A report released this summer shows Seaside’s first-quarter auto sales tax– which accounts for more than half of the city’s sales tax revenue– seriously lagging behind last year’s.

From January through March, Seaside’s new motor vehicle sales dropped 44.1 percent compared with the first quarter of 2007, according to the report. Car sales have been down across California, but to a lesser extent: Countywide, new auto sales fell by 30.1 percent; statewide, 17.4 percent.

While Seaside’s auto sales slid to almost half of last year’s revenue, other local businesses took up some of the slack. Auto leases were up 20.0 percent, service stations up 18.8 percent and restaurants up 17.6 percent, leaving overall city sales down 20.7 percent in the first quarter of 2008.

Sales tax represents about one-third of Seaside’s general fund budget, according to Deputy City Manager Daphne Hodgson. The fact that Seaside’s auto dealerships generate about 60 percent of that sales tax revenue leaves the city particularly vulnerable to fluctuations in the vehicle market.

The city plans to spend up to $15 million revitalizing its auto center, which includes 11 dealerships between Fremont and Del Monte Boulevards, Hodgson says. Most of the construction was finished earlier this year, with lighting and landscaping soon to follow.

“We had sort of a double situation: national and state auto sales falling dramatically, plus we had a dug-up auto center,” Hodgson says. “We believe that added to our decline.”

On Sept. 18 the City Council approved $75,000 to promote the improved center.

Meanwhile, Seaside Mayor Ralph Rubio says, the city is working to expand its income base by redeveloping downtown, building new hotels and pursuing a shopping center on the former Fort Ord. “Overdependence on one revenue source is not a healthy situation,” he says.

The city also hopes to protect its existing revenue sources. “That’s why it’s really important that Measure E fails,” Rubio says, referring to the measure on November’s ballot that would repeal the utility tax. The tax represents about one-tenth of the city’s general fund budget.

But even as the mayor talks about diversifying revenue, the city is moving to add yet another auto mall. On Oct. 2, the City Council will consider granting Mid Coast Holdings Group an exclusive negotiating agreement for developing a luxury auto mall on 26 acres south of Lightfighter Drive on the former Fort Ord.

At Seaside’s Cypress Coast Ford dealership, sales manger Kyle Boyd isn’t sweating the economic downturn.

Sales have decreased this year as compared to last, he confirms, but the last few weeks have been OK despite the Wall Street turmoil. In fact, he says, the dealership has seen an uptick in customers seeking fuel-efficient cars as gas prices rise.

“People are trading in bigger vehicles and getting smaller cars,” he says.

The dealership is paying less for trade-in trucks and SUVs than it has in years past, Boyd adds. “Overall I think we’ve benefited from the market changes,” he says. “You make more money on used cars.”