percent matching funds to the city’s proposed contribution of $100,000, making the current total $1.2 million for next budget year. However, had the city provided $275,000, there would be $1.55 million for advertising the mall next budget year, which begins Oct. 1.

“By cutting our fund at $100,000, you’re actually taking $300,000 out of money that would promote the city,” Lairsen said to the council. “That’s a lot of money. We have competition sprouting up all around us. We’re building a center in Houston. Eleven percent of our traffic comes from Houston. We need this money to attract other entities into San Marcos and shop with us.”

San Marcos City Council Place 1 member Kim Porterfield, who sits on the convention and visitor bureau board, led the effort to deny Tanger’s requested funding level. Porterfield said a business climate in which Tanger builds competitor malls in Houston and Galveston warrants diversification of the city’s tourism dollars.

The city funds the convention and visitor bureau and outlet mall advertising from the Hotel Occupancy Tax Fund. The fund is supplied from a nine percent occupancy tax charged to customers of hotels, motels and inns.

“Tanger is matching the money two to one and Tanger is a great community partner, and, I agree, totally not greedy — but Tanger is promoting shopping,” Porterfield said. “And one of the things CVB has done in the last couple of years is try to diversify our tourism market to include sports tourism with baseball tournaments, tennis tournaments, our new soccer fields…convention center, historic tourism, nature tourism, trying to diversify that. Because we can’t keep all of our eggs in the outlet mall basket forever.”

Tanger, which had 1,540 employees in 2010, was the third-largest employer in the city that year, according to city budget documents. In 2010, Tanger was the third-largest taxpayer in the city, and paid about $231,173 in property taxes that year, according to the documents. Tanger does not publicly disclose its sales figures.

Tanger provides from $3.5 million to $4 million in sales taxes per year to the city, which amounts to about nine percent of total general fund revenues, said Steve Parker, the city’s finance director.

On Tuesday, Lairsen told the council Tanger allows city residents to pay 23 percent less in property taxes. No city staff contradicted his statement.

Premium and Tanger Outlets supply the city with about $9 million in sales tax revenue annually, Parker said. In recent years, the malls supplied about 21 percent of the city’s annual general fund revenues and furnished about half the city’s total annual sales tax revenues.

Premium Outlets did not request advertising funding for next budget year. Simon Property Group bought what was then called Prime Outlets in 2009, later changing its name to its Premium Outlets brand. Council members have expressed concern that money Premium was using to promote its outlets was also promoting its property in Round Rock, a nearby potential threat to San Marcos outlets’ dominance.

Just before they approved this year’s budget, council members opted to reserve $207,000 for Premium Outlets after the company presented a satisfactory marketing plan and negotiated a new contract. The city ended up allocating $65,000 in this year’s budget for Premium.

Parker indicated Premium contributes annual sales taxes totalling about $5 million, which amounts to about 12 percent of the city’s general fund revenues.

In 2010, Premium was the second-largest employer in the city, and the sixth-largest taxpayer, according to city budget documents. The mall contributed about $183,738 in property taxes that year, according to the documents.

The San Marcos Convention and Visitor Bureau’s Hotel Occupancy Tax Fund allotment is proposed to be $940,082 next budget year.

San Marcos council member Jude Prather, on Tuesday, made a motion to take $105,000 planned for the convention and visitor’s bureau and give it to Tanger next year, which would have funded the mall at this year’s level of $205,000. Prather’s motion failed by a 5-2 vote. Prather and San Marcos City Council Place 4 member Chris Jones voted in the minority.

Though Lairsen appeared to ask the council for the original request of $275,000, Linares asked council members — the same night — for $205,000, which would have allowed $1.41 million available for advertising the mall next budget year.

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