Lagging car sales hurting California's city's budget

SAN LUIS OBISPO, Calif. _ A double economic whammy of high gas prices and the current credit crunch has caused sales to drop at some of the county’s auto dealerships and hurt cities that depend on the sales tax.

The city of San Luis Obispo, for example, saw a 10.4 percent decline in sales tax revenue from autos and transportation in the second quarter of this year, compared to the same period a year ago, according to HdL Companies, a sales tax consultant for city government.

In actual dollars, that amounts to a loss of more than $71,000, from about $687,000 to $616,000. Look back even further, and the shortfall is worse. In the second quarter of 2005, the city brought in $777,000 in sales taxes from the auto category.

"It (the drop) doesn’t surprise me, but it doesn’t thrill me either,"said Debbie Malicote, the city’s finance manager.

The decline is especially troubling because San Luis Obispo, like other local governments, relies on a sizable chunk of sales tax revenue from new and used auto sales, roughly 21.2 percent of its total sales tax revenue in the second quarter of 2008. That’s the most recent data available.

With sales tax revenue falling overall, cities will be searching for ways to adjust, said Claire Clark, the city’s economic development manager.

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