HomeMy WebLinkAboutAgenda Bill 1ALate4Part3
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D. Potential Revenue Enhancement to the City with the Development of Deer Creek
Village and East Washington Place Shopping Centers
At the request and requirement of the City, Bay Area Economics performed FEIA's
for both Deer Creek Village and East Washington Place in January zoog. The results of
both studies are significant, especially in light of the current fiscal condition of the City.
The key findings are summarized as follows:89
• The Leakage Analysis is similar in both studies and indicates that Petaluma
is significantly under-retailed in many major retail categories, including
Building Materials stores and General Merchandise stores among others.
• Deer Creek Village and East Washington Place have the potential to
capture a sizable portion of these sales leakages, which are local resident
expenditures going to and benefitting neighboring communities.
• Taking into account local tax and fee revenues generated by Deer Creek
Village and city costs to provide services, the project will generate an
estimated net fiscal surplus of approximately $68~,00o annually to the
City's General Fund, mainly from the Sales Taxes generated.
• Taking into account local tax and fee revenues generated by East
Washington Place and city costs to provide services, the project will
generate an estimated net fiscal surplus of approximately million
e"Fiscal and Economic Impact Analysis for Proposed Deer Creek Village Shopping Center in Petaluma, CA,"
prepared for the City of Petaluma by Bay Area Economics, January zoo9.
9 "Fiscal and Economic Impact Analysis for Proposed East Washington Place Shopping Center in Petaluma,
CA," prepared for the City of Petaluma by Bay Area Economics, January zoo9.
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annually to the City's General Fund, mainly from the Sales Taxes
generated.
If the potential revenue enhancement generated by both projects under the
FEIA's and BEA's analysis were totaled, they could possibly add approximately $t.7
million in annual revenues to the City's General Fund. Had either or both developments
been built over the past two years, City revenues would have been enhanced which
could have mitigated or eliminated much of the reductions in City services and programs.
Amore detailed analysis of the potential for this revenue enhancement follows below.
E. Comparison and Validation of FEIAs' Results
In order to determine the validity of the FEIA's results regarding the Fiscal Impact
Analysis and potential General Fund Revenue enhancements, we performed an
alternative comparative analysis of the potential for added sales taxes with the
development of the Deer Creek Village and East Washington Place Shopping Centers
within the City limits. In our independent comparative model, we identified and
quantified Taxable Retail Sales for specific California cities by analyzing detailed data
provided by the California Board of Equalization in quarterly and annual reports and further
compiled in the California Retail Survey, zoo9 Edition, published by the Eureka Group. This
comparative data provides a baseline of fiscal impacts upon similar communities around
Northern California that can be appropriately applied to Petaluma. We focused solely on the
potential Taxable Retail Sales added to the City with the opening of a Lowe's store at Deer
Creek Village and a Target store at East Washington Place.
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The results and key findings of our analysis are as follows:
• Taxable Retail Sales in the category of Building Materials stores increased by
an average of 4~.9% the year following the opening of a Lowe's store as
compared to the year prior to the opening in eleven Northern California
communities. These stores were opened from zoo3 to zoo? (See Table ~
below).
• Taxable Retail Sales in the category of General Merchandise stores
increased by an average of 58.g% the year following the opening of a
Target store as compared to the year prior to the opening in g Northern
California communities. These stores were opened from zoo3 to zoo?
(See Table z below).
• If the Lowe's store had been opened in Petaluma in the past two years or
into the future, the City could generate an additional z o 00o in sales tax
per year. This figure is solely the result of the opening of the Lowe's.
Sales tax revenues would be greater with the addition of other retailers
within the development.
• If the Target store had been opened in Petaluma in the past two years or
into the future, the City could generate an additional z o 00o in sales tax
per year. This figure is solely the result of the opening of the Target. Sales
tax revenues would be greater with the addition of other retailers within
the development.
• The impacts of the recession and declining economy are reflected in these
numbers since we relied upon data up to and including zoo8. Therefore,
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these are conservative estimates of the potential fiscal impacts upon
Petaluma.
• Our independent analysis further affirms and validates the FEIA
conclusions that additional retail development in Petaluma would result in
significant revenue enhancement to the City.
• In addition, Building Materials stores (Lowe's) and General Merchandise
stores (Target) opened in Northern California communities from zoo3-
zoo7, were among the top 7 sales tax generators in each city the year
following their opening and continuing in successive years. As a result,
these types of stores not only add greatly to the retail mix of a community,
but also provide a steady source of sales tax revenue.
