Few places epitomize the local impact of a nationwide plunge in auto sales like San Bernardino's nearly vacant auto center.

Of at least 15 Inland new-car dealerships that have closed since early 2008, seven were within a one-mile radius of Interstate 215 in the southern part of the city.

The closings, piled atop a rising number of vacant retail storefronts in the same vicinity, leave the city facing the issue of what will become of all those empty buildings and display lots, and how to replace the crucial sales tax revenues those auto businesses once generated.

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William Wilson Lewis III / The Press-Enterprise

The former Mazda/Mitsubishi dealership on Showcase Drive in San Bernardino exemplifies the hard times being experienced by auto centers that are losing businesses.

Overall, San Bernardino started 2008 with 13 new-car dealerships and is now down to six.

The city's officially designated auto district, just west of the freeway, has just two survivors -- Toyota and Nissan dealerships -- after the past year's shutdown of Chrysler, Kia, Lincoln-Mercury, Cadillac and Mitsubishi lots.

On the east side of I-215, two dealers have closed on South E Street, a Buick-GMC lot and a Chevrolet-Mazda business, though a portion of the latter now operates as Arrowhead Motors, selling used vehicles repossessed by a division of Arrowhead Credit Union. A Subaru dealer is now the only new-car business on that street.

City officials and business leaders said recently they are in talks with automakers and regional dealers to possibly relocate or expand their operations into the auto mall. But the timing of the quest could hardly be worse, as the auto industry continues a wrenching downsizing in both production and sales venues.

"The problem right now is that nobody -- domestic or import -- is expanding their dealership networks at this point," said Michelle Krebs, a Detroit-based senior analyst with automotive research firm Edmunds.

In addition, Krebs said regional dealers have limited options if they want to add locations or take on new inventory. To meet moving and real estate purchase costs, they would likely have to find sources of new credit, which are hard to come by in the current climate.

SALES TAXES COUNT

The need to find replacements is underlined by the dependence of many cities on the sales taxes generated by purchases of big-ticket items like cars, needed to support vital public services. Like most cities with auto malls, San Bernardino's sales tax revenue has been hit hard by dealer closings.

City data show that sales tax tallies from new car sales went from more than $4.3 million in 2007 to $2.8 million in 2008, a drop of more than 35 percent. Vehicle sales accounted for 11.5 percent of citywide sales tax revenues, down from 14.9 percent in 2007 and 15.1 percent in 2006.

In many cities, sales from auto dealerships have become indispensable. For example, one-third of Loma Linda's sales taxes come from the city's two auto dealers, and Norco's auto mall accounts for about 40 percent of sales taxes.

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Chris Hoene, research director for the National League of Cities in Washington, D.C., said consumers in the past year have drastically cut their spending on items like cars, furniture and appliances. That's reflected in the rising number of empty car lots and furniture stores in many communities.

Since Prop. 13 capped property tax rates in California, communities have increasingly relied on sales taxes to meet the rising costs of providing necessary services.

"It's a big problem for California cities that have auto malls because they're collecting less on sales of big-ticket items like cars, but what they can collect in new property taxes is capped," Hoene said.

He said cities that can't immediately replace empty dealerships may also need to find ways to help the surviving but struggling auto lots stay afloat, with incentives such as tax breaks. "But you're playing with the same tax revenue stream if you do that," Hoene said.

Some Inland cities have enacted temporary programs over the past year to boost auto dealerships. For instance, in the months before the national Cash for Clunkers trade-in program provided a strong but temporary boost to dealers, cities such as Norco offered loans to local car businesses, and San Bernardino extended a temporary tax holiday to buyers in advance of an increase in its local sales tax rate.

Experts agree more substantive, long-term fixes will be needed to address situations like San Bernardino's.

Cliff Cummings, owner of Toyota/Scion of San Bernardino and a member of state and national industry advisory boards, said there have been talks with numerous automakers and sellers about possibly locating at the auto mall. Officials are not disclosing names while discussions are pending.

Cummings said dealers are also in informal discussions with the city on how to boost the visibility of the auto mall, with improvements that could include new freeway signs. "I'm still very optimistic that something can be arranged to fill those empty spots," he said.

City development officials are working with dealers to form a property and business improvement district at the auto center. Emil Marzullo, interim director of the San Bernardino Economic Development Agency, said the primary stumbling block is that the auto mall is now one short of the minimum three open businesses needed to start what is known as an assessment district.

Before the July closure of San Bernardino Mitsubishi, the development agency was working on a program under which it would lend the auto mall $1.2 million, which would be paid back over five years through assessments paid by dealers.

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The former Shaver Chrysler-Jeep dealership in San Bernardino sits empty after closing in 2008.

New Cars ONly

Another obstacle to filling vacancies is that unless the city charter for the auto mall is changed, used-car businesses won't be able to locate there. Currently, used car sales are only permitted if the dealership also sells new vehicles, Marzullo said.

Yet another issue is that the vacated lots are either under various owners or in legal limbo, which will make it more challenging to reach a consensus on future use of the lots. Some have been placed up for sale by their owners.

"We don't have ownership of the properties," Marzullo said. "That's one of the things that makes it difficult."

Jim Morris, chief of staff to San Bernardino Mayor Pat Morris, said while the situation is serious, the city's auto scene has several elements still in its favor.

For instance, to the north of the auto mall off I-215, there are three new-car dealers doing relatively well despite the overall economy, remaining among the top auto lots in the region. Morris noted that Fairview Ford is strong enough that it was able to absorb the inventory of the closed Lincoln-Mercury dealer, and Moss Bros. Dodge acquired the products of the shuttered Chrysler business.

In addition, Fairview Ford and the nearby Crest Chevrolet have done well with used cars and also have become important links in the regional parts supply chain for Ford and Chevrolet. Morris said it may be tough to get dealers who are faring well in the north to relocate to the southern part of the city, but the auto mall's location -- at the crossroads of I-215 and I-10 -- makes it attractive to brands still under-represented in San Bernardino, such as Kia and Volkswagen.

IMPORT INVITES

Peter Welch, president of the Sacramento-based California New Car Dealers Association, said auto malls statewide have been in touch with import automakers that have recently been increasing their U.S. market share and might wish to broaden their dealer networks, such as Hyundai and Kia. But no foreign or domestic makers are now contemplating major expansion in today's auto sales climate.

Welch said 140 California new-car dealers shut down in 2008, and so far 92 have closed in 2009. More are on the way out by October 2010, with about 65 GM and 32 Chrysler dealers in the state recently seeing their franchise agreements terminated by the automakers.

Morris noted San Bernardino will be in intense competition with other auto malls that have lost dealers, especially in the Los Angeles area.

"There is just a glut of properties right now," he said. "It's going to be a buyers' market for anybody looking at those empty lots."

Hoene, of the National League of Cities, said consumer spending on items like cars should rebound when the economy does, which should help cities looking for auto mall tenants. But in the Inland region, economists believe that rebound might not happen until middle to late 2010, if not later.

Reach Lou Hirsh at 951-368-9559 or lhirsh@PE.com.