Cities Racing to Cash In With Auto Malls : Downey, South Gate, Norwalk Sharpen Pens, Sweeten Pot In Car Wars

It’s becoming known as the auto mall wars.

In Downey, South Gate and Norwalk, municipal officials are vying to build auto malls to compete with Cerritos’ successful Auto Square.

In the past three weeks, officials in South Gate and Downey have announced that they are conducting auto mall studies, while Norwalk officials are already at work on their own plans for a concentration of auto dealers along Firestone Boulevard.

Officials in all three cities say they do not believe that the Southeast area can accommodate three more auto malls. But, individually, officials from each city insist that their particular mall would have the best chance for success.

The competition among the three cities is not even. Downey now has more car dealers and more sales tax revenue than South Gate, Norwalk and Cerritos. But because of political and legal battles at City Hall that have delayed plans for a Downey auto mall, Downey auto dealers are threatening to move to the proposed malls in South Gate and Norwalk.

Much of the fight has been going on behind the scenes in private negotiations where municipal officials are competing with each other to attract auto dealers, but the competition broke out in the open Wednesday.

Downey officials appeared at a county Transportation Commission meeting in Los Angeles to oppose an off-ramp on the Long Beach Freeway that would lead to South Gate’s proposed auto mall site. The county commission voted to approve the $500,000 ramp, pending an environmental impact study and approval by Caltrans.

Although South Gate officials claimed the northbound off-ramp on Southern Avenue is needed to correct a hazardous intersection, Downey Mayor Randy Barb said he told county officials that South Gate officials were using the safety issue as a “ruse” to help build an auto mall.

“It’s very disappointing that a neighboring community would meddle in the internal affairs of one of their neighbors,” South Gate Mayor Bill De Witt said later, charging that Downey officials were “trying to hold the city of South Gate hostage economically and that just won’t fly.”

Downey Councilman Robert Cormack replied that the city’s only concern was additional traffic that might be brought into Downey’s residential neighborhoods. He added he was suspicious of why South Gate officials were pushing so hard for the off-ramp, adding that he suspected it was because South Gate and other surrounding cities are “anxious to have our auto dealers.”

De Witt warned that if Downey officials continue to oppose the off-ramp at the state level, “there will be bad blood between the cities because there will come a time when we will be able to hold up one of their projects.”

There is a good reason why city officials are so interested in auto malls. Since Proposition 13 slashed property taxes, cities have become increasingly dependent on their 1% share of the state sales tax. In Downey, a city with a $22-million general fund, sales tax revenues amounted to $8 million for the current fiscal year while property tax revenues were only $3 million. Of that $8 million in sales tax, $3 million was generated by the city’s 13 auto dealers, city officials said.

All sides agree that the first shot in the auto mall wars was fired in March, when Louis Frahm Honda Inc. of Downey signed a contract with the Norwalk Redevelopment Agency that gives the agency the exclusive right to seek a new location for Frahm in Norwalk. Frahm has run an auto dealership in Downey for more than half a century.

In an interview, Louis Frahm succinctly explained why auto dealers like himself want to be positioned close to other dealers.

“When a guy wants to buy a car, he goes to some place where they have 10 dealers in a row,” Frahm said. “He won’t go driving 10 miles down the street to go from dealer to dealer.”

In Cerritos, the Auto Square has grown from one dealer in 1980 to nine dealers this year. In the 1984-85 fiscal year, the Auto Square contributed $1.5 million in sales tax revenues to Cerritos, which took in $11 million in overall sales tax revenues to help fund a $14-million general fund. The city does not levy a property tax.

The growing success of the Cerritos Auto Square has prompted one municipal official to warn that unless Southeast cities scramble to compete with Cerritos, they may end up with no auto dealers at all.

“If the cities don’t do something, everybody’s going to be relegated to a second cousin” to Cerritos, said former Downey City Manager Robert (Bud) Ovrom. Ovrom resigned last month, saying he was frustrated over delays in Downey’s redevelopment plans. Now Burbank’s city manager, Ovrom predicted that if Downey fails to build an auto mall within five years, it may lose all its auto dealers to other malls in the area.

Of prospects for another auto mall in the future, Doug Corrigan, president of the Cerritos Auto Dealers Assn., said “I wouldn’t be real happy to have another auto mall pop up five miles up the freeway.”

Corrigan, general manager of S&J; Chevrolet, said a competing mall’s chances for survival would “depend on who’s in it.”

Another Southeast auto mall has enjoyed far less success than Cerritos. The Alameda Auto Plaza off the 91 Freeway in Compton was created as a redevelopment project in 1977, but it is still less than half full with only four dealerships. The city Redevelopment Agency broke ground in May on a $30-million hotel and convention center on a vacant portion of the the auto mall plaza.

The following is a look at plans for auto malls in Downey, South Gate and Norwalk.

