City Council Approves Sales Tax Incentive Deal With Cabe Toyota
May 25, 2011 Leave a comment
by Tiffany Rider, Staff Writer
The Long Beach City Council on May 10 approved long time auto dealer Cabe Toyota for the city’s sales tax incentive agreement program. The program allows businesses which expand or remodel, and which generate above $5 million in taxable sales, to share up to 50 percent of the sales tax generated in excess of a predetermined sales tax base.
The dealership, which opened in 1966 and employs more than 80 people, requested support from the city in order to remodel and expand its operation at 2895 Long Beach Blvd. The expansion is expected to cost at least $3 million.
The agreement calls for the city to lend $1 million to Cabe Toyota to be paid over 15 years or until the dealership achieves $1 million in taxable sales. If the dealership is not able to receive a certificate of occupancy for the expansion within four years, Cabe Toyota must repay the money plus market interest to the city.
According to owner John Cabe, the dealership is going to borrow the other $2 million needed for the project. “Once we do that, we’re going to have sales tax revenue,” he told the city council. “In turn, when we do that, we’ll make more and you’ll make more, and it’s paid for.” The deal, as requested by Cabe Toyota, is retroactive starting January 1, 2011.
Between 1999 and 2006, Cabe Toyota’s taxable sales averaged $25 million.
“The economy has hit our local businesses very hard, and no business sector has been hit harder than automobile dealerships,” Deputy City Manager Reggie Harrison told councilmembers at the May 10 meeting. “New car sales in California fell 23 percent in 2008 and 29 percent in 2009, and over 200 California dealerships have closed since 2008. While Cabe Toyota was impacted by the downturn, it remains a significant contributor in terms of jobs and sales tax.”
Though the Worthington Ford dealership was awarded a $600,000 loan last year using the city’s Community Development Block Grant (CDBG) funding, the city is unable to provide such a loan to Cabe Toyota. “We do not have $1 million in unencumbered CDBG funding for this,” Harrison said, noting the city can expect a reduction of $1.7 million in CDBG funding for Fiscal Year 2012.