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Shopping for Success

Cities Use Sales Tax Tools to Lure Retail

by Clint Shields

Editor’s Note: The following article appeared in the September/October 2007 issue of Texas Rising.

Texas towns offer a wealth of shopping opportunities that entice tourists and generate sales taxes. City leaders are increasingly realizing that shopping drives dollars into their communities, whether they are the Gallerias of Houston and Dallas or the galleries of Gruene and Fredericksburg.

According to the Texas Retailers Association, its 1,500 members operate 25,000 stores and account for more than $75 billion in sales annually.

Flocking to Fredericksburg

Weekends in Fredericksburg find a slow trail of cars parading down Main Street and shoppers congregating on the sidewalks, according to Greg Snelgrove, executive director of the Gillespie County Economic Development Commission (GCEDC).

“We don't have a shop on Main that you can find in another city in Texas,” Snelgrove says. “Fredericksburg is different and unique. If we allow it to look like other places, we’ve lost our allure.”

That one-of-a-kind attitude resulted in about $55 million in annual tourism spending, according to a 2005 study. Snelgrove says the city actually sees closer to $94 million in annual tourism spending, which includes $73 million in direct spending and another $21 million from Gillespie County’s 1,800 hotel, motel and bed and breakfast beds. Hotel occupancy taxes generated about $1.3 million for the town in 2006.

The key to continued retail success for Fredericksburg is reinventing its tourist appeal, Snelgrove says. The GCEDC is looking to highlight mid-week attractions and create new ones to rival the weekend crowds.

“Our long-term plan is to construct a center of excellence in wine and culinary arts,” he says.

While the center of excellence is now only a concept, ideally it would include a non-profit public/private venture structured to accept private contributions and public grants. An instructional culinary school would build on the county’s burgeoning wine and specialty foods industry, offering products from area vineyards and food companies and other quality Texas-made items.

Fredericksburg funds its economic development efforts with an annual budget allocation from the city and Gillespie County. It does not use the 4A or 4B economic development sales tax. Instead, Snelgrove says the town’s quality of life, reputation and business climate drive its economic development efforts.

For more information on Fredericksburg’s retail and economic development efforts, contact the Gillespie County Economic Development Commission at (830) 997-6523 or visit their Web site.

Bee Cave

Editor’s Note: The following article appeared in the September/October 2007 issue of Texas Rising.

Bee Cave Buzz

A useful economic development tool for communities seeking retail projects is the Chapter 380 Agreement, named after Chapter 380 of the Local Government Code that authorizes it. Enacted by the Texas Legislature in 1991, 380 Agreements let cities make loans and grants of public money to businesses or developers in return for building projects within the city. Cities often pay these grants from the increase in sales or property taxes generated by the project.

The city of Bee Cave used a 380 Agreement to develop the Hill Country Galleria, a new retail and housing project. It will add an estimated 2,500 jobs and a healthy dose of sales tax revenue to Bee Cave.

“When it’s fully open and operational, we think we’ll see about $4 million a year in sales tax,” says James Fisher, city administrator in Bee Cave. “And that’s a very conservative number.”

Bee Cave’s position southwest of Austin puts it in a prime spot to attract shoppers. “The growth corridor of Austin is moving southwest, and San Antonio is moving north,” Fisher says. “We think this will be a good catalyst and economic engine in southwest Travis County.”

For information on Bee Cave’s retail efforts, contact the city of Bee Cave at (512) 767-6600.

The Comptroller’s Local Government Assistance and Economic Development Division provides technical assistance on a number of tax-related incentives available to local governments: Section 4A and 4B sales tax permissible project expenditures, property tax abatements, Chapter 380 Agreements, county/municipal development districts and sales tax refunds for economic development.