City Helps Car Dealers Saddle Up In Rough Times Convincing the federal government to bail out the automobile manufacturers has been a tough sell. But for Norco, a small town in southern California also known as Horsetown, USA, it was a no-brainer when a couple of local car dealerships needed help.

City Helps Car Dealers Saddle Up In Rough Times

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Almost everyone in need of a financial bailout heads to Washington. But in southern California, a couple of troubled car dealers went straight to City Hall. They told officials in the town of Norco they needed some help to stay afloat. And as NPR's Ina Jaffe reports, they got it without having to beg.

INA JAFFE: After four decades in the automobile business, Mitchell Frahm can still get excited about a car like the new Dodge Challengers on his lot.

Mr. MITCHELL FRAHM (Owner, Chrysler-Jeep-Dodge Dealership): Kind of the old school hotrod from the '70s. It's kind of a remake off of that only with all of the new technology in it. So it rides and handles a lot better. It's a lot quieter.

JAFFE: Frahm has had this dealership in Norco for 20 years, and it's been a good business until recently. Now, he has twice the number of cars sitting on the lot as usual. His would-be customers don't have the money to buy them. And as you've heard just about everywhere, the banks aren't making loans these days. Frahm was in real danger of going out of business...

Mr. FRAHM: If I didn't receive some working capital. I mean, I don't think anybody has a crystal ball, but, you know, everybody knows it's going to be a tough year.

JAFFE: But the city of Norco has come riding to the rescue. That's probably how they'd put it here in the place known as Horsetown USA.

Mayor KATHY AZEVEDO (Norco, California): And we received that honor because we have so many horses here in town.

JAFFE: Says Mayor Kathy Azevedo. Her office in City Hall is decorated with horse paintings, horse statuettes, and horse photographs.

Mayor AZEVEDO: That picture in the center is me on my horse running the city flag in the rodeo.

JAFFE: The rest of inland southern California may be crammed with suburban subdivisions, but Norco has a rule that all homes must be built on no less than half-an-acre, so residents have room to keep their horses. The roads are lined with bridle paths instead of sidewalks, even downtown.

Mayor AZEVEDO: You can tie up your horse and go shopping or, you know, dine and then get back on your horse and hit the 120 miles of horse trail to head home or to a friend's house or wherever.

JAFFE: This lifestyle is supported to a great extent by the sales taxes generated by the auto dealerships, says Azevedo. So in late November, the city tapped into its redevelopment money and gave Mitchell Frahm and another auto dealer in town lines of credit worth half a million dollars.

Mayor AZEVEDO: We need them and they need us. As a matter of fact, the auto mall is 40 percent of our sales tax revenue here in the city, and we just thought it was the perfect use of our redevelopment agency funding to give them this line of credit. And hopefully it'll get them through the storm.

Mr. JOHN HUSING (Economics Consultant, Southern California): This is a very smart thing to be doing...

JAFFE: Says consultant John Husing, an expert on the economics of inland southern California.

Mr. HUSING: In city government, the largest share of the discretionary budget comes from the sales tax, and the biggest share of the sales tax comes from automotive. If a dealership closes, it means the city is going to ask to pare back what they're doing in parks, what they're doing for seniors - the sorts of things that the city councils can control.

JAFFE: In just the past few months, the region has seen 11 of its car dealerships shut their doors. So Husing says other cities in the area may follow Norco's lead. Mayor Kathy Azevedo thinks her town is already a trendsetter.

Mayor AZEVEDO: We kind of like to jest and think that maybe the federal government wanted to pattern themselves after Norco when they decided to help with the bailout.

JAFFE: Meanwhile, Mitchell Frahm knows he's now personally responsible for a half-million-dollar loan. But he seems to be taking it in stride.

Mr. FRAHM: Sincerely, if I didn't believe that I could take care of the debt then I wouldn't do it. I have all the faith in the world in our business that we're going to be here. We're going to get through it.

JAFFE: Both Frahm and the city of Norco have too much riding on this venture to think of it any other way. Ina Jaffe, NPR News.

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