Car Sales-Tax Revenues Fuel Cities’ Tug of War

Coming to a cash-craving community near you: “Car Wars,” the saga of two mild-mannered municipalities, driven to a life or death struggle over auto dealerships, with millions of dollars in sales tax revenue hanging in the balance.

Well, OK, not really life or death.

But the competition between Burbank and neighboring Glendale to entice--or keep--lucrative automobile franchises is real, and so is the possible tax take.

Burbank, which has only one smallish auto dealership within its borders, is openly covetous of some of the inhabitants of Glendale’s vaunted “Brand Boulevard of Cars,” a nearly one-mile stretch that is home to more than a dozen dealers, selling 22 makes of cars, including some of the biggest dealerships in the region.

To keep its dealers from making a run for the border, Glendale is crafting an “action plan,” designed to strengthen the city’s auto row by finding new ways to attract the car-buying public. The city already has sunk more than $50,000 in consultants’ fees into the effort and is expected to review the formal game plan March 9.

The tug of war between contiguous communities to get or keep automobile franchises is certainly nothing new, fueled by whopping sales taxes paid on new car purchases, which can run to thousands of dollars. Some say the rivalries date back 15 to 20 years. Just ask Palmdale and Lancaster or some of the dealer-free communities in the South Bay.

But industry experts say the aggressiveness of Burbank, and the formalized response of Glendale, are fairly unusual. They predict that such responses will become more common as the industry moves to fewer and larger dealerships with huge sales volumes that can mean hefty sales tax infusions for the home team.

“There are some dealers that are having $100 million in [annual] sales,” said Christopher Hart, a senior associate with Citygate, the Sacramento-based consulting firm hired by Glendale to help protect its auto franchises. “That makes them a more attractive target.”

In addition, Hart noted that some manufacturers, especially General Motors and Ford, are looking to consolidate dealerships, reducing a populous network of stores to just a few operated under the corporate umbrella.

“That means there may be fewer dealerships to go around,” he said.

In what some observers called the opening salvo in the latest skirmish, Burbank offered Van Nuys mega-dealer Bert Boeckmann a $12-million-plus package to open a Ford retail center near the Golden State Freeway. After that, Burbank city officials said, the phones started ringing as Glendale dealers sought a “me too” package.

So far, Burbank City Manager Robert “Bud” Ovrom insists, all Burbank has done is field phone calls from inquisitive car dealers.

“We have not gone out trolling for dealerships,” said Ovrom. “We have not walked the streets of Glendale saying ‘Hey, come on down.’ ”

But Burbank has made no secret of its desire to get new wheels and is using cash, and freeway-friendly locations, as the chief enticements.

To counter, Glendale is looking into a number of options, including erecting a promotional sign near the Ventura Freeway that would create a “greater identity” for the Brand Boulevard dealerships, said Glendale City Manager Jim Starbird.

That possibility worries some nearby residents who no doubt are haunted by visions of the Longo Toyota/Lexus sign along the San Bernardino Freeway. Standing 125 feet tall, on a clear day that one is visible from Cleveland.

Starbird hopes to reach a consensus with neighbors, but he and other experts emphasized the importance of some freeway presence.

“One of the challenges we have is that the Brand dealerships are not on the freeway and they’re older,” said Starbird, who noted that even with those hindrances, the dealers continue to increase their share of the Los Angeles auto market.

“We have a strong auto center, but we know there are challenges we have to face,” said Starbird, who views Burbank as “a significant threat.”

“With the advent of the Internet, with these mega-dealers, how do you keep an older auto center vibrant and vital?” he asked.

Starbird said Glendale’s auto dealers, including a collection along Foothill Boulevard, rake in more than $400 million in annual auto sales.

The city’s take is 1% of that, or $4 million, Starbird said.

That prize, or at least part of it, is what makes Burbank officials envious.

Ovrom, who counts Starbird as one of his closest friends, said Burbank is motivated more by need than greed.

“With the loss of Lockheed [Martin Corp.], we have a lot of land that needs to be recycled,” said Ovrom, who said commercial defections from Burbank left more than 400 vacant acres to be filled.

“We’re not going to go in and loot their whole auto row. Glendale has 22 [makes], we have one. We just think we ought to share.”

To sweeten the deal for Ford, Burbank offered a $3-million loan to help with construction costs, $9 million in rebated sales tax dollars, plus land, including a vacated street, valued at more than $2.5 million. But even that was not enough to seal the deal.

It fell apart, insiders said, when Boeckmann could not come to terms with Glendale’s Star Ford, which was to sell out to Boeckmann as part of the package.

The Ford Motor Co. now owns the land and Boeckmann still has an option to buy it.

“So that’s still alive,” said Ovrom. “Mr. Boeckmann still has to decide how best to proceed.”

A nearby site that was to house a cluster of GM dealerships still sits vacant while property owner Lockheed regroups after a deal with Phoenix-based Vestar Development Co. fell through late last year. Vestar had planned to bring a retail, office and auto complex to the 103-acre site north of the Media City shopping complex.

Key Lockheed real estate officials were scheduled to meet this week with potential developers, including Vestar; the Zelman Cos. of Los Angeles, and a team including Dan Selleck, Donahue Schriber and Legacy Partners (formerly Lincoln Property Co.).

Some observers had suggested that Lockheed might spin off the 30-or-so acres slated for auto use to get that part of the project moving.

But Ken Philbrick, Lockheed’s executive vice president for real estate matters, said Monday “I have no intention of spinning that off at this moment.”

Philbrick said he hopes to pick a developer for the project “just as soon as we possibly can.”

Meanwhile, Burbank plans while Glendale sweats.

Both sides said the ultimate villain here is the state, which offers municipalities few funding options outside sales tax revenue.

“It’s cash-box zoning,” complained Ovrom. “Cities make these decisions based on what’s best for their piggy bank. It doesn’t increase the overall economics of the region, but it’s the way California city finances are organized.”

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Valley @ Work runs each Tuesday. Karen Robinson-Jacobs can be reached at Karen.Robinson@latimes.com.