Councilman Supports Mayor's Plan to End Business Tax on Car Dealers

Councilman Mitch Englander Tuesday backed Mayor Antonio Villaraigosa's  proposal to eliminate the city's business tax for auto dealers in a bid to keep new-car dealerships in Los Angeles.

Englander represents the 12 District which includes Chatsworth.

The mayor announced that plans to move to Los Angeles, becoming just the second dealership to open in the city in 25 years. In the same period, 95 auto dealers left Los Angeles and opened in Glendale, Burbank, Pasadena and other cities that have low business taxes or none at all, according to the mayor's office.

The announcement comes despite the city's propensity to buy cars outside the city. Los Angeles now has about 52 new car dealerships.

A forthcoming report from the city's Commission on Revenue Efficiency found the Port of Los Angeles and the Department of Water and Power bought more than 1,000 vehicles, but none from Los Angeles dealerships, over a nine-month period starting in August 2010. The purchases totaled more than $60 million, which could have generated nearly $6 million in sales tax revenue for the city.

In May, LADWP bought 912 pickup trucks worth about $28 million from dealerships in Alhambra and West Covina. In March, the port bought 11 Ford Escape Hybrids from a dealer in Costa Mesa.

The report is expected to be handed up to the City Council in the next two weeks.

Ron Galperin, who chares the commission and is running for City Controller in 2013, said he applauds the move to try and bring more new car dealerships to the city, but "we have to stop sending our money somewhere else, and keep it L.A."

City Council President Eric Garcetti and Councilman Englander are backing the mayor's proposal. Garcetti reiterated his call for the city to go even further and eliminate the business tax completely.

"Targeting car dealers is a big first step. But we must eliminate the business tax altogether," Garcetti stated. "L.A.'s cumbersome tax scheme is one that taxes businesses even when they lose money."     In recent weeks, the mayor has called for making a business tax holiday permanent for new firms or businesses that move to the city, and he recently signed a local-hire preference to give area businesses an advantage in bidding for city contracts.

Last week, Villaraigosa announced the formation of a Regional Export Council he hopes will help local businesses increase sales abroad.

"For too long, L.A.'s business tax has driven auto dealers outside the city limits," Villaraigosa said. "It's time to reform our business tax in a way that keeps auto dealers and the large amount of sales tax they produce inside the city of Los Angeles."

The business tax is self-defeating in that it produces only limited revenue while scaring away auto dealers that would otherwise generate substantial sales tax revenue, according to the mayor's office. Last year, auto dealers generated about $3.6 million in business tax revenue, but $29 million in sales tax revenue.

"Eliminating the business tax for new auto dealers in Los Angeles is a win-win, generating higher sales and higher sales tax for the city," said Charlie Gill, president of the Greater Los Angeles New Car Dealers Association. "For the first time in generations, dealers would be unfettered by this punitive tax and feel free to move into the city, move their merchandise and use the money they save to hire new employees."

Beverly Hills Porsche, which is expected to move into the city next year, generated about $100 million in sales last year. The mayor's business team estimated that the move will generate about $1 million for the city's general fund, which pays for basic services like police and firefighting.

The mayor's announcement was timed to send a message to auto companies ahead of next week's L.A. Auto Show.

"Let's showcase Los Angeles to this industry. Let's show them Los Angeles is open for business, and let's generate new jobs and revenues for the city," Villaraigosa said.

-- City News Service