Villaraigosa Wants To Drop Taxes To Lure Car Dealers Back To LA

LOS ANGELES (CBS) — Mayor Antonio Villaraigosa wants to lure new car dealers to Los Angeles by eliminating city business taxes for auto dealers.

The mayor's proposal is designed to reverse the decades-long flight of new car dealerships to other cities. Villaraigosa plans to unveil the plan during a Tuesday news conference to announce relocation of Beverly Hills Porsche to Los Angeles, the second dealership in 25 years to open in the city.

KNX 1070's Pete Demetriou reports.

In the past two decades, 95 auto dealers left Los Angeles for cities like Glendale, Burbank and Pasadena that have very low business taxes or none at all, according to the mayor's office.

"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 mayor says the business tax is self-defeating because it produces only limited revenue while scaring away auto dealers that would otherwise generate sales tax revenue.

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," Gill added.

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 estimates the dealership's move to the city will generate about $1 million for the city's general fund, which pays for basic city services like police and firefighting.