BACKGROUND:
During the June 14, 2023 Study Session, the City Council directed Staff to bring the auto center’s request for City participation in the replace of five current auto center reader boards to a regularly scheduled City Council legislative meeting.
DISCUSSION:
Formed in 1985, the Cathedral City Auto Center (Auto Center) consists of 10 auto dealers representing 15 brands. Due to Cathedral City’s (City) long term vision and the auto dealers’ daily efforts, the Auto Center has become the largest automotive hub in Eastern Riverside County. The Auto Center produces an estimated $456,880,000 annually in gross sales. With the City’s 1% sales and use tax, the City receives approximately $4,568,800 in sales tax revenue per year. Providing approximately 50% of the City’s annual sales tax revenues, the Auto Center is vital to the City’s economic well-being. The Auto Center employs 510 individuals and is a long-standing supporter of various City charities.
The Auto Center’s main sales and marketing exposure occurs along East Palm Canyon and Perez Road. Appealing signage is vital to maintaining customer engagement and driving auto sales and service. The five Boards are located along East Palm Canyon (double-sided main flagship board), two Boards at Auto Park Drive and East Palm Canyon, one Board at Perez Road and East Palm Canyon, and one Board at Kyle Road and Perez Road. Photos of the Boards are attached. Records show the City and/or the Redevelopment Agency participated with the Auto Dealers in providing message boards in 2005 and 2011.
The existing Boards have reached the end of their useful life. The Board manufacturer is no longer backing warranties nor providing replacement parts. Since parts are becoming increasingly difficult to obtain, broken Boards will be dark for increasingly longer periods of time. Current Board LED’s are operating below half brightness resulting in message readership dropping below 15%. Installing new Boards with vivid life-like LED technology will increase readership up to 98%. New Boards will carry a 10-year warranty.
As readership improves, the auto dealers believe sales will increase 10% to 12% which would provide additional annual taxable revenues of between $456,880 to $548,256.
Increasing readership and engaging consumers is also vital given the Auto Center’s largest competitor is the City of Indio’s Interstate 10 (I-10) Auto Mall. Given I-10 Auto Mall’s Interstate adjacent location, the I-10 Auto Mall has a significant competitive advantage over the Cathedral City Auto Center. I-10 has more than twice the number of potential customers driving by their dealerships each day and is easily accessed by out-of-area customers.
The Auto Center has engaged Southern California’s largest digital reader board maintenance and installation company, Electra-Media, Inc (EMI). EMI is proposing to install five Daktronics reader boards in place of the current five Boards. EMI’s recommended Daktronic boards are the same long-life high-resolution boards currently being used at the City of Ontario, Riverside, Industry, Buena Park, and Montclair Auto Centers. The purchase and installation of all five Boards will cost $478,765. The installation cost has been calculated to include prevailing wages. The purchase and installation of the Daktronic boards is estimated to occur 190 days following receipt of the down payment and City permit approvals. A copy of the Auto Center’s purchase and installation contract with EMI is attached.
The Auto Center is requesting the City contribute 75% (or $359,074) of the total cost to acquire and install the Daktronic boards. The contribution would occur in two payments of $179,537 spaced 190 days apart. In consideration for the City’s 75% contribution, the Auto Center will provide the City 15% total messaging time on the boards for City-related announcements. This offer for 15% advertising time would run for the 10-year useful life of the new boards. According to the Auto Center’s advertising company, a similarly located Lamar billboard would cost $4,000/month (or $48,000/year) for comparable advertising space.
Beyond the Auto Center covering the initial 25% ($119,691) of the acquisition and installation cost and offering the City 15% of programing time, the Auto Center will cover all monthly maintenance, programming, insurance, and electrical power over the 10-year life. Total annual maintenance, programming, insurance, and electrical power is $51,480 or $514,480 for 10 years. Total Auto Center investment in the acquisition, installation, maintenance, and operation of the five new boards is estimated to be $634,491 ($119,691 + $514,480).
The City Attorney’s office created the attached agreement memorializing the City’s financial contribution in exchange for at least 15% City advertising time on the new reader boards.
City advertising content is entirely within City control.
FISCAL IMPACT:
This expense will be deducted from the General Fund Economic Development Community Assistance budget (100-100-130-135-8650-8658). The required budget amendment will reduce the projected general fund balance currently at 52.21% down to 51.69%.
STRATEGIC PLAN:
Supporting the Auto Center’s request aligns with the following goals:
GOAL C: FISCAL STABILITY AND SUSTAINABILITY
Objective: Cathedral City has economically prospered by facilitating the investment of private dollars in high quality development which benefits the community. We remain financially solvent by instituting prudent fiscal policies and transparent financial practices.
GOAL B: COMMUNITY INVESTMENT
Objective: Cathedral City roads, gateways, public spaces, and other city infrastructure are well planned, designed, constructed, and maintained.