Champion Dodge gets $1 Million in Working Capital from City of Downey

XDCX · 06-09-2010, 05:07 PM

News reports indicate that Champion Dodge will receive $1 Million in Working Capital from the City of Downey so the dealership can acquire the Chrysler/Jeep franchises. For the full report - click here

The dealership will receive $500K initially and the remaining $500K over a period of 10 years. As part of the agreement the dealership must create and keep 12 full time jobs and generate at least $275K in sales tax each year for the next 10 years. If the dealership generates sales tax in excess of $350K/year the overage will be split between the city and the dealership.

As I understand it, the $1 Million Working Capital infusion is not a loan and does not need to be repaid if the dealership meets the aforementioned terms.

possum · 06-09-2010, 06:57 PM

I think the comments from the locals was better reading. If the Dealer can get it, he should, but I can't imagine the city getting involved. It's an interesting idea, and the idea of the Dealership keeping half the "tax" revenue is an interesting case for lawyers to anticipate.

XDCX · 06-09-2010, 10:19 PM

Quote:

Originally Posted by possum

I think the comments from the locals was better reading. If the Dealer can get it, he should, but I can't imagine the city getting involved. It's an interesting idea, and the idea of the Dealership keeping half the "tax" revenue is an interesting case for lawyers to anticipate.

I feel the same way. I'm a "pro-dealer" guy and I want this to be a "pro-dealer" site but I think it's crazy that the tax payers are providing a $1 Million gift to a private business owner.

That said, the reason I keep posting threads like this is to make our members aware of what other communities are doing to keep dealerships open. It definitely goes in the category of "If you don't ask, you don't get."

Concerning the sales tax split, I've heard of a number of cases where dealers were able to negotiate that concession - mostly in Arizona and California. The smart dealers threaten to move to another city and then play the two cities against one another.

DealerEx · 06-10-2010, 08:57 AM

I suspect it is probably a setup similar to an Economic Development Corporation in Texas. They are a governmental entity set up by state laws to levy and administer an additional local sales tax to be used to promote the city, attract new businesses, create new jobs, and enhance the local economy. I'm an officer and board member of an EDC here, and we have used tax funds for a wide variety of purposes ranging from "quality of life" projects such as museum expansion, new baseball complex, hospital expansion as well as providing start up capital for small businesses, tax abatements on a new hotel, real estate loans and remodeling capital for a winery. It all comes down to examining the project/proposal closely and determining "will the communtiy be better off economically if we do this or not". In the case of a car dealership, it depends on the sales tax structure in that state. In every state, car dealerships are the single largest source of sales tax revenue for the state, but they don't necessarily generate LOCAL tax revenue directly from sales, in all states. In Texas, car sales are exempt from local sales tax increments, so the benfit would have to be looked at on the basis of jobs retained and/or created and the impact the payroll had in the town, as well as additional revenues generated by customers from outside the town coming there to purchase a vehicle and spending additional money at other local businesses.

DealerEx · 06-10-2010, 09:07 AM

As Possum pointed out, the comments from the citizens tell the story of why nobody but the dealers care about what happened last year. The average consumer out there just flat out DOES NOT CARE about what the government and manufacturers did to the dealers. They think all dealers are a bunch of rich crooks that wake up each day planning how to rip them off. They have no idea what the dealers do for the local economies and all the other charitable and community activities they support and have no concept of the macro economics involved with a business that generates millions of dollars in tax revenues to the state each year.

Txflyer · 06-10-2010, 09:56 AM

Quote:

Originally Posted by DealerEx

As Possum pointed out, the comments from the citizens tell the story of why nobody but the dealers care about what happened last year. The average consumer out there just flat out DOES NOT CARE about what the government and manufacturers did to the dealers. They think all dealers are a bunch of rich crooks that wake up each day planning how to rip them off. They have no idea what the dealers do for the local economies and all the other charitable and community activities they support and have no concept of the macro economics involved with a business that generates millions of dollars in tax revenues to the state each year.

Sad, but very very true.

06-09-2010, 05:07 PM	#1
XDCX Administrator Join Date: Nov 2007 Posts: 14,869	Champion Dodge gets $1 Million in Working Capital from City of Downey News reports indicate that Champion Dodge will receive $1 Million in Working Capital from the City of Downey so the dealership can acquire the Chrysler/Jeep franchises. For the full report - click here The dealership will receive $500K initially and the remaining $500K over a period of 10 years. As part of the agreement the dealership must create and keep 12 full time jobs and generate at least $275K in sales tax each year for the next 10 years. If the dealership generates sales tax in excess of $350K/year the overage will be split between the city and the dealership. As I understand it, the $1 Million Working Capital infusion is not a loan and does not need to be repaid if the dealership meets the aforementioned terms.

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06-09-2010, 06:57 PM	#2
possum Senior Member Join Date: Jan 2009 Posts: 1,122	I think the comments from the locals was better reading. If the Dealer can get it, he should, but I can't imagine the city getting involved. It's an interesting idea, and the idea of the Dealership keeping half the "tax" revenue is an interesting case for lawyers to anticipate.

06-10-2010, 08:57 AM	#4
DealerEx Senior Member Join Date: May 2009 Posts: 549	I suspect it is probably a setup similar to an Economic Development Corporation in Texas. They are a governmental entity set up by state laws to levy and administer an additional local sales tax to be used to promote the city, attract new businesses, create new jobs, and enhance the local economy. I'm an officer and board member of an EDC here, and we have used tax funds for a wide variety of purposes ranging from "quality of life" projects such as museum expansion, new baseball complex, hospital expansion as well as providing start up capital for small businesses, tax abatements on a new hotel, real estate loans and remodeling capital for a winery. It all comes down to examining the project/proposal closely and determining "will the communtiy be better off economically if we do this or not". In the case of a car dealership, it depends on the sales tax structure in that state. In every state, car dealerships are the single largest source of sales tax revenue for the state, but they don't necessarily generate LOCAL tax revenue directly from sales, in all states. In Texas, car sales are exempt from local sales tax increments, so the benfit would have to be looked at on the basis of jobs retained and/or created and the impact the payroll had in the town, as well as additional revenues generated by customers from outside the town coming there to purchase a vehicle and spending additional money at other local businesses.

06-10-2010, 09:07 AM	#5
DealerEx Senior Member Join Date: May 2009 Posts: 549	As Possum pointed out, the comments from the citizens tell the story of why nobody but the dealers care about what happened last year. The average consumer out there just flat out DOES NOT CARE about what the government and manufacturers did to the dealers. They think all dealers are a bunch of rich crooks that wake up each day planning how to rip them off. They have no idea what the dealers do for the local economies and all the other charitable and community activities they support and have no concept of the macro economics involved with a business that generates millions of dollars in tax revenues to the state each year.