Sharp drop in auto sales Sharp drop in auto sales (August 17, 2005)

** A one-third drop in sales tax revenue from auto sales impacts city services, jobs.

By Rory Brown

Special to the Almanac

Five months after the closure of the Cadillac Buick Pontiac GMC dealership at 1300 El Camino Real, it's clear that lagging auto sales are affecting Menlo Park's work force -- and not just the people working at local dealerships.

The city's budget has taken a big hit over the last few years from the decline in auto sales-tax revenues, and has been forced to limit its losses by cutting city service positions. This year looks to follow that trend.

During the economic boom, sales-tax revenue was the city's largest source of income, thanks in large part to soaring auto sales. But for the past five years, auto sales and sales-tax revenue in general have declined to the point where property tax generates more money than sales tax, according to City Manager David Boesch.

During the 12 months ending March 31, the city's sales-tax revenue from new car sales totaled $595,601 -- down 32 percent from the year-earlier period, said the city's finance director, Carol Augustine. That is the most recent data available.

Mr. Boesch said he's confident the city has seen the worst of decreasing sales-tax revenues, and hopes the local economy will improve soon.

"Things appear to have bottomed out," said Mr. Boesch. "We aren't experiencing the overall precipitous declines we were, and soon we're looking to see some modest revenue growth and gradual improvement in the overall economy."
Auto mall plan

One plan being considered to improve the economy is the creation of an auto mall near U.S. 101 and Marsh Road. The city has been exploring the possibilities since August 2004 and, according to David Johnson, the city's business development manager, the traffic study for the site is due soon.

The city's goal in establishing an auto mall would be to allow auto dealerships now located on El Camino Real to relocate there, and to draw more dealerships to the city, Mr. Johnson said.

The original Cadillac site at 1300 El Camino Real remains abandoned due to several economic obstacles. "The property is set up for an auto dealership, meaning it would be difficult to actively reconfigure the space," he said. "It's also hard to sell property on El Camino when a far superior site is being constructed near 101."

The lease on the El Camino property expires in four and a half years, adding another obstacle to drawing extended interest. "Despite the difficulties, there is continuing interest in the property," said Mr. Johnson. "But we're looking at mixed results at best."
'Painstaking process'

Until the local economy benefits from an auto mall, the El Camino site, or another source of revenue, the city will continue to carry out the difficult process of deciding what city services will be cut.

When asked what services have been cut in the past, Mr. Boesch replied that the more appropriate question is, "What services have not been cut in the last couple years?"

"The city has been in cutback mode for the last four or five fiscal years," he said. "It's a painstaking process."

Past cuts have included limiting hours of the public library, and eliminating the four-officer Traffic Enforcement unit of the police department. The responsibilities of the Traffic Enforcement Unit were handed to patrol officers.

According to Mr. Boesch, approximately 28 city service positions have been cut over the past three or four years, about 14 percent of the city's employees. "We've reduced staff in virtually every area," he said.

This year's budget calls for another set of cutbacks, but city officials have pledged to thoroughly examine what services the city can afford to cut. "In this year's budget there is explicit recognition to actively engage the community to help us decide what can or cannot be cut," Mr. Boesch said.

But the city is also planning ahead. "If the auto mall concept is derailed, we're looking to use the 101 site for hotel space or other retail," said Mr. Johnson.

"There will be a lot more public discussion about how the public prefers we use that space. ... As for the dealership spaces on El Camino, I'm looking forward to what the public's long-term vision of El Camino is going to look like."

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