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Local News

Sandwich City Council voices differing views on auto dealer's sales tax rebate request

Sandwich Mayor Rick Olson
Sandwich Mayor Rick Olson

Sandwich officials have been asked to approve a sales tax rebate agreement for one of the city’s largest car dealerships or risk losing it to a neighboring community.

Scott Gjovik, president of Gjovik Ford Inc., has met twice with city council members to discuss his company’s plan for the dealership, one of four he has on Route 34 along the east entrance to the city.

The first meeting was to present the company’s plans and at the last meeting, on May 14, the request was placed on the council agenda for a vote that Gjovik said he hoped would close the deal.

The dealer is asking the city for financial assistance through a sales tax rebate over a 20-year period.

When the item came up for vote at the May 14 meeting, it did not receive a second, so it was then placed on the agenda for discussion at a May 21 council work session. The council could vote on the agreement during the next regular meeting on Tuesday, May 29.

According to information provided by Gjovik, the dealership is asking the city to rebate annually an amount equal to the greater of 15 percent of the total annual sales tax revenue generated by Gjovik Ford for the city, or 100 percent of the excess over $245,690 of the total annual sales tax revenue generated by the dealership for the city.

The rebates would start in 2020 and continue for 10 years or until the cumulative sales tax rebates equal $750,000 if that happens sooner.

The agreement also asks that all utility connections and building permit fees for the new dealership facility be waived or refunded to Gjovik.

In addition, the agreement asks that the city make a qualified engineering assistant available to Gjovik and its construction team at no cost, to assist Gjovik in securing necessary government approval of plans and specifications for the new facility.

Council members have voiced differing opinions on the request.

Alderman Les Redden said the rebate issue has been under discussion since 2015.

He said the question before the council is whether the city can afford to lose a business such as a car dealership.

“My question is whether Sandwich can afford to keep a high-sales-tax-generating business by using tax revenue to help support them,” he said.

Redden said that Gjovik claimed the dealership can’t afford the expansion project without taxpayer participation.

He noted that the council had recently approved a 1 percent sales tax increase unanimously the second time it came up. Redden said he wondered what the residents would think if the council gave sales tax money away to a business which is not struggling or ready to close its doors and lay people off.

He contends Gjovik is a successful business that is asking for a taxpayer handout.

Alderman Pete Dell said he did not agree with Redden, but sees the request differently. He said he believes it is exciting that a project like this is on the horizon.

“It’s not a remodel, it’s not a total rebuild, but an expansion that will be a new state-of-the-art facility which would be significantly bigger. I see it as new business that does come from an existing business in town but has the potential for significantly more sales tax income in the future,” he said.

Dell said he is more motivated to help an existing business that has been a good citizen than he would be for an outsider to come to town. He said this project would help secure this business in the city for decades if the project is completed.

“I do see it as new business. It’s just that it’s coming from an existing business,” Dell added.

Mayor Rick Olson said there also is the issue of real estate tax being increased with the new building. He said a new facility would help entice people from out-of-town to purchase a new vehicle here.

“It’s an important decision. I think we need to look at all sides of the story,” Olson said.

Alderman Kevin Kelleher said another business owner told him he would expect help from the city if it is given to Gjovik.

Alderman Richard Robinson said the city should do something for the Gjovik considering it is the city’s largest source of sales tax. If others seek help, the council can deal with them at that time, he said.

Tim Ayers, a Sandwich resident, questioned why the city should give the dealership $750,000 if it is making money. He said it would have to spend money if it moves to a new city, where it would have to construct a new facility.

Gjovik said the new facility would be two stories, totaling 32,800 square feet of space, and would be located west of the present Ford dealership.

He said they cannot expand on the present site because of easements on the property.

“We’ve have a lot of pressure being put on us by Ford Motor Company because our present facility does not adequately serve the needs of the community. Our commitment to the Sandwich community has driven us to ask for something very modest.”

The second phase of the project would be to remodel the existing building for use as an expanded Quick Lane operation, an expanded Allstate agency, a vehicle reconditioning center, and a new vehicle accessory sales and display area.

He said Quick Lane is a Ford-branded quick service operation that specializes in maintenance and light repairs and would be open evenings and weekends.

He said Ford Motor Co. has agreed to contribute $750,000 toward the cost after the new facility is open.

Once complete, it would consist of a 22-acre complex of four dealerships, plus the Allstate and Quick Lane service operation.

Gjovik said they expect this development to attract other new businesses and residents to Sandwich.

Based on their assumptions and estimates, Gjovik said the total tax revenue over the 20-year period could total $12.6 million, which would include $10.8 million from sales tax and $1.8 million from real estate tax increases.

If Sandwich accepts the tax rebate proposal soon, the dealership could proceed with construction plans. He estimated the completion date for late summer or early fall of 2019.

He noted that he is not overly optimistic, based on the council members tabling rather than approving the sales tax rebate proposal.

“Based on discussions at that meeting, we believe that there is a strong possibility that the City of Sandwich will reject our sales tax proposal,” he said in a letter to the Record.

Gjovik said there are greater opportunities for financial help from adjoining municipalities. They include a 50 percent rebate of all sales tax revenue for up to 20 years and some include “significant real estate tax rebates,” he added.

Some municipalities already approve these incentives, he said, but noted that he has not asked Sandwich to match any of these offers because the company prefers to stay in Sandwich.

However, if Sandwich is unwilling or unable to honor the request, Gjovik said company officials will need to seriously consider relocating the Ford dealership, Quick Lane operation and Allstate agency to another town.

If this were to happen, they would leave the existing facility on a standalone basis next to an abandoned, distressed 11-acre parcel of land.

And 55 to 60 jobs provided by these businesses would leave Sandwich, along with millions of dollars in sales and real estate taxes, he said.

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