After 36 years at 2950 N. Bellflower Blvd. in Long Beach, Calif., Cal Worthington Ford has become one of the city’s 10 biggest tax revenue generators and home to 115 employees. At the age of 89, local celebrity Calvin Coolidge Worthington still stars in the store’s TV and radio commercials. His grandson, Nick, runs the dealership’s parent company, which also includes franchises in Carlsbad, California and Alaska. So why are they contemplating a move from Long Beach?

The answer lies in an incentives package Nick Worthington says Ford Motor Co. put on the table in March to entice the dealership to relocate. Worthington told the city of Long Beach that he and his grandfather would prefer to keep the dealership where it is. But to turn down Ford’s offer and remain viable, they say they’ll need hundreds of thousands of dollars in loans from the city.

Go See Cal!

Like many dealers, Cal Worthington started small. He survived an impoverished upbringing in Dust Bowl-era Oklahoma to become one of the nation’s most successful auto retailers. He got into the car business after a distinguished career flying B-17 bombers for the Army Air Force in World War II. After leaving the military, he went from selling cars from a rented lot to signing franchise agreements; first with Hudson, then Chrysler and then with Ford in 1974.  

More than three decades later, Worthington is a living legend. Multiple generations of Southern Californians grew up watching his TV commercials, which co-starred a series of exotic animals as Worthington’s “dog,” Spot, each urging car buyers to “Go see Cal.” Millions did, and Cal Worthington Ford grew along with its owner’s fame.

Two years ago, the global economic crisis changed everything. The fallout from frozen credit markets led to the closing or disenfranchisement of thousands of dealerships, including one of Worthington’s closest neighbors, Champion Chevrolet of Long Beach. Cal Worthington Ford survived, but so did Pacific Ford in nearby Lakewood.

It is widely believed that the Detroit Three stand a better chance for recovery under the “megadealership” model employed by Japanese automakers operating in the United States. This model requires large franchises to serve exclusive markets to prevent dealer oversaturation.

The adoption of this business structure could explain why Ford would wish to put some distance between Worthington and Pacific Ford, but the terms of the purported incentives remain unclear. In a letter to Long Beach’s Deputy City Manager, Reggie Harrison, Nick Worthington described Ford’s offer as “very lucrative.” When contacted for comment by the Los Angeles Business Journal, Ford Motor spokesman John Clinard would offer only a tacit confirmation that any discussions had taken place.

“To ensure that our dealers provide the best coverage for the public and achieve profitable sales and service volume for their businesses, we continually monitor market coverage and from time to time suggest that dealers consider relocation,” Clinard said.

Desperate Measures

The alternative to moving is to secure enough financing for Cal Worthington Ford to expand into the now-vacant Champion Chevrolet lot. According to Nick Worthington’s letter, that would offset the refusal of incentives from his OEM and allow the dealership to increase its annual sales goal to $100 million.

“… We would like to partner with the city of Long Beach to make this expansion a reality in order to retain the considerable sales tax generation and job opportunities here in our local community,” he wrote.

There is a precedent. Several other dealerships in Southern California have won financial concessions from cities fearful of losing tax revenue from stores forced to close or relocate:

Norco Mazda and Frahm Chrysler Jeep Dodge, Norco, Calif.: City Manager Jeff Allred told The Wall Street Journal that Norco, a city located in the Inland Empire area east of Los Angeles, gets about 40 percent of its sales tax revenue from its auto dealerships. Facing closure after losing their floorplan financing in late 2008, the owners of Norco Mazda asked the city for help on behalf of their store and neighboring Frahm Chrysler Jeep Dodge. The city answered with $500,000 lines of credit for each dealership. Several months later, Norco Mazda closed its doors and began defaulting on its payments. City officials are attempting to work out a new repayment plan with the former owner, but hedged their bets by filing a civil suit against the dealer in May. As of this writing, Frahm Chrysler Jeep Dodge is in business and current on its payments to the city.

Ostrom Chevrolet, Montebello, Calif.: In April 2009, the City of Montebello purchased the land under Ostrom Chevrolet for $12 million and began leasing it back to the dealer. By that time, the dealership had been in business for more than 80 years and, like Cal Worthington Ford, is one of its city’s Top 10 tax revenue generators.

