________________________
________________________
October 23, 2023
By Brian Hews
It is no secret that the Cerritos Auto Square is the largest tax revenue generator for the city, selling an average of 60,000 cars per year. Each year, the CAS generates approximately $1.5 billion in annual sales, with Cerritos receiving nearly $15 million in sales tax; the CAS essentially pays for Cerritos’ L.A. County Sheriff’s Station and Community Center, which is budgeted at $15 million annually.
The partnership benefits both Cerritos and the CAS, but as one City Councilmember told LCCN off the record, “the city bends every time they [CAS] asks for something.”
It was rumored that the CAS put pressure on the City Council in 2019 to squash the proposed 3/4 cent sales tax increase for the city that would have brought in over $11 million with then Councilwoman Carol Chen bending for the CAS, voting no to place the measure on the ballot.
And the city, at its September 28, 2023 bent once again for the CAS, with the City Council voting 5-0 to provide what one observer called “corporate welfare.”
In March of 2023, Cerritos received a request for financial assistance from the CAS to upgrade the existing Cerritos Auto Square digital billboard; the self-proclaimed “largest auto square in the world” needed financial help to fix their billboard.
The city provided financial assistance ten years ago when the sign was upgraded, but since then, the digital display panels have aged and are now operating at less than half brightness.
Now, the CAS wants financial help again, and the Cerritos City Council obliged, in a big way.
The CAS “recently solicited bids,” on its own to upgrade the digital sign, which will replace the panels and refurbish lighting and sign structure. Based on “competitive bids” received by the CAS, the total cost to upgrade the existing sign will be over $892,000.
The city trusted the bid amount and now stands to give away $892,000 of Cerritos’ taxpayer dollars.
The city cited Cerritos’ Municipal Code 3.20.060 “to dispense with competitive bidding.” The Section states, “bidding may be dispensed with when the City Council determines it would be in the best interest of the City.”
As reasons to dispense with formal bidding, the city cited the (non-competitive bid) from the CAS and familiarity with the billboard vendor who schedules Cerritos’ free ads on the billboard.
When the city cites its code to bypass the public bidding process because “the city knows the vendor who schedules the city’s free ads,” something seems amiss.
Those CAS donations to the City Council sure are paying off.
The other reasons the City Council could use to dispense with bidding under 3.20.060: CAS’ billboard company is the only company that can do the required work. There are two in Los Angeles that have built several large billboards off many of the major Los Angeles freeways.
The other reasons are do not apply: emergencies, cooperative agreements, and contracts with government agencies.
The final reason, “in the best interests of the city as judged by the City Council,” was a no-brainer and good old-fashioned pay-to-play.
Is it in the best interests of the city to give an association that is earning huge profits free money? The Cerritos Auto Square will not move; think Disneyland and Anaheim.
Follow the money; the CAS gave over $12,000 to certain City Council campaigns in 2020.
That’s a Return on Investment (ROI) that would make Wall Street blush: $12,000 investment that yielded $892,000 in 2.5 years.
Yessirritos!
Finally, in a move typical of the anti-union majority on City Council, the city will allow the CAS to guard the henhouse regarding wages paid by the contractors to refurbish the billboard.
The billboard is a privately-owned sign, and the CAS will privately manage the project. The city will “require” the CAS and its contractors “to follow all applicable prevailing wage requirements because the city is paying in part the repair work for the project. The CAS will be responsible for implementing prevailing wage requirements that may apply to the project.”
The city’s confidence that the CAS is going to pay prevailing wages was not very high; the city asked for indemnification from any claims about prevailing wages during or after the project is finished.
Other People’s Money
In their proposal, the CAS requested a down payment of 50%, or $446,000 immediately; many residents who spoke at the City Council meeting questioned such a huge amount.
But then the CAS asked the Bank of Yesirritos to bundle the remaining $446,000 in a five-year loan at 4% interest.
Consequently, the CAS will pay nothing for the board up front.
But wait, it gets better. The city will pull all the permits; once the permits are approved, the city will give the CAS the remaining $446,000 but will not require the first loan payment for 60 days.
The CAS presumably charges its dealers to advertise on the billboard, so the CAS will have cash flow from their Free City of Cerritos Billboard before the first loan payment is due.
But wait, there’s more. Since 2013, the city has received 10% of the board’s airtime, six minutes per hour, “for the display of public art, advertising and promotion of city sponsored events, programs and other items as the city deems appropriate.”
After handing the CAS $882,000, the city (Art Gallucci) kept the free airtime at 10%. No state law dictates the amount of free advertising the CAS (or any billboard owner) can give, yet Cerritos did not ask for additional time.
The not-want-to-be-identified Cerritos City person told LCCN, “personally, I don’t like to give them (the CAS) anything. They are making record profits, and they are asking for money? They are Art [Gallucci’s] favorite.”
Gallucci retires Nov. 4, 2023.
