In an effort to attract car dealerships to the Mint City and to increase sales tax revenue, the Chehalis City Council discussed the establishment of a specific new automobile dealership economic assistance program during its regular Monday meeting.
The council originally hoped to pass the ordinance, but after receiving input from municipal research, legal questions arose.
The ordinance, which would only apply to new automotive franchise dealerships located within the city over the next three years, would provide certain tax-saving opportunities.
City Attorney William Hillier advised the council that providing the dealerships with a sales tax break would be considered the gift of public funds, something that would be illegal.
Hillier said the city could pass a resolution stating the city would do everything it can to move forward legislation at the state level to create opportunities for sales tax to be diverted toward development as an incentive for businesses.
Councilor Chad Taylor voiced his support for the program, saying that in order to get new dealerships within city limits, the council would need to pass the ordinance sooner rather than later.
“We have an amazing opportunity here to attract a new business into our town,” he said.
Taylor said dealerships generate “an obscene amount” of sales tax in the city, something that would be beneficial. He also said they provide high wages to their workers, as well as additional jobs.
The ordinance states that new automobile sales and service businesses are concerned by flooding in the city resulting in a reluctance to locate their dealerships in the area.
In the event of a flood in Chehalis resulting in capital construction flood damage to a new car sales and service business, the business would be able to seek a reduction in the amount of local sales tax it is required to pay to the Department of Revenue in the amount of 50 percent of the regular local portion of the sales tax due.
Citing a slow recovery from the 2007 downturn and concerns from dealerships that want to relocate to the area but are worried about flooding, the draft ordinance stated “... The City wishes to promote economic development and encourage new car dealerships to locate in the City by forgiving a portion of the sales tax realized by the City in the event that the business suffers direct property damage as a result of a major flood occurring in the City….”
The forgiveness of a portion of the local sales tax would be authorized by the city for a period not to exceed five years from the flood event.
The money saved by the business would have to be spent on capital construction costs to rebuild the dealership facility. As part of the requirement, the dealership would have to show the city proof that tax savings were spent on the improvements. If the business failed to do so, the tax forgiveness benefit would be terminated.
The ordinance stated new dealerships established within the city between the time the ordinance was passed and between March 1, 2019 would benefit from the tax savings benefit. The dealership would have access to the financial benefits until Dec. 31, 2039, when the ordinance would sunset.
Existing businesses currently operating in the city would not be eligible. The ordinance draft also stated the new dealership operations must conduct sales and service of new and used automobiles.
The council set a special meeting for Tuesday, Feb. 16, at 5 p.m. to further discuss its options.
In the meantime, City Manager Merlin MacReynold will look into options to see how the city could move forward with a similar money saving ordinance for dealerships.
