Westminster residents who buy a new car or recreational vehicle at a dealership inside city limits now can get a taxpayer-funded rebate of up to $500, after city council members Wednesday voted to pass a new residential rebate program.
The cash-strapped city, whose voters in November 2016 passed a one-cent sales tax increase that city leaders said would save the city from drastic cuts and potential bankruptcy, will set aside up to $3 million for the program from one-time property sales over the next five years.
The only resident who commented on the proposal at the May 10 council meeting, former city council candidate Mark Lawrence, called the program a “special carve out” for auto dealerships to counteract the effect of the one-cent sales tax increase.
“You almost beat us over the head with a cudgel, ‘if you don’t give us your money gang members are going to be eating dinner with you,’” Lawrence said, referencing the argument made by supporters of the tax increase that failing to pass it would result in public safety cuts.
During the campaign, Orange County auto dealers argued the sales tax increase could discourage potential buyers or drive dealers out of town. Sales taxes from car sales go to the city where a car is registered, not the city where the vehicle is purchased, meaning Westminster residents pay a higher sales tax no matter where they buy a car.
The Westminster Auto Dealers Association ultimately signed onto the official ballot argument in favor of the tax increase.
The rebate vote was 3-0, with council members Margie Rice and Sergio Contreras absent. Contreras was present for the start of the meeting, but left right before the vote on the rebate.
The three members who voted for the rebate program, Diep, Mayor Tri Ta and Councilwoman Kimberly Ho, all had opposed the sales tax increase.
Westminster Councilman Tyler Diep said the rebate, which is only available to Westminster residents who register their car to a city address, would keep tax dollars in city limits.
“…If you purchase a car from [a] particular dealership, you’re more likely to come back to that dealership for maintenance, tire balance, oil change,” Diep said. “That’s really where our car dealerships earn their revenue.”
Lawrence accused council members of being swayed by their campaign contributions from car dealerships. The city has eight dealerships, of which Elmore Toyota and Lexus of Westminster have been reliable contributors to council members.
In 2016, Diep received $4,000 from Elmore Toyota, $1000 from Dennis Dillon RV and $1000 from Lexus of Westminster. Ta received $1000 from both Dennis Dillon RV and Elmore Toyota that year. Ho received $1000 from Elmore Toyota and $500 from Lexus of Westminster.
Contreras, who did not vote on the item, received $500 from the Lexus of Westminster in 2016 and Rice last received a contribution of $500 from the dealership in 2014.
“Now look at the special carve-outs. That amounts to a discriminatory practice against the other retailers,” Lawrence said.
Diep said the situation is different for big box retailers, as shoppers can generally just go to another city if they don’t want to pay the extra sales tax at a Westminster Wal-Mart, Home Depot or Costco, he said.
“You cannot escape it if you go to purchase a new car,” Diep said, because the city sales tax on cars is applied to any purchase within the state.
City Manager Eddie Manfro said the program could be rolled out as early as Memorial Day on May 29, depending on how quickly car dealerships begin to participate.
There were no studies conducted to determine the size of the rebate. Manfro said city staff looked at similar rebate programs statewide and $500 “seemed like a number that would attract people.”
Other cities’ and a statewide auto rebate program, such as the one in Corona, tend to focus on encouraging consumers to buy electric or hybrid vehicles.
Westminster so far has appropriated $150,000 for the rebate program for the next fiscal year but has yet to identify funding for the entire five-year program.
Assistant City Manager Chet Simmons said the city is currently considering offers on 15172 Goldenwest Circle, a former redevelopment agency property that is used to house the city public works yard, and that the proceeds of the sale would go toward funding the rebate program.
The rebate is part of a larger economic development strategic plan approved by the city council in April.
In addition to the car rebate, the plan also includes new programs for business improvement loans and tax subsidies for new hotels.
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