Major Auto Dealer Poised to Leave Town

Erica Williams
Staff Writer

April 1 -- Frustrated by a slow-moving City bureaucracy and a Planning Commission he deems “arbitrary and capricious,” one of Santa Monica’s biggest revenue generators is poised to leave town, taking with him an estimated $1.5 million a year in sales tax revenues.

Mike Sullivan, who owns the city’s Lexus, Toyota and Volkswagen dealerships recently made an offer on 12 acres of land just across the Santa Monica border near Olympic Boulevard and Bundy Drive, The Lookout has learned.

Although his “absolute goal is to stay right where I am,” Sullivan added that he has spent “a great deal of time” clearing the move with the auto manufacturers and negotiating the land deal.

“As difficult as the political climate is in Santa Monica today, I will absolutely be forced to leave,” Sullivan said.

The move would be a blow to the slumping local economy at a time when City officials are scrambling to fill a looming budget shortfall that could reach as much as $16 million in the next fiscal year.

“If we lost the dollars and didn’t have other dealers replacing them, it would be very bad for the local economy,” said Councilman Michael Feinstein, who has been working with the Chamber of Commerce’s Auto Dealer Taskforce.

“In these times I don’t think any city could afford to lose a big sales tax generator like that,” said Saul Gomez, director of the Los Angeles Economic Development Corporation. “It is a pretty sizable chunk that contributes to the local economy.”

For years, Sullivan has been grappling with both a lack of space and with disgruntled residents who say they are fed up with the impacts of the dealership on their neighborhoods.

His Lexus and Volkswagen dealerships are crammed on the 2400 block of Santa Monica Boulevard, while the Toyota dealership he recently purchased -- the leading dealer of Toyota’s gas/electric hybrid in the country -- is on the 800 block at Lincoln Boulevard,

All three dealerships abut residential neighborhoods. As a result, parking for employees, customers and deliveries is limited and noise from tractor-trailer trucks unloading parts and supplies at night continues to rankle nearby residents.

“The ability to store our new car inventory and allow employee parking all on site is a huge lure,” Sullivan said of the West LA site.

Numerous meetings with Los Angeles City Council member Cindy Miscikowski about his potential move to her West LA district have been “very encouraging,” Sullivan said, “pretty much a direct antithesis of what you’d find in Santa Monica.”

“Everything in Santa Monica is a fight,’ Sullivan said. “If you want to park your inventory, move a sign, or buy a new piece of property, the Planning Commission’s hostile attitude makes it just not worth it.”

But Planning Commissioner Kelly Olsen, a former council member, denied the commission he headed until last year was hostile to business.

"When I took over the Planning Commission, I publicly stated that my intent was to create an atmosphere of openness and increase the amount of time that the public has to speak and the amount of time the applicant has to speak,” Olsen said. "I think we've done an excellent job turning things around and making it a more friendly environment."

Olsen, who is up for reappointment in June, said Sullivan has never come before the Commission since he was appointed in July 1999. Only three dealerships have appeared, and two of them had their applications approved, he said.

"I look forward to hearing from him if ever he has a project," Olsen said. "He will be afforded the same respect and courtesy we give to everyone despite his inflammatory and inaccurate comments."

Sullivan’s ire was particularly piqued during a recent meeting with the City when a planner suggested the dealer store his new car inventory in Loma Linda.

“Think of telling a prospective buyer we were going to jump in the car together and drive 90 minutes each way to look at the color she wanted to see -- not terribly practical,” he said.

Much of Sullivan's frustration could be traced back to a citation slapped by the City's code enforcement unit on his Volkswagen dealership two years ago. Sullivan sued the City and eventually reached a settlement last year.

"I was cited and warned, and when the dust settled I was pleased," said Sullivan, adding that under the settlement he cannot discuss details of the case.

Still unsettled are questions about Sullivan's expansion of the Volkswagen dealership across the street to the site of an auto repair facility that operated there for 25 years.

Sullivan contended that the existing Conditional Use Permit should apply to his expansion. But the City disagreed and has required him to apply for a new CUP, a two-year process he is now complying with, Sullivan said.

City Attorney Marsha Moutrie said the City is working on a settlement with Sullivan on this issue as well.

Former mayor Feinstein, who Sullivan credits as “one of the few council members (looking) for a way to keep dealers in town,” conceded that the City may have made a few missteps in addressing auto dealers’ concerns.

“I do think we waited too long to address the issues, and this (Sullivan’s move) could be one of the impacts if he goes,” Feinstein said. “There are issues specific to the dealers and residents who live near them, and by not addressing those issues we have let down both sides.”

Some of the issues include parking and noise associated with the delivery of parts and vehicles, Feinstein said.

The City is currently working with the chamber’s Auto Dealer Taskforce that Sullivan chairs in order to come up with some solutions, Feinstein said. In addition, the City is working on a development standard study that would attempt to address those issues.

"Mike Sullivan brings a lot of positive energy to the interactions between the auto dealers and the City," Feinstein said, "positive energy that gives me hope that we will reach an approach that works for dealers, residents and the entire community."

At a time when Santa Monica faces its biggest budget crisis in more than a decade, auto dealers have been one of the few stalwarts of the local economy, which has been hard hit by a State budget crisis, a battered tourism industry and an exodus of dot.coms.

New and used car sales and leases accounted for a combined $5.3 million, or 24 percent, of total sales tax revenues for the City for the fiscal year ending June 30, 2002, according to Gwen Pentecost, an administrative analyst in the Economic Development division.

Based on Sullivan’s estimates, his dealerships accounted for about $1.5 million, or 28 percent, of the total sales tax revenues generated by dealerships.

Gomez, of the Los Angeles Economic Development Corporation, noted that the sales tax goes to pay for police, fire and basic City services. The 1 percent the City gets from the state sales tax collected also comes back to the City in the form of money from the County for programs in health, education and employment, he added.

“So it goes beyond the firemen and the police and public works,” Gomez said. “In aggregate you’re looking at impacting the (school) system,” for instance.

And, Gomez added, “In high-end retail every one job created creates another one-and-a-half to two jobs elsewhere -- dry cleaners, restaurant workers, clerks, stores around the dealer -- so the multiplier effect is also lost.”

That multiplier effect could have a compounding impact on a city that is facing record budget deficits over the next several years -- a $3.3 million gap this fiscal year that could widen to $16.8 million next year and swell to $30 million in six years, economists warn.