Carson’s Cormier Chevrolet facing April 29th $2.53 million cash call from GMAC


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At Saturday’s Municipal Officials for Redevelopment Reform, MORR Conference, held at the Long Beach Marriott hotel, we had a broad spectrum of invited guest speakers and attendees including Christina Walsh of the Institute for Justice in the DC area. Our luncheon speaker was Attorney Tim Sandefur of Pacific Legal Foundation. Attorney’s Robert Ferguson and Chris Sutton provided case histories and legal recommendations to the 85 attendees at this all day event. After the luncheon (Irvine) Assemblyman Chuck DeVore provided an update on redevelopment related legislation.

We also listened to health concerns expressed by a representative of a local group, “Carson Citizens for Reform.”  I sat with some of these Carson residents at the luncheon where we discussed their concerns. Since the meeting I have been in contact with two of their group getting background data for two stories.  A future post will expose a plan by the city of Carson to build homes above a former 168 acre dump site knowing that methane gas is in the dump site located near the intersection of the 405 and 110 freeways.

This post will address a second story relating to an urgent redevelopment agency “bailout” of an auto dealership which follows below.

One of the attendees told me that Cormier Chevrolet’s “primary lender, GMAC Financial Services (GMAC) was calling approximately $2.6 (effectively $2.53 million) million of the Dealership’s line of credit. The last day for payment to GMAC is April 29, 2009.”
 Lacking the funds the city approved a DDA by and between the Carson Redevelopment Agency and C-P Land Company regarding the dealership that is located on 10.8 acres at 2201 E. 223rd street. Under this agreement the city worked out a lease agreement “bailout” in which their redevelopment agency is purchasing the dealership land and buildings based on an “appraised value purchase price of $7.8 million dollars” of which $2.7 million is to be credited to the agency to pay off their prior redevelopment Agency obligation. The Agency is to place $5.1 million of the purchase price into escrow with “$2.4 million to be used to pay off an outstanding Developer bank loan and the Developer will receive the remaining approximately $2.7 million to pay GMAC.”
The five year lease terms call for a first year payment by Cormier Chevrolet of one dollar. In year two the agency is to receive .25% of the dealership’s gross sales of new and used vehicles and service revenues. In the third year the lease increases to .50% of dealers gross sales, increasing to .75% in year 4 and capping at 1% in the 5th year.

Is this the local equivalent of an Obama “bailout” plan? Rescue every ailing corporation? What about those smaller local Mom and Pop businesses that are also hurting in this prolonged recession?
The resident informed me that in 2001, 2002 and again in 2003 the redevelopment agency made improvements to the project site which eliminated any blighted conditions yet this deal is with the same agency of the city whenthere is no visible blight to be found.

One obvious negative impact. If the city now takes title to the Cormier property than they have just removed the dealership’s property taxes from the tax roll.

The following coverage, on this same auto dealership story is from the Mercury News. The link can be found at the end of this post.

Carson approves $8M bailout for Cormier Chevrolet

The Associated Press
Posted: 04/23/2009 08:01:14 AM PDT
Updated: 04/23/2009 08:01:14 AM PDT
CARSON, Calif.—The giant Cormier Chevrolet dealership is getting a nearly $8 million bailout from the city of Carson. The City Council approved a plan late Tuesday that calls for the Redevelopment Agency to acquire the dealership’s property and lease it back for five years at a subsidized rate.

It’s designed to keep the 43-year-old dealership in operation.

Slumping auto sales nationwide has GMAC, the financial arm of General Motors, calling in dealer loans. Without the city’s help, the dealership would be unable to pay a $2.6 million debt to GMAC and would close.

Cormier Chevrolet brings some $550,000 in annual sales tax revenues to city coffers. City officials say it is important to protect existing sources of revenue.

 http://www.mercurynews.com/news/ci_12208844

 

Larry Gilbert, Orange County Co-Director, Californians United for Redevelopment Education, CURE, the “grass roots” partner of MORR and; Member Castle Coalition, the “grass roots” affiliate of the IJ.


About Larry Gilbert