75B - PH - VEHICLE INCENTIVE PROGRAM

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Resident Vehicle Incentive Program (VIP) Agreement March 19, 2019 Page 2 tax base and to encourage Santa Ana residents to buy local by creating specific incentive programs aimed to entice residents to buy their products in Santa Ana. The VIP has been developed to incentivize Santa Ana residents to purchase a car and/or truck from a Santa Ana certified auto dealer by offering a $500 rebate. The program will also rebate Santa Ana businesses that purchase vehicles from the qualified franchised vehicle dealerships. With the new sales tax measure recently passed in Santa Ana, local dealerships stated that the citywide sales tax increase could lead to decreases in the number of cars sold to residents. The VIP has been developed in order to address the serious leakage of local automotive purchases to outside jurisdictions. This represents a serious shifting of local revenues, as well as the loss of funds needed for vital City services, to outside jurisdictions, resulting in a negative impact on the City's local economy. This affect is further compounded, as is the resulting downward pressure on dealer expansion and job growth, by the loss of revenue that is typically generated by servicing of these vehicles that could have been performed at Santa Ana's local dealerships. In 2017, the 10 participating dealerships from the Orange County Auto Dealers Association sold 6,220 new cars, with 1,688 (27%) sold to Santa Ana residents; leased 8,348 cars, with 687 (8%) leased to Santa Ana residents; and sold 5,979 used cars, with 597 (10%) sold to Santa Ana residents. In terms of sales tax, the City of Santa Ana receives 1 % of the 7.75% current rate. Data provided from the Orange County Auto Dealers Association show that average vehicle purchase price in Orange County is $37,557. The total retail sales generated from Santa Ana residents purchasing new vehicles from those 10 dealerships (1,688 new vehicles in 2017) was estimated at over $63 million dollars which equates to over $633,000 (1%) to the City in sales tax generated. Used vehicle sales (597 in 2017), with an average purchase price of $17,705, generated roughly $1 million in total retail sales with 1% ($105,698) back to the City. Sales Tax Generated 2017 Average OC Number of Vehicles Sales Tax Pre -Sales Tax Vehicle Purchase Sold to SA Residents Measure (1%) Price (2017 New Vehicles $37,557 1,688 $633,962 Used Vehicles $17,705 597 $105,698 Note: Estimates are based on OCADA sales data With marketing of the program, staff is expecting that the number of new, leased, and used autos cars sold to local residents, and entitled to the incentive, could reach up to 3,500 vehicles. With a rebate amount of $500 per resident, the anticipated first year budget for the program is capped at $1.7 million dollars with a $25,000 City marketing and administration budget. The below chart shows the projected sales tax per vehicle to the City at each purchase price level and the estimated revenue to the City after the rebate is given to the resident. 75B-2