"Reviving the Economy"-Auto Sales' Impact
Friday, May 08, 2009SUSIE GHARIB: Slumping auto sales are forcing many communities to downshift their budgets. In many towns, auto dealers are big generators of jobs, tax revenues and charitable contributions. As we continue our series "Reviving the Economy: Government Responds," Diane Eastabrook takes us to Libertyville, Illinois, where sputtering auto sales are being felt from the village hall to the little league field.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Libertyville, Illinois, relies on sales tax revenue for 20 percent of the village's budget. Sue Opeka's gift shop has been doing its part to boost tax receipts this year.
SUE OPEKA, OWNER, THE PRESENT MOMENT: Through the first quarter, we are up 10 percent year to date.
EASTABROOK: But the same isn't true for Libertyville's dozen car dealerships. Those businesses account for the lion's share of the village's sales tax revenues -- more than 60 percent. The recession is making this one of the worst years in history for auto dealers, including Dan Mark's 36-year-old Lincoln Mercury dealership.
DAN MARKS, PRESIDENT, LIBERTYVILLE LINCOLN-MERCURY: The first quarter of '09 traffic was down significantly obviously, due to the economic situation and I would say we are down 15 to 20 percent relative to the first quarter of '08.
EASTABROOK: Cities across the U.S. are struggling in one of the worst economic crosscurrents in decades. Last year, three common sources of municipal revenues -- sales, property and income taxes -- were down across the board. Experts see the trend continuing this year. Michael Pagano, dean of the college of urban planning at the University of Illinois at Chicago, says Libertyville's dilemma isn't unique. Pagano says many municipalities are seeing sales tax revenues shrink. But he says there isn't much they can do, because states typically restrict sales taxes.
MICHAEL PAGANO, DEAN, COLLEGE OF URBAN PLANNING, UIC: We still are confronted with the problem of having a very narrow base that the retail sales tax is applied to and the consumer's dollar -- most of the consumer's dollar is now spent on services which are not part of the retail sales tax base.
EASTABROOK: To offset sales tax losses on dealers row, Libertyville has been marketing its downtown business more and working harder to attract new business to its industrial park. But faced with a growing budget shortfall, community development director John Spoden has recommended a village hiring freeze and cost cuts wherever possible.
JOHN SPODEN, COMMUNITY DEVELOPMENT DIR., LIBERTYVILLE , IL: We are doing budgeting 12 months a year instead of just two months at the end of the year. We're constantly looking at what is coming in and what is going out. The village has done a lot of attrition in terms of folks who have left the village or retired. We are not necessarily filling those positions.
EASTABROOK: Even Libertyville's little league has been affected by the slump in auto sales. This spring, two auto dealers dropped out as league sponsors, so sponsorship director and coach Jeff Kistler is finding other ways to fund teams.
JEFF KISTLER, SPONSORSHIP DIR., LIBERTYVILLE LITTLE LEAGUE: We've had to be certainly a little bit more creative and do a little more actual personal knocking on doors, asking people to dig a little deeper and support the community. I think we're going to have to get a little more involved this year in terms of fundraisers.
EASTABROOK: Libertyville doubts its dealerships will ever generate the kind of sales tax revenues they did just a few years ago and that could change the way this community does business indefinitely. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Libertyville, Illinois.
