City OKs Loans to Dealers to Help Prop Up Auto Mall

In an effort to prop up this city’s beleaguered auto mall, the City Council has approved as much as $430,000 in loans and grants to two car dealerships.

Acting as the city redevelopment agency on Tuesday, the council approved an $80,000 loan to Paul E. Hobbs’ Jeep/Eagle dealership to ease its financial crunch. Since the Santa Ana Auto Mall lost a Mazda dealership two years ago, city planners have been concerned about the potential loss of other businesses--and the consequent decline in sales-tax collections.

According to a report to the council, the Jeep/Eagle dealership is expected to generate $120,000 in sales taxes this year. The loan will help satisfy Chrysler Credit Corp.’s requirements for the level of working capital that its dealerships must maintain. Hobbs will use personal property as collateral.

The council also voted to lend Santa Ana Honda $150,000 and grant it as much as $200,000 in an effort to help move it into the auto mall. Sales at the dealership, which is at 2114 E. 1st Street, have declined, partly because of nearby freeway construction and road closures. Relocation to the auto mall is expected to boost the dealership’s new- and used-car sales by $129,000 a month, the council report says.

The loan would be used to help purchase and renovate the vacated Mazda dealership, said Cindy Nelson, executive director of community development.

The council also agreed to pay Santa Ana Honda’s rent at its 1st Street location as soon as the dealership moves to the mall. The city would continue to pay the rent there, up to $200,000, for as long as two years until the dealership subleases the 1st Street site.