$4M loan to car dealer on hold

SAN MATEO -- A plan to loan the owner of a car dealership $4 million to open needs further study, City Council members agreed Monday.

Under the proposal, the city would take the sales tax revenues generated by a new Ford dealership on San Mateo Drive and loan them back to the owner for 12 to 14 years to help the business get off the ground.

At a study session, council members expressed some confusion over how the deal would be financed and questioned whether an auto dealership is the best use for the site, just south of Burlingame's Auto Row.

The 3.2-acre lot at 800-880 N. San Mateo Drive has been vacant since the Shen Chevrolet dealership went out of business several years ago. In that time, two development schemes, one to build a grocery store and retail complex and the other to construct residential housing, have been rejected by the Planning Commission.

Robert Branzuela, who owns a Mitsubishi dealership at 885 N. San Mateo Drive, wants to establish a Ford dealership at the site but needs financial assistance to do it. If the plan is approved, the city would loan Branzuela about $300,000 a year until the sum reached $4 million, at which point he would begin to pay the city back in installments.

"We're not putting any city dollars at risk," City Manager Arne Croce said of the loan, which would be backed by Ford Motor Co. "We will be loaning money that we would not have in the absence of this project."

Croce added that this could be the city's last chance to install an auto dealership at the site.

But Vice Mayor Jack Matthews said he does not believe a car dealership would represent the "highest and best use" of the lot, which is expected to sell for about $12 million, since a residential development would bring in about $10 million more in sales tax revenue over 20 years.

Matthews said the proximity of the site to the Burlingame Caltrain station makes it ideal for transit-oriented housing.

But Mayor John Lee pointed out that, with several major housing projects underway, including the second phase of the Bay Meadows redevelopment, the city's need for housing may not be acute.

"There's an awful lot of housing being developed in this city," Lee said. "I'm worried about our commercial business."

Lee said another advantage to using the site for an auto dealership is that it could be operational within a year, whereas an apartment complex could take five years to complete.

Lee and Councilwoman Carole Groom said they were concerned about what would happen if the Ford corporation, which recently slashed jobs in the face of slumping revenues, defaulted on the loan. Both said they would like to use bonds to minimize the city's risk.

The council concluded the session by directing staff members to assess what the best use of the land would be and develop a more thorough analysis of how the proposed deal would be financed.

Staff writer Aaron Kinney can be reached at (650) 348-4302 or by e-mail at akinney@sanmateocountytimes.com.

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Bibliography for "$4M loan to car dealer on hold"

View more issues: Nov 5, 2006, Nov 6, 2006, Nov 8, 2006

Aaron Kinney "$4M loan to car dealer on hold". Oakland Tribune. Nov 7, 2006. FindArticles.com. 16 Jun. 2008. http://findarticles.com/p/articles/mi_qn4176/is_20061107/ai_n16823133