Gilroy could offer incentives to attract new dealerships to its auto mall, boosting sales tax revenue lost from the pandemic-related economic downtown.
The Gilroy City Council on Nov. 16 showed interest in discussing what those incentives might look like at a future meeting.
The city relies heavily on vehicle sales tax to fund services such as public safety and parks maintenance. Gilroy financial reports list five dealerships among the 25 highest sales tax-generators in the city.
Senior Management Analyst Trevin Barber said it is too early to say what those incentives might be, but examples could be along the lines of sales tax rebates or reimbursement for improvements.
City Administrator Jimmy Forbis pointed to the City of Morgan Hill, which has offered tax rebates to entice auto dealerships to come to the city since 2002. Ford Store Morgan Hill was the first to take advantage of the program in 2003, and secured another tax incentive deal when that one expired.
Since March, when the Covid-19 shelter-in-place order was enacted, South County Chrysler Dodge Jeep RAM permanently closed in the Gilroy Auto Mall. Soon after, South County Hyundai closed its sales operations, but its service department remains open.
Gill Automotive Group, which owns Gilroy Chevrolet Cadillac, is looking to take over operations of the adjacent Chrysler dealership.
Mayor Roland Velasco said the council needs to decide quickly if it wants to offer incentives.
“The reality is, we can’t keep this dealership on hold for too long,” he said. “They are trying to figure out what the next step is. If we want to be serious about economic incentives, then the council needs to have a discussion about what that is going to look like.”
Rob Benn with Gill Automotive Group said the Gilroy Auto Mall is an ideal place to do business, but said more needs to be done to attract more dealers to it.
He pointed to Nissan of Gilroy, which will soon relocate down the street to 6807 Automall Parkway, leaving its current location at 400 Automall Drive vacant.
“With Nissan moving out to their new facility, that’s going to leave another blank building in the auto mall,” he said. “Which is really sad. You’ve got a beautiful auto mall there, and we can’t afford to have blank buildings there.”
He said the automotive group has reached out to different franchises about the possibility of opening a dealership in Gilroy.
“Nobody has a taste to jump here,” he said. “Part of it is because there are no incentives to come here. We need to do something to try to make it more attractive.”
Councilmember Marie Blankley pointed out that existing dealerships would not be able to participate in the incentive program, unless they were expanding their operations. Councilmember Cat Tucker said she would expect existing dealerships to ask for similar incentives.
To continue finding ways to crawl out of the recession, the council agreed to renew two downtown incentive programs on Nov. 16.
In 2019, the council approved the programs that reduced building and planning fees for downtown development, and offered matching grants for facade improvements.
According to city staff, over the year the programs were available, 12 facade projects were reimbursed, while 34 permit applications qualified for the reduced fees.
The council approved a renewal of both programs with modifications. The facade improvement program will now apply to Gourmet Alley as well, while the city will reimburse other projects at either 50 percent of the costs or $2,500, whichever is lower.
Gary Walton of the Gilroy Downtown Business Association said the programs were successful in helping improve the aesthetics of downtown. He encouraged the city to find funding to allow businesses such as restaurants to construct parklets downtown, pointing to Hollister’s recently completed project as an example.
With indoor dining once again prohibited by the state due to the rise in Covid-19 cases, Walton said restaurants will need outdoor seating that is comfortable for diners, especially as the winter months approach.
“With the state action, it’s really impairing our restaurants,” he said. “Restaurants are important to our downtown. They bring people to downtown, and they go to the other retail shops. They create a destination.”