A small but growing number of dealerships are obtaining tax breaks or government funds in connection with their facility improvements.
Through August, about two dozen such arrangements have been negotiated and approved nationwide this year. While that's only a handful, industry observers say that's noticeably more than has been common in recent years.
Local and state governments say the incentives benefit local economies because dealerships create jobs and contribute to a strong tax base. Dealers benefit financially while spending on pricey improvements. But the deals require upfront investment by dealers in time and legal fees, and they often come with strings.
"The typical dealer wants less government involvement in their business, not more," said Jim Appleton, president of the New Jersey Coalition of Automotive Retailers and chairman of the Automotive Trade Association Executives, a body of state and local dealer groups. "While free money is nice, most money attached to the government comes with strings and might not be worth the aggravation."
Local governments are usually eager to invest "in the future," said Michael Hastings, principal of Direct Point Advisors in Burbank, Calif. "We are busier than we've ever been doing these kinds of deals in Southern California, Utah and Arizona."
Hastings' firm specializes in economic development arrangements. He has won approval for 15 tax incentive deals for dealerships in those three states this year, and four more are in the works. He did two deals in 2012 and six in 2013, he said.
Government subsidization has been an occasional topic of conversation among Appleton's peers recently. Mostly, Appleton said, it reflects dealers learning from Tesla Motors Inc. "how to shake government down for some money."
Earlier this month, Nevada's governor signed tax breaks worth as much as $1.3 billion -- and a measure allowing Tesla to sell directly to state residents -- to bring Tesla's giant lithium ion battery factory to Reno.
On a smaller scale, in August, the Michigan Economic Development Corp.'s Strategic Fund authorized a so-called tax increment financing for George Matick Chevrolet to make various property improvements.
The project to renovate the 50-year-old building and property will cost $9 million, said Karl Zimmermann, owner of the dealership in Redford Township, a Detroit suburb. After completion of the project, the improved property's tax assessment will rise, pushing up the dealership's property-tax bill. But over a period of more than two decades, Matick Chevrolet will be reimbursed for part of those higher property taxes. Zimmermann says he expects to get $719,528 in tax reimbursements eventually.