Auto Mall Dream Fades as Dealers Defect : Development: Dealers cite a sweeter deal in Signal Hill than that offered by Long Beach. Plans for the Long Beach site, near the 405 Freeway, may now be revamped to include major retail stores.

LONG BEACH —  The city’s dreams of boosting its sales tax income with the development of an auto mall near the 405 Freeway have fallen into a gaping pothole with the defection of four Long Beach car dealers to neighboring Signal Hill.

The four dealers join two other Long Beach dealers who had previously signed with Signal Hill to move to that city’s planned auto mall, which will open just a few blocks from the Long Beach mall.

“There are no dealers left to go into the Long Beach mall at this point in time,” observed Gary Cooper, president of Long Beach Nissan, one of the four dealers who last week decided to say goodby to Long Beach and jump into Signal Hill’s camp.

The dealers said they broke off their negotiations with Long Beach because Signal Hill offered them a sweeter financial deal and land that will be ready for construction years before the Long Beach site.

“Signal Hill can produce. Long Beach hasn’t produced,” declared Lars Eriksson of Jim Gray Volvo, another of the dealerships that is abandoning Long Beach.

Susan Shick, Long Beach’s community development director, said the city has not given up hope of establishing an auto mall, but may use the collapse of the talks to revamp the development proposal for the 90-acre site to include major retail stores. “We really have the ability to start fresh,” said Shick, who was hired at the beginning of the year, well after negotiations had begun with local dealers. “We may have the potential for a better deal . . . for the city.”

The chief gripe of the dealers revolved around Long Beach’s requirement that they guarantee the city a certain amount of annual sales tax income to pay off the bond the city would have had to float to finance the mall development. If the project’s sales tax fell short of that amount, the dealers would have had to make up the difference.

Over in Signal Hill, the Redevelopment Agency wasn’t asking for such guarantees. Moreover, Signal Hill was willing to sell the four dealers land at $10 a square foot, compared with the $13 a square foot Long Beach was asking. Commented Eriksson, “When you have the ability to go right next door and not guarantee the sales tax . . . “

Now clustered along Long Beach Boulevard and other older, declining commercial strips, the dealers have been anxious to move to flee light rail construction and neighborhood crime and get closer to a freeway.

The six Long Beach dealers will fill up Signal Hill’s auto mall, contributing an estimated $2 million a year in sales tax revenues to that small city’s treasury.

“There was no robbing of dealers,” said Tim O’Donnell, Signal Hill’s assistant city manager. “It just boiled down to who could put the best deal together in the quickest amount of time.”

Although Long Beach has long talked to the dealers about tax guarantees, Eriksson said that until a meeting with city officials last week, “we were under the impression they would find other guarantees” for the mall bond. After the meeting, at which dealers said they were also informed the Long Beach land prices were increasing from $10 to $13 a square foot, the dealers approached Signal Hill and struck a bargain within a couple of days.

The Signal Hill City Council Tuesday night approved exclusive negotiating agreements with the dealers, allowing 120 days for the two sides to arrive at a final deal. Both Signal Hill and Long Beach plan to pay for their auto malls with bonds and money from selling land to the dealers. But because two-thirds of Signal Hill has been declared a redevelopment zone, that city could use an existing redevelopment bond that is paid off with increases in property taxes from throughout the zone.

In Long Beach’s case, the city planned to float a new bond just for the mall, which would have been repaid from sales tax income from the mall. “The city can’t put up all the money and take all the risk,” said Shick of the guarantee requirement. “That’s not the way the world works.”

Even though the guarantee demand drove the Long Beach dealers across city lines, Shick said she is talking to larger dealers with manufacturers’ backing who would not be bothered by such a requirement.

Long Beach had not acquired all of the land for the mall and will put the purchase on hold until it lines up other dealers or retail stores, Shick added.

The city would be interested in putting retail stores on the site, she said, because those sales are not as prone to cycles of ups and downs as car dealerships, and because retailers and developers would probably be able to put up enough money of their own to eliminate the need for a city bond.

With no major successful shopping malls within city boundaries, Long Beach officials have been eager to find ways to increase the local sales tax income. Two years ago a city task force recommended that Long Beach join the ranks of Southern California cities that have turned to car dealerships to invigorate their sales tax bases. An auto mall, the study group concluded, would help the city retain existing dealerships that want to leave outdated locations and attract new dealers.

“It’s hard for me to understand how they could let most of the dealers leave the city. I’m sorry to see it,” said Mike Salta, a Long Beach car dealer who was on the task force and who had earlier signed up to move most of his operation to Signal Hill.

“We have to move. People just won’t come down Long Beach Boulevard after 5 or 6 because they’re afraid.”