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Amid news that Berkeley’s Volvo dealership, and the more than $100,000 in annual sales tax revenue it generates, is packing off to Emeryville, the City Council Tuesday debated how to attract new businesses. 

“Right now we don’t have anything to offer [companies] except it’s great to come to Berkeley,” said City Manager Phil Kamlarz. 

Increasing revenue from business taxes is pivotal to preserve city services, Kamlarz told the council. Skyrocketing employee benefits have contributed to a $10.9 million structural budget deficit over the next two years. And with residents rejecting new taxes, he said, city officials must find ways to raise revenues to avoid cuts that include losing a fire truck and school crossing guards this summer. 

Mayor Tom Bates insisted that the city manager return next month with strategies to build commercial zones along five traffic corridors: San Pablo Avenue, Shattuck Avenue south of Dwight Way, and Ashby Avenue, University Avenue, and Gilman Street, all west of San Pablo. 

“These are great opportunities for us,” the mayor said. “We have to look at land use rules there. If not, we’re just going to drift.” 

In other matters Tuesday, the council voted unanimously to hold a public hearing on the “structure of merit” designation granted to 2040 Fourth St., home of Celia’s Mexican Restaurant. The council also unanimously rejected an appeal of a use permit for a condo development at 2700 San Pablo Ave. and approved both a city auditor’s report on parking enforcement and contracts with environmental planners for developers looking to speed up the city’s permitting process. 

McKevitt Volvo’s departure announcement was a long time in the coming, company employees said. 

“We’ve wanted to move to a more prominent location for a long time,” said Warren Johnson, a salesman at McKevitt Volvo and Nissan. He added that Volvo also wanted the dealership in locale “where we would move more than 30 cars a month.” 

In 18 months, Johnson said his company is slated to relocate from 2700 Shattuck Avenue to just across from Ikea in Emeryville. 

“It’s the busiest traffic corridor in the area,” he said Wednesday. “I don’t know if Berkeley had a comparable site.”  

McKevitt’s move is not a total loss for Berkeley’s tax base. Johnson said the dealership, which rents its Berkeley showroom, expected to keep its Nissan operations in Berkeley and might use the Volvo lot to sell used cars. 

Including McKevitt, Berkeley is home to five car dealerships, which all rank among the city’s top sales tax generators, according to Finance Director Fran David. 

“To match the revenue of one car dealership, someone would have to generate $45 million in retail sales,” she said.  

Berkeley’s other dealerships, located mostly on South Shattuck are also at risk to flee the city, said David Fogerty of Berkeley’s Office of Economic Development. 

“They’re all under pressure from their parent companies to relocate close to the freeway,” he said. 

Complicating efforts for the city to keep the dealerships, Fogerty added, the South Berkeley Plan, completed in 1990, doesn’t allow new dealerships on South Shattuck. City zoning laws also prohibit dealerships on substantial portions of Berkeley’s main corridors by I-80: Gilman Street, Ashby Avenue and University Avenue. 

Many lots on those avenues are zoned for light industrial and artisan uses. Mayor Bates said he wants to see small revisions to the West Berkeley Plan so the city could build commercial zones on the streets near I-80.  

Increasing commercial development in West Berkeley is sure to meet opposition from artists and industrialists who fear that encroaching retail shops will drive up rents and force them out of Berkeley. 

Aware of the entrenched opposition, Bates said Tuesday, “I recognize there are people who don’t want any change, but things happen.” 

Despite the impending loss of McKevitt, Berkeley tax revenues are projected to jump $5 million to $115 million next fiscal year, due to better than expected returns on property taxes and property sales, according to Finance Director David. 

The sales tax, projected at $13.5 million and the business license tax, projected at $10.6 million have remained flat in recent years, due to a sluggish economy and increased competition from Emeryville and El Cerrito, Fogerty said. Property-based taxes remain the city’s top revenue generator, taking in nearly $28 million—about 23 percent of all revenue in the city’s general fund. 

To increase revenues, councilmembers suggested a few new taxes, all of which Kamlarz rejected because they were either illegal or would require voter approval. Councilmember Linda Maio inquired about a surcharge on video rentals and movie tickets, while Councilmember Laurie Capitelli asked if the city could tax Internet purchases made by residents. 

City staff hinted that they would consider going to voters with an increase to the business license tax, which didn’t sit well with business representatives at Tuesday’s meeting. 

“Be careful before you do that to business,” said Lisa Bullwinkel, executive director of the Solano Avenue Association. She also urged the city to staff the Office of Economic Development better. 

Celia’s designation hearing 

At the request of councilmember Darryl Moore, the City Council will hold a hearing April 26 on the Landmarks Preservation Commission’s designation of 2040 Fourth St. as a “structure of merit.” The building, which is home to Celia’s Mexican Restaurant, is proposed to be torn down to build a square block of condos at the University Gate to the city. 

The LPC must give approval to the final project, which Don Deibel of the developer Urban Housing Group said he feared would “make the development nearly impossible.” 

Asked about his request for a public hearing, Moore said: “Unfortunately landmarking procedure was used to stymie development on that site. I don’t think that that was appropriate.” 

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