Just what the doctor ordered. Raise taxes and destroy the ailing auto industry

“Ready fire, aim” sounds like members of our state legislature who raised our taxes and now hope to persuade us to pass Prop 1A with all their deceptive TV ads.

Let’s look at one key segment of our state and local revenue stream, auto dealers.  I read that there are between 1,200 to 1,600 surviving dealerships in CA. One hundred and twenty (120) closed last year with another fifty closing their doors in the first four months of 2009.

Reading a Dec. report from KGO it points out that “the average auto dealer in Silicon Valley employs 85 people and pump $1 million of sales tax into the city.”
They go on to state that as part of their restructuring GM plans to close 1,750 underperforming dealerships (nationwide) over the next four years. In addition, Chrysler may trim it’s 3,300 dealers.
Another report states that auto sales represent 14 percent of the revenue in the city of Freemont while I have read other data indicating numbers as high as 30 percent.

In the city of Mission Viejo “10-20% of the total sales tax revenue is derived from car sales.”
The numbers speak for themselves. From three million car and truck sales three years ago the CA Dealers Association is projecting a decline to one million new vehicle sales this year.


So as we try to craft a state budget we raised taxes that obviously hit the high ticket items the hardest. So as the CA auto dealers struggle to survive the sales tax was increased and “authorizes the Department of Motor Vehicles to increase the Vehicle License Fee (VLF) from 0.65 percent to 1.15 percent when registration fees are due on or after May 19, 2009.”

Wait, there’s more to the story.
The result of downsizing will create wars between cities with auto dealerships competing to save these revenue generators. Look at the south Orange County dealerships in Mission Viejo, Irvine, Newport  Beach, Tustin and Santa Ana. There will be winners and losers over the next few years. For those funded with Bonded Indebtedness (tax increment financing) the cash flow to pay off those bonds may be seriously impacted.
As one person recently stated “the inevitable consolidation tsunami is just beginning.”

Gilbert note: Don’t be misled. Vote NO on Prop 1A


About Larry Gilbert