DOWNEY

Several auto dealers openly acknowledge they are contemplating moves to Norwalk or South Gate.

“I can’t see why they (city officials) are dragging this on, either they want us or they don’t,” said Gary Simpson, owner of Simpson Buick. He said that he will wait 90 days to see what Downey is going to do. After that, he may accept an offer from either South Gate or Norwalk.

“It’s not a scare tactic, it’s a matter of wise business judgment,” Simpson said. “I personally want to stay in Downey, I’ve been here since 1959, and it’s been putting bread and butter on my table, but times change.”

James Ferber, president of Paramount Chevrolet, said he was concerned about Ovrom’s departure from City Hall. “I don’t think they have any leadership down there at City Hall right now,” he said, adding that he was more impressed with auto mall plans presented to him by South Gate officials.

“It’s (a) 180-degree difference over there” (in South Gate) Ferber said. “They’ve got a site and they’ve got a program. It’s not some nebulous two-year-away dream.”

Ferber said he told South Gate officials that he has outgrown his present location on Firestone and has to have a new location within a year.

Frahm, the dealer who signed a contract to move to Norwalk, provides a good example of what happens to an auto dealer who does not have enough space for his business. Because his auto dealership has not been expanded, Frahm said his annual allotment of Hondas has been cut from a high of 2,000 cars in 1979 to just 1,200 cars last year. The extra cars went to larger dealers in the area, he said.

In an interview last week, Downey council member James Santangelo agreed that the council “didn’t totally realize the urgency.” But he added that now council members are committed to building an auto mall for the city’s car dealers.

“I think it’s damn urgent,” he said.

The city had planned an auto mall on the east side of Firestone but the proposal has been slowed by political and legal battles over the city’s redevelopment policies. A residents’ group opposed to a 380-acre redevelopment district along Firestone filed suit against the city last July.

Former Downey city manager Ovrom said the Firestone site is not as good a potential auto mall site as the 22-acre Wilderness Park that the council considered before ruling it out at a meeting last Tuesday. The park is a “phenomenal commercial site” because it is next to the 605 and 5 freeways, which carry a combined total of 300,000 cars a day, compared to 50,000 cars a day on Firestone, Ovrom said.

SOUTH GATE

South Gate took a giant step toward building its auto mall Wednesday by signing its largest auto dealer, Pete Ellis, to a contract with the city’s redevelopment agency. The contract gives the agency 180 days to negotiate for 15 acres in a proposed auto mall site.

Ellis is president of two franchises, Pete Ellis Dodge and Pete Ellis AMC-Jeep-Renault. The two franchises, both on Firestone Boulevard in South Gate, supplied the city this year with more than $600,000 in sales taxes, Ellis said.

South Gate has planned its auto mall on a triangular piece of property near the confluence of the Rio Hondo and Los Angeles rivers. The land is bordered on the east by Garfield Avenue, on the west by the Long Beach Freeway and on the north by Southern Avenue. The 30-acre property is now occupied by a trucking firm, two vacant warehouses and manufacturers, which would have to be acquired by the redevelopment agency.

Bob Philipp, South Gate’s director of community development,, called Ellis’ move “the key, the catalyst, the drawing power” for the proposed South Gate auto mall.

Ellis said that he would get more “freeway exposure” from the proposed mall site. He added that he is negotiating with a Korean manufacturer of subcompacts, Hyundai, to bring a third Ellis franchise to the South Gate mall.

The South Gate City Council is enthusiastically behind the project, with members saying the city desperately needs new sales revenues. The city has a $14-million general fund in the current fiscal year, taking in only $3.4 million in sales taxes and $750,000 in property taxes.

Philipp said the Ellis move may prompt other dealers to move to South Gate, adding that it would probably be two years before the mall opens.

Of Downey officials he said, “They’re yelling and screaming that we’re stealing dealers from them, but there’s enough dealers to go around.”

NORWALK

“We hope Louie Frahm is the tip of the iceberg,” said Mike Wagner, city redevelopment director, adding that he has visited several Downey dealers, at their request, to discuss plans for moving to Norwalk.

Wagner and the assistant redevelopment director, Bill Nevius, said that the city has 20 acres along Firestone available immediately to auto dealers, and 40 to 60 additional acres on Firestone that may be available in the future.

The two sites along Firestone are within two blocks of each other, near the intersection with the 605 Freeway and between Imperial Highway and Pioneer Boulevard. The city is hoping to put several auto dealers in to add to sales tax revenues that amounted to $5 million this year in a city with a $14-million general fund. Norwalk has no property tax levy.

Of his visits to Downey auto dealers, Wagner, a former Downey city planning consultant, said, “It’s my job to be a vulture.”

Added City Administrator Ray Gibbs, “We’re not trying to rip off dealers from another city, it’s a matter of trying to enhance our own commercial base.”