LA eliminates tax to entice auto dealers to stay in city limits


There are 50 workers at the new Kia dealership in downtown Los Angeles. That number will soon be going to 75. Officials say in this economy that's a big deal. The Kia dealership is the second new dealership to open in downtown Los Angeles in the last 18 months.

"Those are jobs we want to keep," said L.A. City Councilman Eric Garcetti. "We want you to be able to support your families. We want you to be able to go out and spend that money in our restaurants."

Car dealerships bring in a lot of sales-tax revenue, which is one reason cities want them. But some new dealers say it was getting too expensive to do business in the city of Los Angeles.

"The city business tax has always been a burden to dealers doing business in the Los Angeles area," said Lenny Sage, Sage Automotive Group.

The Sage family has owned car dealerships since the 1960s. He says Los Angeles charged a gross-receipts business tax, while some neighboring cities like Glendale did not.

More than 100 new car dealerships left the city of Los Angeles over the last two decades. They took with them millions in sales-tax revenue and hundreds of jobs.

To get dealerships to move back, on Monday Mayor Antonio Villaraigosa signed into law a new city ordinance that eliminates the gross receipts for new car dealers.

"It's important to figure out how we create wealth, how we bring more businesses, how we expand the revenue pie," said Villaraigosa.

"With the savings our dealerships realize from the elimination of the business tax, we'll hire and train new employees, invest in equipment and infrastructure, and continue to give back and support our local communities," said Lenny Sage, Sage Automotive Group.

Officials say the money they lose from the gross-receipts tax will be offset by the extra sales tax.

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