SAN JUAN CAPISTRANO : City OKs Pact With Car Dealership

In an unusual financial agreement between the city and a prospective car dealer, the dealership has agreed to pay for some public works improvements in exchange for the City Council’s permission to operate in San Juan Capistrano.

The City Council voted 4 to 1 last week to approve the deal with San Juan Lincoln/Mercury, which would become the city’s seventh auto dealership.

Under the agreement, the company would pay for $542,920 for off-site improvements, be reimbursed for some of the costs and in exchange be granted the right to do business at Valle Road next to Yates Volkswagen/Porsche.

The major public works improvement expected is the installation of a new traffic signal at the intersection of Valle and San Juan Creek roads. But, because some of the improvements--such as the signal, street widenings, curbs and gutters--will benefit the entire city, $292,000 will be paid back to the dealer through sales tax revenue from car sales.

“It’s a sales tax reimbursement agreement,” said Cynthia L. Pendleton, the city’s finance officer, adding that the funds to pay back the dealer will come from future car sales. “The money will not come from any existing revenues of the city or community redevelopment agency.”

City Councilman Gary L. Hausdorfer compared the deal to the one that allowed the Price Club to move to the city.

“This is an investment the city makes that pays off in the long run,” Hausdorfer said. “It means years and years of future sales tax revenues we wouldn’t have gotten.”

City Councilman Jeff Vasquez was the lone council dissenter, calling the agreement “another dealership asking for a special deal.”

“Right now developers’ arguments are that the costs are too high,” Vasquez said. “I think if a commercial enterprise is not financially viable yet, it’s not time for that enterprise to develop. What we are doing by creating these deals is accelerating the development of the community.”

The agreement came just two weeks after a Toyota dealership was approved on Camino Capistrano, directly across Interstate 5 from the future San Juan Lincoln/Mercury site.