South Gate’s Stumbling on Auto Mall Puts Plans by Car Dealers in Limbo

It seemed like plans for a South Gate auto mall were off to a smooth start last summer.

City officials found a 35-acre site along the Long Beach Freeway and had no problem attracting auto dealers who were eager to move to a prime freeway location.

But more than a year later, the proposed South Gate auto mall appears even further away, and a string of Southeast area auto dealers say they are uncertain where their dealerships will ultimately land.

What happens could be important to not only South Gate but also to Downey and other Southeast-area cities that have been eagerly trying to attract car dealerships because of sales taxes that they pump into city coffers.

In June, 1985, South Gate accepted $10,000 deposits from Downey Toyota, Downey Datsun, Pete Ellis Dodge of South Gate and Randy Sopp Chevrolet of Huntington Park, who signed agreements to negotiate exclusively with the city’s redevelopment agency.

Claim by Property Owners

But plans went awry after three property owners on the prime site claimed the city “jumped the gun” by accepting deposits before notifying the property owners of the plan.

“Whether we were premature with our (auto mall) plans, I don’t know,” said Ruben Lopez, deputy director of the redevelopment agency. “But at the time, it seemed like the way to go.”

Since then the city has refunded the deposits, rescinded the agreements, and Pete Ellis--whom city officials described as the mall’s “drawing power”--has dropped out of the plans.

“Their attitude through all of this has been ‘we’re going ahead with this anyway’ regardless of the problems they have caused,” said Melvin Small, owner of United Container and Display, one of 14 businesses on the industrial site.

Small, the owners of J. B. Hunt Transport Inc., and Guardsman Chemical Inc. say they want to develop a 31-acre industrial park on the site where the city wants an auto mall. The plan they have submitted to the city’s redevelopment agency calls for a $23.7-million investment on the property that the city declared “blighted” in a 1974 redevelopment plan.

The Goal Is Revenue

The city, while saying it will consider that proposal, still has its heart set on an auto mall.

“Our goal is to generate revenue, and we are determined to rid this city of blight,” Mayor John F. Sheehy said. “We are looking for the highest and best use for that land, and that use seems to be commercial.”

While an industrial park would generate jobs and some revenue for the city, auto malls and the sales taxes that they generate have become big money-makers for cities. Since the passage of Proposition 13 in 1978, which slashed property taxes, cities have been eager to attract business that sell high-priced items like automobiles.

Auto dealers say they like the auto mall concept, believing that it improves their competitive position in attracting potential customers to their showrooms.

City Atty. Bruce Boogaard said South Gate is being fair to the owners of the site where the city has planned its auto mall.

“We gave the $10,000 deposits back when United Container expressed interest in presenting an owner-participation plan,” Boogaard said. “We had to rescind the agreements (with the dealers) so we could negotiate with the owners in good faith.”

Murray O. Kane, an attorney for the owners, tells a different story. He said the city agency returned the deposits only after he threatened to sue it for violating state redevelopment law, which requires the agency to study the owners’ plan before displacing them.

Boogaard said the redevelopment agency will work with the owners on their proposal while an environmental impact report for the auto mall is being prepared.

But while the agency studies both plans, the auto dealers say that they are wondering if the project will ever get off the ground.

Described as ‘Standstill’

“They are, at best, at a standstill,” said Carmen Koosa, owner of Downey Datsun. Koosa added that he needs to expand his showroom and lot to accommodate increasing sales. “I don’t think they are going to make it, and as a result we are in dead limbo. I don’t know whether to expand or get out.”

About four months ago, Downey Toyota and Downey Datsun each gave the South Gate Redevelopment agency $50,000 “good-faith” deposits, according to Richard Watts, an attorney for the dealerships. Watts said the dealers are eager to negotiate with the agency when the project is ready and the deposits indicate their interest in the project.

According to Lopez, Randy Sopp Chevrolet also submitted a $50,000 deposit, but Sopp could not be reached for comment.

Lopez said the dealers offered to submit the deposits, which the city is holding uncashed. If the auto mall plans fall through, the deposits will be returned to the dealers, Lopez said.

In the past year, the city has hired traffic engineers and appraisers to evaluate the site for the feasibility of an auto mall. The city has also issued an $18-million municipal bond to help finance various redevelopment projects, including the proposed auto mall.

Nestled between the Rio Hondo and Los Angeles rivers, the triangular site is bordered by the Long Beach Freeway to the west, Garfield Avenue to the east and an oil refinery to the north.

Effort Began in 1974

South Gate officials have been trying to stimulate commercial development in the area--characterized by stark industrial buildings and oil tanks--since 1974, when the city adopted a redevelopment plan consisting of seven areas throughout the city. After being hit by the closings of three major industrial plants since 1979, the city has been scrambling to get the projects off the ground.

