CERRITOS — In the high-stakes race for auto sales tax dollars, this city has been way out in front from the start. Since the first showroom opened five years ago in a former cow pasture along Studebaker Road, the Auto Square has been in high gear, attracting nine dealerships and rolling up millions in revenue in a city already flush with money.
Challengers to the sales supremacy of Auto Square dealers soon followed, and in the past year blueprints for similar auto centers have surfaced in Norwalk, Downey, South Gate and Signal Hill.
But in a move that some other cities admit may put the brakes to their plans, Cerritos officials are expanding their lucrative Auto Square.
'Strong Interest' Expressed
The City Council has rezoned about nine acres on the north side of the Auto Square to allow only auto sales or related businesses, like repair shops or parts stores. The expansion makes room for at least four new dealerships, and about a dozen dealers have expressed a "strong interest" in setting up shop in the auto center just west of the 605 Freeway, said Dennis Davis, Cerritos' top planning adviser.
Once completed, the Auto Square could become the nation's biggest with annual sales topping $250 million, according to the National Automobile Dealers Assn.
This all comes as bad news for other cities trying to match Cerritos in what has become known as "Car Wars" in the Southeast-Long Beach area.
Among the challengers to Cerritos, a planned auto center in South Gate is showing promise at the expense of a similar proposal in neighboring Downey, while Norwalk's auto mall is in limbo. In Signal Hill, officials may decide this month whether to build a car mall at the corner of Cherry Avenue and Spring Street, while in Compton the area's oldest auto center, Alameda Auto Plaza, continues to struggle for new dealers.
Slashed Property Taxes
Ever since Proposition 13 slashed property taxes in 1978, cities have become increasingly dependent on their 1% share of the state sales tax and have tried to attract businesses that sell big-ticket items like automobiles. In the last fiscal year, the Cerritos Auto Square generated $1.5 million in sales tax revenues for the city.
The expansion of the Cerritos Auto Square--ballyhooed as the Southland's most successful with estimated sales last year of $150 million--is clearly an attempt by the city to expand its revenue base and "maintain an edge over others moving into the market," said Davis, the city's director of environmental affairs.
(Only the Irvine Auto Center with 12 dealerships in south Orange County is larger than Cerritos in California, according to the auto dealers association.)
By adding four dealers, Davis estimates sales tax revenues from the Auto Square could soar to $2.5 million a year.
The decision to add 8.6 acres north of 183rd Street between Crusader Avenue and Studebaker Road to the auto center was triggered by demand from outside dealers wanting to open stores in Cerritos, Davis said. Officials would not disclose which dealerships have approached the city.
"We have a hot property, and obviously there's a lot of interest in being associated with a successful operation," said Davis, who declined to comment on the effect the Auto Square expansion may have on efforts in neighboring cities to cluster dealers.
However, one Cerritos official, who asked not to be identified, said: "We're not about to sit back and watch others take any of our business. This is economic war."
The city still must acquire the rezoned property before any serious negotiations with individual dealers can begin. Davis said he does not anticipate any problems purchasing the land, which is owned by three parties--General Telephone, First Interstate Bank and a Cerritos dairyman, John Vuidervaart.The city then will sell the plots to the dealers, who build the showrooms and service bays.
Some auto dealers, like Pete Ellis in South Gate, say they are not worried about the effect of the Cerritos Auto Square expansion on the market.
"I just can't think of anyone they could add that would have any effect on us," said Ellis, who plans to move his two South Gate dealerships to that city's new auto center at the juncture of the Rio Hondo and Los Angeles rivers next to the Long Beach Freeway. His two dealerships generate more than $600,000 a year in sales tax revenues for South Gate.
But a longtime Downey Honda dealer, Louis Frahm, disagreed. The Cerritos expansion "would hurt anything in Downey, Norwalk or South Gate," said Frahm, who recently abandoned plans to relocate in the Norwalk auto mall because his new store would have been too close to another Honda dealer in the Cerritos Auto Square.
"If you can get every franchise in one location, wouldn't it be wonderful for a customer?" Frahm said. "It would be like going to an auto show."