Libertyville incentive program would drive demand for cars

Like tinkering mechanics, Libertyville officials hope to jump-start the village's largest and most visible source of sales tax by handing out $100 in coupons to car buyers.

Auto dealers, who have fueled village coffers for decades, stalled last fall and have lost ground since.

Mayor Terry Weppler has proposed incentives totaling $65,000 to get tire-kickers in showrooms. The thought is that doing nothing could be worse.

"It's an investment but it's also a gamble," he said of the proposal, thought to be the first of its kind in the Chicago area.

On Tuesday, the village board will consider a program in which dealers would give customers who buy or lease a new car a village-issued voucher for $100.

Car dealers would not be handing out cash for a sale. As proposed, a new car buyer would receive four $25 vouchers to be used at other Libertyville businesses.

"It's not a rebate. It's a reward program for purchasing the vehicles in Libertyville," explained Heather Rowe, the village's economic development coordinator.

Each of the 13 dealers would receive 50 vouchers, representing a total of $65,000.

"The purpose is to support business in the community and support employment in the community," said Village Attorney David Pardys. "That's the logic for it being a public benefit."

Libertyville apparently is one of the first communities to pursue the strategy, said Dave Sloan, executive vice president of the Chicago Automobile Trade Association.

According to information prepared for the association by Auto Outlook Inc., the past six months have possibly been the most difficult ever for the modern car sales trade.

For the first quarter of 2009, registrations of new light vehicles declined in every Chicago area county - including more than 32 percent in Lake County - compared with the same period last year, Outlook Inc., reported.

"Dealers do have mayors calling them, saying, 'How's everything going? Can we do something for you?'" Sloan said.

"This is something to talk to our dealers about."

Some details are to be worked out and could change but village leaders say they are moving as quickly as possible. The ordinance authorizing the program as proposed would begin June 15 and run through Labor Day.

"We need to send a message," Weppler told the village board during an informal discussion that followed a previous meeting with several dealers.

Trustees support the notion of providing a spark for car sales while spreading some wealth to other merchants.

While an estimated 800 new and used vehicles are sold each month in Libertyville, some dealers have reported a 40 percent drop in sales.

Using $25,000 as an average, Libertyville's cut is $250 for every sale - its 1 percent share of the state sales tax.

While the village would make less per vehicle if the incentive program is approved, the theory is it would result in more sales which would offset or exceed the investment.

The program is structured so that money invested by the village also would be spread to other businesses and increase sales tax from those sources.

"No matter how much we put up, it will generate more," Weppler told dealers.

The idea is based on a promotion that began last week in Tracy, Calif., which is an hour south of Sacramento and an hour east of San Francisco.

That community authorized the expenditure of $500,000 to protect its nine dealers representing 16 "nameplates" or car brands. Libertyville has 13 dealers representing 25 nameplates.

A marketing program is part of the California effort. A public relations firm was hired to craft a television promotional campaign and a special Web site. The target is people living within a 40-minute drive.

In that program, new car buyers receive $500 - substantially more than being proposed in Libertyville.

"They get the gift card after they purchase the vehicle and they have to spend the money in Tracy," said Ursula Luna-Reynosa, economic development director.

Unlike in Libertyville, where no dealerships were ordered closed by manufacturers, two nameplates were lost in Tracy.

"The city understands there will be a downsizing of the car industry," according to Luna-Reynosa.

"We will call this successful if we can maintain all our Tracy dealerships and when all is said and done they'll be able to pick up bigger market share."

Three days after it started, Tracy had received requests for 100 gift cards, Luna-Reynosa said. Those customers had to wait because the because the city did not yet have the printed gift cards.

While $100 is a pittance compared to the price of a new car, dealers think it will help.

"Any effort by the village is hugely appreciated," said Joe Massarelli, co-owner of Liberty Auto City.

"I'm excited about it. I think it would be huge," agreed Jim Spellman, owner of Libertyville Chevrolet.

The dealers plan on forming an association and kicking in a set amount - $500 has been discussed - each month during the run of the program for marketing.

Village officials are contacting merchants to participate.

"They're directing people to my shop and they're giving them money to spend. Why wouldn't I?" said Adrienne McGill, owner of Adrienne Clarisse boutique downtown.

In Libertyville, sales tax represents about 16 percent of all revenues received by the village and car sales account for about 60 percent of all sales tax.

According to the Illinois Department of Revenue, sales in the automotive and filling station category in Libertyville dropped more than 23 percent in the last three months of 2008, the most recent figures available, compared with the same period in 2007.

Demand: Some dealers saw 40 percent drop in sales