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Cormier Chevrolet, Carson, Calif.: In another case of assistance in the form of a land purchase, the City of Carson in the South Bay area of Los Angeles County bought Cormier Chevrolet’s property and building in order to lease them back to the dealership. The move was spurred in part by an earlier loan that Cormier’s owners had been repaying since the mid-’90s. City officials feared those payments would stop if the dealership closed. In April 2009, GMAC Financial Services called in more than $2.5 million on Cormier’s line of credit. The city stepped in with a financial package to cover the initial loan, the cash call from GMAC and the land deal. Terms of the five-year lease were generous to say the least: The dealership paid $1 for the first year and will pay between 0.25 percent and 1 percent of total annual sales for the next four years.

The Auto Gallery Audi, Canoga Park, Calif.: The Auto Gallery Audi was preparing for a multimillion-dollar expansion before the economic downturn. In 2009, officials found Los Angeles Mayor Antonio Villaraigosa receptive to their requests for financial assistance. Villaraigosa pushed to expand the footprint of California’s State Enterprise Zone in order to allow The Auto Gallery Audi and other businesses in Los Angeles’ San Fernando Valley to take advantage of the program’s tax credits, reduced utility rates and numerous other benefits. In May, the mayor’s office announced that the dealership will move forward with a $5 million expansion plan that will create 60 construction jobs and 35 permanent positions.

The Bottom Line

A potential finance package for Cal Worthington Ford has taken several forms. According to the Long Beach Press-Telegram, the dealership first asked the City of Long Beach for assistance in 2008. They requested a $200,000 economic development loan to upgrade Worthington’s giant electronic sign in the hopes of improving showroom traffic. Negotiations to secure the funds continued into March of this year.

“We’re doing what we can to create whatever incentives are possible within reason to keep the dealership in Long Beach,” Randy Gordon, chief executive of the Long Beach Area Chamber of Commerce, told the Los Angeles Business Journal. “We’re just trying to compete with Ford Motor Co. It’s sort of David and Goliath here, and we don’t know what Ford Motor’s offer is.”

In April, officials placed the loan item — which, by then, increased to $250,000 — on the city council agenda. However, the proposal was pulled when it was discovered that, under the terms of Long Beach’s current action plan, the amount could be no higher than the initial request of $200,000.

The city was hoping to use a portion of the $9 to $10 million federal Community Development Block Grant it receives annually (see sidebar). Granting a loan for a higher amount would require a change to the action plan, which would require approval from the U.S. Department of Housing and Urban Development.

As of this writing, city officials planned to weigh a revised proposal for an initial loan of $200,000 and a change to the action plan to allow for a second loan in the amount of $400,000, all at an interest rate of 5 percent.

It remains to be seen whether the Worthingtons will pull up stakes after more than three decades as a Long Beach institution. Unlike countless other dealerships in the United States, however, Cal Worthington Ford can at least be assured of many more years in business, whatever its location.

Sidebar: Accessing Funds From CDBG

The future of Cal Worthington Ford depends partly on the city of Long Beach’s allocation of funds from its Community Development Block Grant, a program administered by the United States Department of Housing and Urban Development (HUD). It was created in an attempt to improve conditions in some of the country’s most economically depressed cities and neighborhoods.

Since President Gerald Ford signed the legislation that created the CDBG in 1974, several changes to the program have been enacted, many of which have helped to make grants more accessible to business owners such as auto dealers. It’s a long road to financial assistance, however, and those seeking funds must work closely with the officials who administer the program at the municipal level.

The program’s structure is designed to promote involvement from the citizen level and up; however, individual business owners must present a compelling case to get their foot in HUD’s door. Funds from the program are allocated first to those working to provide housing, then to those offering services to the disadvantaged and, lastly, to programs or businesses that can create or retain jobs in low- to moderate-income areas.

Each of the 1,100 municipalities and urban counties on the CDBG’s roster must submit to the federal agency a quarterly report that details allocations of funds. Beyond that, however, HUD leaves the funding decisions to those in charge at the state and local levels.

For more information, go to www.hud.gov/offices/cpd/communitydevelopment/programs.