A Fiat Chrysler dealership is coming to Morgan Hill, with the help of an incentive from City Hall worth up to $780,000 in sales tax rebates.
The Morgan Hill City Council unanimously and ecstatically approved the 10-year sales tax rebate with developer and Fiat Chrysler dealer Josh Towbin at the Jan. 25 council meeting. The incentive agreement is similar to rebates offered to the city’s other two large auto dealerships—Ford Store Morgan Hill and Honda of Morgan Hill—in recent years.
Council members, city staff and other proponents of the incentives—which are part of the city’s “Auto Dealer Economic Development Strategy” developed in 2002—say these deals are effective in attracting businesses that generate significant public general fund revenues and more jobs.
“We are very excited,” Morgan Hill Economic Development Manager John Lang told the council. “This is a great opportunity to grow our job base, and our sales tax base… The city really does not have much to lose. We are not giving up tax (revenues), and he is taking on the burden of development.”
The deal provides the forthcoming Fiat Chrysler dealership—which will be located on Condit Road next to the Ford Store—with up to $780,000 in sales tax rebates over a 10-year period. The rebate is intended to offset the developer’s cost of impact fees, mitigation, habitat conservation fees and offsite improvements, according to a city staff report.
In return, Towbin agrees to operate an automobile dealership in Morgan Hill for at least 20 years, Lang said.
Towbin plans to invest about $14 million into the acquisition of the six-acre future dealership site and its development.
The city’s two auto dealerships are by far the most prolific generators of sales tax for Morgan Hill, which gains 1 percent of the sale price of every vehicle sold in town (without rebates). Over the next 10 years, city staff expects to gain at least $825,000 in sales tax revenues from the Fiat Chrysler dealership, after the $780,000 rebate is paid.
If the new dealership performs at “the upper range” of similar dealerships in California, the city could gain up to $1.9 million in sales tax revenues over the next decade, according to city staff. Towbin expects to have the new Fiat Chrysler dealership built and open for business by Dec. 1.
For the 2016-17 fiscal year, the city expects to receive about $8.8 million in sales tax, the largest source of revenue for the $36.2 million general fund which finances basic city services such as public safety, street maintenance and parks and recreation.
Back in 2014-15, city staff expected a total of $1.2 million in sales tax from Ford Store and Honda, based on projected total sales for the year of $78 million and $44 million from each dealership, respectively.
Towbin, who owns car dealerships in Nevada and starred in a reality television series about auto sales in 2006-2007, told the council that as a businessman he strives to be a part of the community his shops are located in. This includes working with area community colleges to offer apprenticeships, and committing to promoting employees from within the company.
“My favorite part of business is watching folks succeed,” Towbin said. “We have many stories of people who changed their life because of the business we are in.”
He added that when open, the Fiat Chrysler dealership will employ between 40 and 50 people.
“Years ago, I came to Morgan Hill and fell in love with the community,” Towbin said. “I’m really excited about being here.”
Towbin, as the owner of Morgan Hill Real Estate LLC, is already under contract to purchase the future Fiat Chrysler site, which is on Condit Road just north of the Ford Store, from South Valley Mushroom Farm.
The city’s first use of the auto dealership incentive program was in an offer to the Ford Store in 2003. That dealership “exceeded all previous sales tax expectations” by the end of the 10-year agreement.
Then in 2014, the city revived the incentive program with another 10-year agreement with Ford Store, and one with the Honda dealership. These offer up to $750,000 in sales tax rebates to Ford Store, and up to $450,000 for Honda. Both dealers promised to complete their expansion plans and remain in business for at least 10 years.
During the discussion of the deal with Towbin at the Jan. 25 meeting, councilmembers could hardly contain their excitement about the new business coming to town.
“I am very pleased (with) what your company could provide to the community,” Councilman Rich Constantine said. “To put forth a positive attitude is, to me, what Morgan Hill is all about.”
Towbin was the star of the A&E Network reality television series “King of Cars,” which centered on his Towbin Dodge dealership in Henderson, Nev. The series aired in 2006 and 2007.
