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California Town's Bailout Gamble Just Got Riskier

Posted By Conn Carroll On January 27, 2009 @ 11:57 am In Economics | Comments Disabled

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Across California, many cash strapped towns are desperate to keep their fledgling tax bases afloat. For Victorville, a desert town on the main highway between Las Vegas and Los Angeles, that now means a taxpayer bailout for Victorville Motors. The Wall Street Journal [1] reports:

Car dealerships in these towns have been the economic engine of local government as well as pillars of the community, sponsoring everything from Little Leagues to rodeos. Victorville Mayor Rudy Cabriales said car dealers are the city’s largest source of sales-tax revenue. Victorville, a city of about 106,000, projects sales and use tax revenue of $19.5 million in fiscal 2009, down 24.5% from last year.

Victorville Motors initially requested $1 million, the mayor said. The $200,000 credit line the city eventually approved will roll into a five-year loan with 5% interest and is secured by the dealer’s real estate and other assets. “I can’t speculate on whether this will be enough to sustain the business,” Mr. Cabriales said. He notes that Victorville Motors has been a longstanding contributor to the community, which weighed heavily in his vote for the loan.

The taxpayers of Victorville should be very concerned about what President Barack Obama did yesterday to the their new Victorville Motors investment. Obama signed an order that will allow the Environmental Protection Agency to grant a waiver to California officials who want to impose a 30 percent reduction in tailpipe emissions by 2016. [2]

Cars with higher fuel-efficiency do not grow on trees. They will be smaller and cost more than othee cars. General Motors Vice Chairman Robert Lutz told Forbes [3]: “If Obama accepts the California waiver, that works out to 43 miles per gallon. We can do it, with a lot of technology, but that costs money–$4,000 to $5,000 extra, on average, per vehicle.”

What that means for Victorville is that after the new California regulations come into effect, the car dealerships across the border in Nevada will have a permanent advantage over them. Victorville can only sell the small, expensive California compliant cars. Nevada dealerships will be able to sell those cars, and their bigger, cheaper cousins.

So good luck getting that loan back from Victorville Motors, Victorville!


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/01/27/california-towns-bailout-gamble-just-got-riskier/

URLs in this post:

[1] Wall Street Journal: http://online.wsj.com/article/SB123292845938013899.html

[2] impose a 30 percent reduction in tailpipe emissions by 2016.: http://www.detnews.com/apps/pbcs.dll/article?AID=/20090127/POLITICS/901270388/1022

[3] Forbes: http://www.forbes.com/2009/01/26/autos-emissions-regulation-business-washington_0126_autos.html

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