Old law prevents cities from attracting car dealerships, critics say

Old law prevents cities from attracting car dealerships, critics say

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SALT LAKE CITY — The Wasatch Front has long been fertile ground for the new car industry. A drive up or down State Street or along I-15 will yield a plethora of dealerships featuring the most popular brand names in the business that are helping to provide much-appreciated tax revenues for the municipalities fortunate enough to have them.

But some cities claim they have been denied from participating in that potentially lucrative revenue generating part of commerce because of a nearly 25-year-old law that some detractors call “protectionism.”

At issue is the impact of the Utah New Automobile Dealership Act of 1991. Critics, including West Jordan city officials, contend that the law unfairly prevents the municipality and others like it from attracting dealerships.

The law essentially states that potential new car dealerships wanting to locate in the same county — or within 15 miles of an existing dealership of the same brand — must submit their business plans to a board composed of competing car dealers for review.

West Jordan Mayor Kim Rolfe said he would like to see the law changed to reduce the radius to 5 miles without requiring approval from anyone.

“That protects the existing dealerships and still allows other dealerships to locate within the valley,” Rolfe said.

A bill sponsored by Rep. Mike McKell, R-Spanish Fork, proposes to decrease the radius to 10 miles. HB290, introduced last month in the 2015 Utah Legislature, received unanimous support in the House and is scheduled for debate Monday in the Senate Business and Labor Committee.

Photo: UtahFairTrade.com
Photo: UtahFairTrade.com

But Rolfe said the proposed compromise won’t really help his city or other nearby southwestern municipalities. He said no dealers are willing to disclose their private financial information to a panel of potential rivals.

He says the vehicle manufacturers or local dealerships should regulate themselves.

“A few years ago, we lost a dealership to this particular law, and we currently have a couple of dealers who want to locate in West Jordan that the current law forces to turn over all their books to competitors in order to have a hearing,” Rolfe explained. “Most private businesses aren’t willing to turn over all of their business model and records to their competitors. I don’t think it's fair for the citizens of West Jordan or citizens of Utah in general.”

McKell said he believes reducing the radius to 10 miles is a reasonable compromise that would help cities — specifically Spanish Fork — by eliminating a hurdle for car dealers considering locating there.

“What I’d like to do is remove any barrier that may impact a dealership coming to my community,” he said.

Craig Bickmore, executive director of the New Car Dealers of Utah, said the proposed change is a fair compromise from the existing law, noting that a proposed provision would allow dealers to appeal to an advisory board to override the radius rule to within 6 to 10 miles. Carmakers, he said, actually have the final say in where dealerships are located.

“If the manufacturers want to put a new (dealership) somewhere, they simply have to make sure if somebody protests, they can prove economic viability,” Bickmore said.

If the market can support it, a new dealership can potentially be located inside the legally mandated radius, he said.

Because of that provision, Bickmore said, the New Car Dealers of Utah fully backs the proposed change in SB290.

“As an industry, we have come to an agreement with the bill’s sponsor," he said, "and we are supporting the bill as it goes through the Legislature.”

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