Auto industry woes hit coffers of Southern California governments

When Heritage Lincoln Mercury closed in August, the city of Tustin felt the pain.

For decades, the dealership had operated out of the Tustin Auto Center -- which has 17 other franchises -- and it was once among the largest Lincoln Mercury dealers in California.

It was also a crucial source of revenue for the city, which relies heavily on taxes from automobile sales to keep afloat. Of the city's $20-million annual budget, about $5 million comes from the auto center, said the city's director of finance, Ronald Nault.

But with sales of Lincoln and Mercury cars and trucks down by nearly a quarter nationwide through October compared with last year, the dealership was forced to fold. Meanwhile, many of the other dealerships in the auto center, although still in business, are seeing severe sales declines, spelling further reductions in sales taxes.

"It has definitely affected us," said Nault, adding that collections from the auto center were on pace to be off 20% for the year. And with industrywide vehicle sales falling even more sharply in recent months, the revenue shortfall could be substantially greater, forcing Nault to consider capital-spending cuts, a freeze on salary increases, reductions in travel and, perhaps for the first time in the city's history, layoffs.

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--Ken Bensinger

Photo: Gina Ferazzi/Los Angeles Times