City counts on Subaru sales to rev up revenue
Banking on a boom in Subaru sales to help pad its coffers, the city of Ventura is giving financial assistance to Barber Automotive to help move its dealership to the Ventura Auto Center.
Here’s the catch: Up to half of the $300,000 loan the city is making to the Subaru dealership is likely to be forgiven because a portion of the increase in sales-tax revenue at the new location will be applied toward the loan balance.
“The purpose of the city’s investment is to bring in new sales tax,” said Jeffrey Lambert, Ventura’s community development director. “That’s why we’re helping them with this move.”
The city expects that the new location, which provides Highway 101 visibility, will generate an additional $5.3 million in sales-tax revenue over the next 10 years. But half of that increase can be applied as a credit to the loan balance, meaning that by the city’s projections, the loan will likely be paid off well before the 10-year deadline.
The city has similar agreements in place with Land Rover Jaguar Ventura and Bunnin Auto Group, Lambert said. But the Subaru agreement is one of the first of the city’s efforts to continue economic development after California dissolved local redevelopment agencies earlier this year. “We don’t have the tools for redevelopment we once had, so we continue to look at other tools,” Lambert said.
Barber Subaru is also getting assistance from Subura of America, the U.S. parent company of the Japanese brand. If the dealership meets sales targets, the national firm will give it up to $150,000 in the first two years at the new location. That money will then be passed directly on to the city to pay off its loan.
Subaru, which has seen its U.S. sales spike in recent years, is embarking on a nationwide program to help dealerships spruce up their facilities or move to bigger, better ones. “Subaru is increasing its sales and it wants its dealerships to be in adequate facilities to match their growth,” said Gil Alcala, vice president and general manager of Ventura-based Barber Automotive, which also owns Ford and Volkswagen dealerships in the city.
Barber’s Subaru dealership is currently located at 1969 E. Thompson Boulevard, in Ventura’ mid-town region. The new location in the auto mall will give it freeway visibility.
Because it is eager for the sales-tax revenue that would come with the expected uptick in Subaru sales at the new location, Ventura has agreed to finance the $300,000 gap in financing for the move, expected to happen in August. The total projected cost of the relocation is $800,000. Barber Automotive is footing $500,000 of that bill itself.
The Ventura City Council approved the loan in a 6-0 vote on June 11. Officially, it must be paid back within 10 years at 6 percent interest, but both the city and the dealership project it will be officially recouped — through the sales-tax credit and the Subaru performance payments — by 2016.
With city budgets under pressure around the state, the competition to lure car dealers, and the potentially hefty sales taxes that accompany them, has become intense.
“The City of Ventura, like many California cities, has worked collaboratively with local auto dealers and landowners in a very competitive retail industry to consolidate auto sales locations for customer convenience,” Lambert said in a staff report.
The Ventura Auto Center is a major source of income for the city, he said, generating more than $1.8 million in annual sales-tax revenue.
Thousand Oaks announced earlier this month that it had secured dealerships for luxury car brands Bentley and Rolls-Royce dealerships for its auto mall. Thousand Oaks City Manager Scott Mitnick said the dealers chose
Thousand Oaks in part because of improvements made to Thousand Oaks Boulevard near the auto mall, one of the city’s last redevelopment agency projects.
Alcala said that while all of Barber Automotive’s dealerships in Ventura have been doing well, Subaru has been a “standout.”
“They’ve got a product that’s been very well accepted for safety and durability. They appeal to a certain demographic of the population. The Subaru customer is a very loyal customer,” he said, noting that trade-ins are rare — most people pass their used Subarus on to family members.
In 2008, Barber Subaru generated $6.8 million in sales from 175 vehicles sold, according to the city’s staff report. In 2011, sales were $9.3 million, with 240 vehicles sold.
Barber estimates it can grow the dealership’s revenue to $15.3 million by 2017. To staff its larger service and sales departments, the dealerships said it will double its workforce to 28.
Nationwide, Subaru of America has experienced record-breaking sales in recent years, selling 136,602 cars in the first five months of 2012 — a 22 percent increase over the same period last year. The company said it plans to sell 380,000 vehicles a year in the U.S. by March 2017.
The new Subaru location at the Ventura Auto Center was formerly occupied by the Todey Hyundai-Mitshubi dealership and has been vacant since December. The Barber dealership in Ventura is the only Subaru location between Thousand Oaks and San Luis Obispo.