Slammed by a triple whammy of high gas prices, rising unemployment and a credit crunch, many auto dealers around the region are closing or consolidating operations. It promises to be a period of transition for a business that was once cruising along in the fast lane with the top down and the sun shining.
It's also a transition time for local governments. As auto sales drop, so do sales tax revenues for cities and counties. Many of them designed their budgets, land-use plans and incentive packages during an era of competition for auto malls. That needs to change.
Indeed, there appears to be at least one upside to the downturn in auto sales: Local governments can finally have a rational discussion about these dealerships instead of engaging in all-out war.
Starting in 2004, it appeared that Sacramento city and county might be heading toward such a battle.
That year, Mel Rapton Honda announced plans to move from unincorporated Sacramento County to the former home of the Sacramento Trapshooting Club, on city-controlled land next to the Haggin Oaks Golf Course.
A lawsuit by the county seemed possible. Lawyers started researching whether the city had violated state law – which prevents localities from using subsidies to lure auto dealers and retailers away from other jurisdictions – by spending $6 million to remove lead from the trapshooting site.
Fortunately, cooler heads prevailed, and those heads have now reached agreement on a historic tax-sharing deal. Approved by the City Council on Tuesday and the county supervisors Wednesday, the agreement encourages both entities to find the best possible site for a prospective auto dealership instead of working at cross purposes.
Here's how it works: Currently, the city receives about $3 million in yearly tax revenue from auto sales, and the county receives about $7.7 million. Under the agreement, each entity could continue to keep that "base" amount. But they'd share revenues from the growth of existing dealerships as well as revenues from any new dealerships.
Local leaders say the pact will help them retain existing auto lots and help them recruit "an expanded green fleet of vehicles using alternative fuels." There's only one problem with the agreement: It seems aimed at helping the city and county triumph over other localities instead of fostering a broader cooperation. A preferable option would institutionalize such agreements across the region and expand them to include all forms of retail outlets, including big-box stores and regional malls.
State Sen. Darrell Steinberg of Sacramento attempted to craft such a pact as an Assembly member in 2002, but his timing was off. Cities such as Roseville and Folsom were rolling in sales tax revenues at the time, so they ganged up to kill Steinberg's bill, AB 680.
Now the economy is different. Indeed, everything is different. The Internet is changing how people shop, and $4 gas is changing what they shop for. At the same time, a rising unemployment rate demands that elected leaders redouble their efforts to create sustainable, decent-paying jobs.
Instead of fighting each other to land big-box stores and auto malls – often placing such projects next to light-rail stations and other inappropriate spots – localities need to redirect their priorities. Redevelopment funds and zoning decisions should be focused on attracting manufacturers, neighborhood-friendly businesses and a more affordable mix of housing.
A regional tax-sharing plan would help in that cause. But it will never happen if the region's elected leaders can't look beyond their noses and the ledger sheets they have on their desks.
