By Steven Piper
In an effort to promote large-scale development, stimulate private investment in the retail sector, and enhance sales tax revenue, the Long Beach City Council approved a recommendation during its May 10 meeting to authorize City Manager Pat West to implement a sales tax incentive agreement with Cabe Brothers for the expansion of its Toyota dealership at 2895 Long Beach Blvd., which is in District 6.
“Cabe has requested financial assistance using the city’s sales tax incentive program to help to defer the cost of expansion and redevelopment costs,” said Deputy City Manager Reggie Harrison. The cost of expansion is estimated to be $5 million, and according to the City’s financial consultant, Kaiser Marston Associates, Cabe has a feasibility gap of $3 million for its planned redevelopment program.
If the plan is implemented, then the dealership stands to collect 50 percent of its sales tax revenue over a 15-year period, and it will help close the gap by at least $1 million– the maximum amount of sales tax revenue that the dealership would be able to collect over the 15-year period. “For expanding businesses, the City may share up to 50 percent of the sales tax generated in excess of a predetermined sales tax base,” Harrison said. Annually, Cabe Toyota has averaged $25 million since 1999, and the agreement would last the 15-year period unless Cabe is paid a total of $1 million– whichever happens first.
Also stipulated during the May 10 Council meeting was a requirement that the dealership obtain its permit of residency for the property of the planned expansion within four years, or by 2015. If the permit is not obtained in the allotted four years– the agreement is retroactive to January 1, 2011– then the dealership will be required to return its portion of the sales tax revenue with market rate interest.
Cabe Toyota has been in business since 1966, and it has remained an anchor business of the area. Additionally, citing a crippled economy, Harrison claimed that one of the most affected sectors has been automobile sales. “New car sales in California fell 23 percent in 2008 and 29 percent in 2009. Over 200 California dealerships have closed in California since 2008… Cabe Toyota remains a significant contributor in terms of jobs and sales tax revenue,” Harrison said.
Apparently, similar agreements have been made in the past, like in 1992 when a sales tax incentive agreement was created to assist Worthington Ford.
Additionally, a similar agreement has been made between the Signal Hill City Council/Redevelopment Agency (RDA) and Hooman Nissan Auto Dealership, 1800 E. Spring St., who has also sought to expand. The dealership requested a $700,000 loan from the RDA, and if the company successfully meets their projected $2.1 million in sales tax revenue over the next five years, then the City will forgive the loan. If the sales revenue goals are not met, the dealership must repay the loan in full.