At tomorrow’s meeting (PDF), the Oakland City Council’s Community and Economic Development Committee will receive a report on the status of Oakland auto industry (PDF). It’s kind of a downer.
Just like every other source of revenue the City relies on, sales tax is down. Auto sales tax (new cars, used cars, and car leases) especially down. Check it out:
That’s how much money has come to the City each year from auto sales tax since 1996, for a total of $64.8 million. And it’s a hefty percentage of the total sales taxes we receive:
Oakland isn’t the only place car dealerships are struggling. Nationwide, new car sales were down 38.4% (PDF) in the first quarter of 2009 versus 2008, and in California, the decline was an even greater 43%. Nevertheless, compared to other Bay Area cities, Oakland suffered an especially steep decline in auto sales tax revenue from 2007 to 2008.
So, we obviously don’t want to lose any more of that sales tax (and business tax) our dealerships contribute, not to mention the 500+ jobs they supply. The question is then, what can we do to keep our few remaining dealerships (Broadway Volkswagon, Honda of Oakland, Oakland Acura, Mercedes Benz of Oakland, Audi of Oakland, Bay Bridge Auto Center, Downtown Auto Center, Infiniti of Oakland, Coliseum Lexus of Oakland, East Bay Truck Center, TEC Trucks, and Western Truck Center) from going the way of Broadway Ford and Saturn of Oakland?
For a while, we were trying to relocate some of the auto row based dealerships to the Army Base. A friend of mine in the business was skeptical of this effort when I told her about it two years ago, telling me:
Yeah, I can imagine the dealers are looking to get out of downtown Oakland. Space is certainly something you need to run a dealership. But even still, I can’t believe how little space they’re getting – that link says that the 3 dealerships are getting 16.2 acres and the one dealer says he expects to go from $50M to $100M in sales. Just to give you some perspective, we sit on a little over 3 acres and did $31.5M last year. They’re going to be running some big stores off relatively small pieces of land at the base. Oh, and just a national average for you – NADA says that the average car dealer makes about 2% net profit on that sales figure. So now they’ll be making something like $2M for the move, but have to pay out about a million per acre. Crazy.
And, well, it’s not working out so far. Or, as tomorrow staff report puts it “The Auto Mall Project has stalled due to major development costs associated with infrastructure and construction.”
So what are we going to do about all this? Here’s the suggestions listed in the report:
- Aggressively pursue replacement of new auto dealer for former Superior Toyota dealership with automakers and auto financing entities. When new dealership is identified, prioritize permits and approvals to assist in expedited opening.
- City,along with Private Industry Council (PIC) Rapid Response Team, work with each dealership when and if employee reductions are necessary, to assist employees with unemployment options, re-training opportunities, and owners to meet all state requirements.
- Work with each dealership to maximize Oakland Enterprise Zone benefits by special referral to Program consultant.
- Continue working with two existing auto dealers interested in expanding their dealership facilities.
- Designate a CEDA staff person as a primary point of contact for auto dealership issues.
I find the retraining one particularly depressing to find in a retention strategies report. Dealerships have requested assistance in the form of marketing, “facilitating car inventory parking facilities,” and “facilitat[ing] public and private financing options with lending institutions.”