May 14, 2009

Is the auto mall going extinct?*

Two of the most prized possessions for a California city are a big box store and an auto dealership. Many a redevelopment-agency loan was made to first attract and then keep these revenue generators in town.

But the economic downturn has sucked the life out of many big box stores, and sent a few into bankruptcy. But worse for cities is the loss of dealerships, which generate the sales tax needed to keep city services going. So the news out today that ailing GM and bankrupt Chrysler will eliminate hundreds more dealerships is staggering.

Chrysler told a bankruptcy court it plans to close 789 dealerships nationwide; GM is expected to close as many as 2,600. Already California has lost 145 dealerships and it's not clear exactly how many more will go. The LA Times reports:
Throughout the state, local governments are struggling to keep their auto dealerships alive, because most have become reliant on the big-ticket sellers to provide a steady stream of sales tax income.

Since Proposition 13 limited California property taxes in 1978, many cities have encouraged the construction of malls and other retail uses that bring in sales taxes to fund the municipal budget.

Car dealerships are now among the biggest generators of tax revenue.
*Update: Three San Fernando Valley dealerships are on the chopping block, the Daily News reports.

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