Cars drive sales tax revenue

For the first time in the 17 years the city of Newport Beach has tracked sales tax revenue generated by local businesses, auto sales have outshined the restaurant industry in the amount of money that goes to the general fund.

More than 20% of the sales tax brought into the city during the fourth quarter last year was made by selling new cars. But restaurants weren’t far behind, making up almost 19% of the tax dollars the city will use in its general fund during the same period. But it doesn’t mean people have stopped frequenting the restaurants in Newport.

“We’ve seen wonderful growth in both categories,” revenue manager Glen Everroad said. “Restaurants aren’t doing poorly at all. Restaurants, it appears, are having a great year.”

Everroad attributes the flip to the addition of Newport Lexus, along with powerhouse car dealer Fletcher Jones Motorcars.

“We saw that margin between restaurants at No. 1 and new auto sales at No. 2 decrease significantly with Fletcher Jones’ introduction to the city, and then more recently the Lexus dealership in town has contributed to new auto sales usurping restaurants in that top position in terms of sales tax production,” Everroad said.

According to an economic impact report compiled by the Orange County Automobile Dealers Assn., Newport’s car dealerships forked out more than $2.35 million in tax revenue in 2006.

Last year in Costa Mesa, local dealerships generated more than $7 million in tax revenue for the city.

But in Costa Mesa, the 15 dealerships’ sales taxes came in a distant second to that of general consumer goods — almost $20 million in tax revenue generated in large part by South Coast Plaza, a major force in the local economy. And it doesn’t seem Costa Mesa will soon see a change in the top producer any time soon.

“Autos and transportation … is our second-largest sales tax producer … and I would expect that to remain the trend for the foreseeable future,” Costa Mesa finance director Marc Puckett said.

The South Coast Toyota dealership on Harbor Boulevard experienced a 30% jump in business last year compared to 2005, general manager and vice president Paul Lunsford said.

He and Fletcher Jones Mercedes general manager Garth Blumenthal said one reason the local dealerships have fared so well is because of customer service.

“I think the synergy of a good Toyota market and some of the philosophical changes we’ve been putting in places from a customers treatment standpoint are beginning to take hold,” Lunsford said.

But at Fletcher Jones and some of the other luxury dealerships, the service goes beyond philosophical changes. Fletcher Jones offers free shuttle service to the airport at its hub near John Wayne Airport. While away, Mercedes owners can have their car washed and serviced and not pay a dime for storing the car.

Fletcher Jones’ client base comes predominantly from the Orange County area, with a heavy concentration in Newport Beach and South County. But 30% of its business comes from people outside the area. Blumenthal credited that outside clientele to the volume of cars the dealership houses.

Sales tax revenue generated in both cities are included in their general funds, which pay for public services such as safety and road work. A portion of sales tax generated by Newport Lexus goes back to the dealership as part of the deal that brought the car company to Newport.