Clovis News

Clunker program failed to boost Valley cities' revenue

The Cash for Clunkers rebate program was supposed to bring in piles of sales tax money for cities in car-crazy California.

But while the third quarter of 2009 was better than the first half of the year for most city coffers, only one central San Joaquin Valley city had a sales-tax revenue gain in the quarter.

And it doesn't even have a new-car dealer.

Woodlake, a small city east of Visalia, got a bump of about 6% in the July-to-September period compared with the previous year, according to state figures.

Tax revenues there were hiked by sales of supplies to citrus and olive growers, said Bill Lewis, city administrator.

It was only $5,423 more than the third quarter of 2008, but it was in the right direction.

"It certainly is better than losing money," Lewis said.

For the most part, the downturn in sales-tax revenues was not as severe in the third quarter, which ended Sept. 30, as in the year's first and second quarters, and Cash for Clunkers may have helped, officials said.

Statewide, the results of Cash for Clunkers were "murky," said Michael Coleman, fiscal policy adviser with the California League of Cities. "I don't know what it would have been like without it."

Cash for Clunkers wasn't a boon for sales-tax revenues, said Mark Rapin, president of the Fresno-Clovis New Car Dealers Association and vice president of Freedom Ford in Fresno, because many new vehicles sold during the July and August program were smaller and more energy-efficient -- and less expensive.

To reap sales tax dollars, "the dealers had to sell two or three times as many [of the smaller vehicles] compared with prior years," when more expensive vehicles such as large pickups and luxury vehicles were targeted by buyers, he said.

But it's only a matter of time before demand picks up, Rapin said.

"The numbers are flat right now, but it's not dropping any further," he said. "Everybody is anticipating a small increase [in 2010] because we are seeing many older, higher-mileage vehicles coming in for service. The time is going to come where people will have come back into the market."

Today, sales are stronger than prior to Cash for Clunkers, and Bill Hedrick, owner of Hedrick's Chevrolet in Clovis, says he is optimistic that the trend will continue in 2010.

"California is always the last to go in and come out of recessions and the rest of the country is doing a little better," he said. "If we can get employment up, we will be back riding pretty good."

For cities, auto dealers are generally the most important sales-tax revenue generator, so when auto sales fall, so do city revenues.

In Fresno and Visalia, third quarter sales-tax revenues were 13% lower in each city than the previous year's third quarter. But that was an improvement over the second quarter, when revenues dropped by 21% in each city.

"At some point, you have to be happy it's not worse," said Eric Frost, Visalia's finance director. "This is the first quarter for results that were not below what our forecast was."

Third-quarter sales tax revenues in Clovis were down 3.1%, significantly less than the decreases in the first two quarters and the smallest decrease of any Fresno County government.

But Finance Director Robert Woolley said the city recouped about $172,000 that had been mistakenly provided to other communities in previous quarters. Without that extra money, the quarter's revenue decline would have been similar to the 8.2% decline in the first quarter, he said.

Even in Selma, hit hard by budget cuts and falling auto sales, there is reason for optimism, city manager D-B Heusser said.

The city's sales-tax revenues fell 16.4% in the third quarter, compared to declines of nearly 25% in each of the previous two quarters. Selma gets about 41% of its revenue from sales taxes, and nearly half of that is from auto sales.

People are starting to spend money again, Heusser said.

"There still is a great deal of interest in small business startups and I go into our shopping centers and have a hard time finding a parking place," he said.

Housing starts and home renovations are starting to rise, too, he said.

But, best of all, Heusser said, city spending is within budget.

"Everyone is really pinching pennies," he said. "It is making elected people and staff very much aware of money we don't want to throw away."

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