The most spectacular plan came in 1983, when the city proposed construction of a $250-million heliport, hotel and high-rise office complex at Firestone Boulevard and Garfield, about half a mile away from the proposed auto mall site. City officials touted the plan, called Project Delphi, as a pioneering project that would make South Gate a major Los Angeles commercial center. The project included helicopter launch pads atop a dozen six- or seven-story buildings and a station for the proposed bullet train between Los Angeles and San Diego. But the project was abandoned after the city dropped the developer and could not find another developer to finish the project.

Since then, the city has pursued a less ambitious plan for the Project Delphi site; construction of Price Savers, a retail membership warehouse, is scheduled to begin in August. A $15-million shopping center is planned for the 15-acre site, according to city officials.

Offers by Downey

While South Gate’s auto mall is being studied, Downey is trying to persuade its auto dealers to stay where they are. City officials have offered Downey Toyota a $250,000 loan at an 11% interest rate to expand its facilities if the dealership agrees to stay in Downey for at least 10 years. The city has also offered similar proposals to Simpson Buick and Paramount Chevrolet, according to James R. Cutts, director of community development.

Tom Watts Jr., owner of Downey Toyota, said he and the city are still negotiating.

“I have some loyalty to Downey,” said Watts, attorney Richard Watts’ father. “But a dealer wants to sell the most cars, and I will go wherever I can do that best.”

While many dealers say they would like to stay in Downey because of its proximity to four major freeways, a few dealers have criticized the city for ignoring their needs.

James M. Ferber, president of Paramount Chevrolet, said the city is finally starting to feel the competition from nearby cities like South Gate and Norwalk, who are also eager to attract auto dealerships, and is now working with the dealers to improve their businesses by offering financial help.

“Downey took their auto dealers for granted in the past and thought they would not look elsewhere for a better site, but after overtures from South Gate, I think they finally want to do something about it,” Ferber said.

The race to attract auto dealerships heated up after the highly successful Cerritos Auto Square was completed in 1980. The plaza is generating $2 million a year in sales tax revenue, according to Cerritos officials.

Other Mall Plans

Southeast area auto dealers have seen more than one auto mall plan fizzle since then.

In Downey, proposed auto mall plans have been abandoned, and the city is focusing on an auto row along Firestone Boulevard, according to Cutts. Auto mall plans were also discussed in Norwalk, but William Nevius, assistant director of the redevelopment agency, said the city is also planning an auto row along Firestone Boulevard.

Downey officials say that developing an auto row, which is a concentration of auto dealers among other businesses along a major street, is a much easier task than developing an auto mall like the Cerritos Auto Square, which is designated specifically for auto dealerships.

In Signal Hill, auto mall plans have been plagued by problems since the City Council approved the plan in December. In March, a group of businesses that would be displaced by the project filed a lawsuit against the city in an effort to block the project.

While South Gate officials say it is too early to predict the outcome of their plans, the auto dealers are not the only ones who feel stymied. Property owners on the proposed auto mall site say their future is uncertain.

“It’s kind of a comedy of errors if you ask me,” said David Curtiss, terminal manager of J. B. Hunt Transport Inc., a trucking company that moved onto the site last year. “But I’m not laughing. We put a lot of money into renovating this place. If they move us out, where in the world are they going to put us?”

Apprehension Cited

The property owners claim that the agency overlooked the problems involved in relocating industrial facilities in a city where vacant industrial lots are scarce. City officials have suggested the site of the old General Motors plant, but Curtiss said it is a high-crime area and he is apprehensive about sending his employees to work there.

Roy Williams, general manager of Guardsman Chemical, said that moving his facility, which manufactures industrial coating and lacquers and uses 19 underground storage tanks, could destroy his business. Williams said that according to Environmental Protection Agency standards, a new facility with underground tanks would have to be completed before the company could move.

“It would be a severe problem for us to relocate,” Williams said. “We moved in here in 1960 when no one was around. There are very few places they could move us now without public outcry from people who do not want to be near a chemical company.

Boogaard says South Gate is required to pay the owners fair market value for their property and to compensate them for moving costs. The city must also pay for costs involved in setting up new facilities.

“This is not an emotionally charged issue. It is a matter of dollars and cents,” Boogaard said. “All those property owners need (to operate) is four walls and a ceiling.

While South Gate officials and the property owners are at a standstill, Gary Simpson, general manager of Downey Datsun, said he is anxious for someone to make a move.

“We are under-facilitized, and it’s hurting our business,” Simpson said. “If South Gate offered us a good deal, we would go. But right now we don’t know if we’re coming or going, and I don’t think they do either.”