Proposed Tax Increase for Roads Riles Chehalis Car Dealerships

As the city of Chehalis grapples with how to fund road improvements and infrastructure, reactions to the Feb. 14 ballot measure of a sales tax increase to fund road improvements have been mixed.

After a presentation by Chehalis staff at the Port of Chehalis meeting, port commissioners approved a motion endorsing a yes vote for the ballot measure. It was the first time the port had endorsed a ballot measure initiative. 

But at an open house regarding the measure on Thursday, the city hall chamber was filled with people representing the I-5 Auto Group who said the sales tax increase would hurt business. 

Both Chehalis Mayor Dennis Dawes and a representative of the I-5 Auto Group said the only people in attendance were those from the car dealerships. 

The auto group owns four car dealerships in Chehalis and uses the low sales tax within the city to draw in business from outside areas.

Michael Bannan, the sales manager at I-5 Toyota, said the dealerships advertise in areas with the unofficial motto “drive a little, save a lot.” The I-5 Auto Group uses the low sales tax as a major advertising point when soliciting business north of Chehalis.

According to Bannan, who spoke on behalf of the I-5 Auto Group, last year the dealerships sold over 4,000 vehicles. Fifty-five percent of that business came from outside of Lewis County. On an average cost of sale of $25,000 per vehicle, those from the Olympia area often save around $200, while those from Seattle where the tax is higher save $400 or more. 

“It’s definitely one of the biggest reasons people shop our dealerships,” Bannan said. “They can save some money coming to Chehalis.” 

As of now, Bannan said, the dealership has the lowest tax rates in Western Washington, but if the sales tax increase is approved, he said that would no longer be the case. 

“This sales tax increase is going to hurt us,” he said. “It’s not just car dealerships. If you are a construction company or a contractor in Chehalis, if people want your services they get a lower sales tax here. If it goes up, it ruins your competitive advantage.” 

Chehalis Mayor Dennis Dawes said the auto group is a significant generator of tax revenue for the city. Bannan stated that 15 percent of the city’s sales tax revenue is generated from the four dealerships.

Dawes said like all businesses, the city appreciates the car dealerships who help the city thrive. But he also said the city is run as a business, and the sales tax increase would help with much needed repairs to roads and streets. 

Even if the sales tax increase passes, Dawes said, the dealerships will remain to have one of the lowest tax rates in the area. He also said other municipalities north of Chehalis are looking at placing similar measures on the ballot, something that would keep the auto group competitive.

“I know Lacey is looking at putting a similar issue on their ballot,” Dawes said. “I’m sure if some of the cities to the north don’t have one, in the next year or two they probably will because they will be suffering from the same things we are.”

With dwindling state and federal money for roads, Dawes said, the city has to take care of itself through local measures and has to find the funding mechanism to do that.

The decision will ultimately come down to voters who will cast their ballots in favor or in opposition of the measure.

Despite some concerns that the measure was “snuck under the rug,” Dawes said the city followed all of the required procedures prior to putting the measure on the ballot.

Chehalis formed the Transportation Benefit District in 2014, but a funding mechanism was not pursued at that time. Since the city decided to put the sales tax increase on the ballot, Dawes said, the measure has been listed on its city council agendas, a public hearing has been held, and it was noticed following the proper protocol.

“There is never a good time to raise taxes,” Dawes said. “We think as a city, the staff has tried to explain the needs that we have with our streets. If we don’t address them, they are going to get worse.”

The city currently dedicates 4 percent, or $160,000, of its sales tax revenue to its chip sealing program each year, but Dawes said that does not address main roads in the city like Market Boulevard, Main Street and National Avenue, which all need work outside of chip sealing.

Chehalis, according to Dawes, has recently seen an uptick in sales tax revenue, finally matching the over $4 million it received in 2008 prior to the recession, but that money is split throughout the general fund and in most cases is not directly allocated to city streets. Fifty-six percent of its general fund is allocated to police and fire services. 

City Manager Jill Anderson told port commissioners that costs continue to increase.

“As quickly as our revenue goes up, our costs also go up,” she said. 

For the first time ever, the Port of Chehalis decided to endorse a ballot measure initiative, casting their unanimous vote in support of the sales tax increase at the port commission’s meeting on Thursday. 

Randy Mueller, chief executive officer of the port, said the entity has an interest when it comes to streets.

“The port is vested in having a good transportation network here,” he said. 

Don Schmitt, street and stormwater superintendent, said the city is currently fighting a losing battle.

“One cent additional cost on a $5 purchase in my opinion is insignificant, but taken as a whole, the $850,000 a year will make a significant impact on our ability to catch up and hopefully get ahead of our streets.”

If approved, the measure would have a 10-year term. All of the money generated from the sales tax increase would go directly toward transportation improvements. 

Anderson said the measure will affect all shoppers in the city, not just the residents.

“Nobody likes to raise taxes but in order to actually be able to have the funds necessary to invest in our infrastructure, we need to have sufficient revenue to do that,” Anderson said. “This seems to be a way to spread the burden and also the wealth because everyone would benefit from it.”