A City Council majority agreed Tuesday to give $175,000 in low-interest loans to a car dealership in the Compton Auto Plaza, despite one member's suggestion that the council is using federal funds never intended for this purpose.
"What we must do is make sure that we act in a prudent investment, business-like fashion, and I don't believe we're doing that in this particular case," Councilman Maxcy D. Filer said.
Filer was outvoted, however, after Councilmen Robert L. Adams, Floyd A. James and Mayor Walter R. Tucker rose to defend the firm, Brett Mitchell Chevrolet Inc. All three politicians have received sizable campaign contributions from the dealership, which has operated since 1985 in the city-subsidized auto plaza at Alameda Street and the 91 Freeway.
Councilwoman Jane D. Robbins said nothing but sided with the majority. (She said in an interview that she has never received campaign money from Mitchell Chevrolet.)
"It isn't easy in business, as far as meeting a fixed cost, as well as the cost of living, paying taxes, then making a profit," Adams said. "And $175,000, that is no money. I mean, whoever believes that that's a great amount of money, all we have to do is come up here and look at the resolutions that we have that involve millions of dollars."
Adams said the dealership also deserves a boost because it is a black-owned firm in a minority city that has encountered a variety of discriminatory economic red-lining.
"Most black businessmen are small businesses," Adams said, "and if we can help and assist them to become big businesses, that's what we need to be doing . . . One day, he (28-year-old owner Brett Mitchell) may be a great big businessman like Mr. Iacocca and all the big boys . . . . They talk about running him (Chrysler president Lee Iacocca) for President."
Adams' son, Acting Redevelopment Director Laurance H. Adams, explained that while city records have described the Mitchell loans as necessary to meet an urgent working-capital need, "this is not a distress loan. He's coming to the city to expand his business . . . to create more jobs, to provide better services."
Laurance Adams did not detail the expansion, but Mitchell said Wednesday that it would pay for improvements in the body shop and service and parts departments.
City records state that the dealership will repay the money through monthly payments over three years at an interest rate of 7%, which is 1.25% below the prime rate that banks charge their best commercial customers. In all, the city stands to receive $19,565 in interest.
Not the First Time
"This isn't the first time we've helped this individual out," Filer said. "We gave this individual one year of one of the lowest rents that you can think of. That's fine, I'd love to see him get ahead. I want to see him get ahead. However, he can't keep coming back to the same source."
By now, Mitchell should be able to obtain a conventional loan from a bank or private lender, Filer said. After the dealership's first year of operation, he continued, "all the announcements I heard said that this particular company was making money . . . Where did the money go? . . . It's just a rhetorical question."
Echoing Councilman Adams' argument that minority businesses have trouble obtaining commercial loans, James said he would be "willing to bet" that Mitchell, "with all of his assets, could not go to a bank and get a loan like this . . . I know because I've tried." Adams runs a funeral home.
Mitchell said that he approached California Federal Savings & Loan Assn. about borrowing the money but found they no longer make loans to such business. "While several other alternatives were looked at," he said, "this (city loan) was the first to materialize."
The council's discussion became testy at various points.
When Filer began to ask about the real estate holdings that Mitchell intended to use as collateral, James interrupted to say that the council "shouldn't divulge that publicly" because it is part of the businessman's personal assets.
"I totally disagree with that," Filer replied. "This is a loan of public money. And when you're loaning public money then, of course, the person has to divulge whatever the collateral is publicly . . . "I didn't know that Floyd James was a censor."
Redevelopment project manager Michael Nuby said the loans-- $100,000 from a revolving fund fueled by grants from the federal Economic Development Administration and $75,000 from a program financed by a community development block grant--would be secured by two parcels of land owned by Mitchell. One property is Mitchell's home in View Park, in unincorporated county territory. The other property is a South Central Los Angeles apartment building currently in the name of a Mitchell business partner.
Under questioning by Filer, Nuby confirmed that both properties already are encumbered by loans, tax liens and a court judgment. But Nuby said each parcel carries an appraised value that is greater than the existing debts.
Noting that the Mitchell loans will come from two federal programs designed to aid businesses that are seemingly less established, Filer asked, "Is this a low- or moderate-income person?"
Compton Residents Employed
Redevelopment director Adams answered that the loans satisfy federal regulations because they will benefit low-income people in Compton by employing a few residents and paying thousands of dollars in sales taxes.
Mitchell said Wednesday that he employs 14 Compton residents, who make up 25% of his staff. While he was hesitant to say how many employees might be added as a result of the expansion, Mitchell said, "As business dictates, we certainly will add on."
When Councilman Adams broke in at one point during the debate, Filer became irritated and asked Tucker to keep his colleague from interrupting.
"If he gets out of order, I'll tell him so," Tucker assured.
A few moments later, Filer complained that the younger Adams was trying to lecture him on some past council actions. "I don't need you to tell me what happened," Filer said.
"He doesn't need you, either," Councilman Adams shot back in defense of his son.
Tucker quickly called for a vote and the loan measure passed with Filer still urging a delay at least until city staffers prepare the formal loan contract.
"Even if we got the contract, Councilman Filer's not going to vote for it anyway," the mayor said, ending the debate.