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Hemet council introduces ordinance to allow sales-tax sharing for auto-dealership investments
Summary
The council conducted first reading and introduced an ordinance to authorize sales-tax sharing agreements with qualifying new or upgraded dealerships and related vehicle retailers; the measure excludes Measure U revenue sharing and includes limits and a 10-year program window.
The Hemet City Council on March 11 introduced and conducted first reading of an ordinance creating a framework for sales-tax sharing agreements to incentivize investment by auto dealerships and related vehicle retailers in the city.
City Attorney Stephen Graham Pacifico and staff explained the ordinance’s purpose: enable the city to offer a portion of the Bradley-Burns 1% sales tax collected at qualifying auto, motorcycle, off-road vehicle, motorhome and similar new-vehicle dealerships as reimbursement for substantial capital investments, renovations or new dealership development. The draft ordinance excludes Measure U revenue from sharing and would instead use the city’s general sales-tax receipts for reimbursements.
Key points of the draft ordinance
- Eligible businesses: primary sellers of new automobiles, motorcycles, motorhomes, off-road vehicles and related new-vehicle retailers; staff said council could add travel trailers, boats and other motorized craft during revisions.
- Eligible costs: capital costs for new construction, expansion or renovation; routine operational or maintenance expenses are excluded.
- Sharing and caps: staff recommended a cap tied to the applicant’s investment and discussed a maximum reimbursement ceiling (staff proposed 7.5% of qualifying sales tax for renovations; $10 million ceiling for new-dealership packages as a planning reference), to be finalized via a resolution accompanying second reading.
- Anti-relocation and clawback: the ordinance bars use of the program to induce relocation from another local jurisdiction; if a recipient leaves the city or fails to meet performance benchmarks, the city may claw back shared revenue.
- Limited program window: the ordinance includes a 10-year availability window for the program unless the council later extends it.
Staff said the program aims to encourage investment at the existing auto mall and to create jobs and incremental sales activity, not to spark relocation contests between neighboring cities. The ordinance will return for a second reading and adoption at the next regular meeting, accompanied by a resolution that will set limits on the number and size of individual awards and other implementation details.
