Tax revenue losses from the failure of auto dealerships put dents in government budgets.

Southland communities suffering from the loss of vital sales tax revenues because auto dealerships have closed are finding few takers to fill the hole in their budgets. And some cities are having trouble luring any new tenants at all.

Auto dealerships are the No. 1 generators of sales tax revenue, noted Howard Wong, a retail properties specialist with the South Bay office of Grubb & Ellis Co. While property owners try to find any tenant the space is zoned for, city redevelopment officials use incentives to try to persuade auto dealers to lease the spaces.

But auto dealerships are not easy to come by.

During prosperous times, auto dealerships brought more than $1 million a year in sales tax revenue to the City of South Gate. But the three Pete Ellis dealerships there folded during winter 1991, and last spring another dealership, Freedom Ford, followed suit.

The dealers abandoned a total of 11 acres of prime real estate, said South Gate City Councilman Larry Leonard.

Pete Ellis operated a Dodge dealership on the corner of Firestone Boulevard and Garfield Avenue, plus Jeep Eagle and Chrysler Plymouth dealerships just east of that. Only the corner parcel, which Pete Ellis turned over to Dodge when he went out of business, has since been leased.

The new tenant, South Gate Motors, is a Chrysler dealership that leased the six-acre space from Dodge four months ago. This Chrysler dealership, which faces a slumped auto market and a name far less known that Pete Ellis, can probably be counted on to generate no more than $300,000 in sales tax revenue for the city per year, Leonard said.

The adjacent two-acre space that was once the home of Pete Ellis' Jeep Eagle dealership belongs to South Gate-based World Oil Co., while the similar-sized third parcel is owned by a man named Jim Leach. South Gate is vying to bring auto dealerships to both of these spaces.

"We really need a sales-tax-producing tenant. The car dealerships are desirable," Leonard noted. But Leonard said the city is having trouble securing dealerships as tenants because dealers are asking for concessions -- a portion of the sales tax revenue that the city can't afford to give up.

"Most of these dealerships now, they want a piece of the action," Leonard said.

At one time, a General Motors Saturn dealer expressed interest in the vacant parcel owned by Leach, but the dealer and Leach couldn't come to an agreement on the terms of the lease, so the deal fell through, Leonard said.

Ford also considered opening a dealership on one of the empty parcels, but a franchising agreement with a neighboring dealer precluding them from doing so, Leonard added.

Other retailers are the second biggest generator of sales tax revenue, Wong said, and at one time Atlanta-based Home Depot considered opening an outlet on one of the lots, but "nothing came about," Leonard said.

In another part of town, the Freedom Ford dealership took up two parcels along Long Beach Boulevard, a showroom and a used car lot. The city plans to turn the showroom parcel into a youth center, and an independent used car dealer will soon take over the other parcel, Leonard said.

In the meantime, the city is losing as much as $700,000 a year in sales tax revenue, and city officials are trying to balance a $17 million budget that now has only half of the $3 million in reserves it once boasted.

Many Southland cities that are having trouble attracting new auto dealers are now faced with deciding what to do next with their empty properties, Wong said.

One choice redevelopment officials have is to let the properties sit empty for a year or so until automobile sales pick up again. Their other option, Wong said, is to try to lure in other retailers.

The City of Montebello recently did just that, he said.

Montebello had an empty parcel of land during 1991 that redevelopment officials had designated as space for an auto dealership. The lot was about 10 acres in size.

Originally, Chevrolet planned to open a dealership there but didn't because of the poor climate for automobiles sales.

Just recently, though, Montebello redevelopment officials secured a different tenant for the property -- San Diego-base Price Club.

The fate of yet another former dealership site is also up in the air, the parcels of land on which Paramount Chevrolet used to sit.

Ted Lawson, senior vice president at the South Bay office of CB Commercial Real Estate Group, is representing Richard Ferber, the owner of the property at the corner of Firestone and Paramount boulevards in Downey. The dealership had been in existence for 53 years, and Lawson said it will be much harder now to lease the five parcels than it would have been a few years ago.

Brokerage signs were posted on the property the week of Jan. 6, and Lawson said he and his partner have received about 50 inquiries so far. Some callers include owners of restaurants and car washes, but no auto dealers have bitten the bait yet, he said.

Getting phone calls and finding qualified tenants are two entirely different matters, Lawson said, adding that a qualified tenant is going to need strong financial backing.

Banks just aren't lending on real estate, he added.

He is looking to secure "big box tenants," such as a Price Club or a Home Depot. Other options for the spaces include a name-brand restaurant or other name-brand retailer such as Philadelphia-based Pep Boys, Lawson said.

He said he soon plans to distribute 2,000 brochures advertising the seven acres of property.