If the potential revenue enhancement generated by both projects under our
alternative Taxable Retail Sales analysis were totaled, they could possibly add
approximately $550,000 in annual revenues to the City's General Fund with just the
openings of Lowe's and Target stores. Had either or both stores been built over the
past two years, City revenues would have been enhanced which could have mitigated
or eliminated much of the reductions in City services and programs.
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TABLE 1
Taxable Retail Sales of Northern California Cities
With Lowe's Stores Openings, zoo3-zoo?
Retail Retail
Sales Sales Change
Current Year Prior Year From
City County Population Opening to After Year
(1!112009} Date Opening Opening Prior to
of Lowe's of Lowe's Year
($000) ($000) After
Antioch Contra 100 361 712612005 17.6
Costa 105,087 123,619
Cotati Sonoma 7,409 51512006 78,678 131,900 67.6
Dublin Alameda 47,922 1211512007 86,231 69,060
Fremont Alameda 213,512 111812005 160,215 208,007 29'8
Gilro Santa 51,508 51212003 85,520 118,686 38.8
y Clara
Jackson Amador 4,319 511412006 37,842 62,037 63.9
Lincoln Placer 40,060 811812007 201,140 47.1
136,743 est.
Lod'+ Joaquin 63,362 1012912004 43,081 82,242 114.1
Los Merced 36,198 111412006 149.1
Banos 12,290 30,614
Stockton Joaquin 290,409 112012006 538,219 306,327
Yuba City Sutter 63,647 11712007 113,786 97,862
Average 41.9
Change
Source: Cal'rfomia Board of Equalization in quarterly and annual reports and further compiled in the
California Retail Survey, zoog Edition, published by the Eureka Group. Taxable Retail Sales figures include only
those from Building Materials stores.
Table t highlights the changes in Taxable Retail Sales in Building Materials stores
in Northern California cities that have had Lowe's store openings from zoo3-zoo7. On
average, each community experienced a significant ~tg% increase in Taxable Retail Sales
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in this retail segment the year after the opening of the Lowe's. The only cities that
experienced declines in Taxable Retail Sales --including Stockton, Yuba City, and Dublin
had Lowe's stores opening in either late zoo6 or the end of zoo7, which was the
beginning or in the midst of the economic recession. More importantly, each of these
cities was also at the epicenter of the subprime mortgage lending crisis and has
experienced the highest or nearly the highest rates of home foreclosures and home loan
defaults in the nation.
TABLE z
Table Retail Sales of Northern California Cities
With Target Store Openings, zoo3-zoo7
Retail Retail %
Sales Sales Change
Current Year From
City County Population Opening prior to Year After Year
(11112009) Date Opening Opening prior to
of Target of Target Year
($000) 1$000) After
Albany Alameda 16,884 101612004 86,594 141,043 62'9
Antioch Contra 100,957 101812003 20.5
Costa 201,952 243,363
Gilroy Santa 51,508 101812003 143.8.
Clara 60,404 147,240
Hayward Alameda 150,878 101412006 239,640 301,442 25'8
Lincoln Placer 43,020 101412006 93,634 174,226 86'1
Manteca Joaquin 67,754 31512003 107,580 126,615 17'7
Morgan Santa 39,814 712512007 15.1
Hill Clara 53,813 61,932
Napa Napa 77,831 101612004 129,649 145,826 12.5
Riverbank Stanislaus 21,805 101512005 58,177 142,855 145.5
Average 58 9
Change
Source: Cal'rfornia Board of Equalization in quarterly and annual reports and further compiled in the
California Retail Survey, zoog Edition, published by the Eureka Group. Taxable Retail Sales figures include only
those from General Merchandise stores.
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Table z highlights the changes in Taxable Retail Sales in General Merchandise
stores in Northern California cities that have had Target store openings from zoo3-zoo7.
On average, each community experienced a 58.x% increase in Taxable Retail Sales in this
retail segment the year after the opening of the Target.
The detailed calculations and model for this analysis are attached in Appendices B
and C.
F. Petaluma's Fiscal Situation with and without Additional Retail Development
It is clearly evident from an analysis of the City's current fiscal situation that
severely declining revenues over the past several years has created a downward spiraling
effect upon essential city services and programs. City employees have been laid-off,
positions eliminated, and vacancies unfilled. In the current fiscal year, remaining City
employees are expected to take a 4% cut in pay with another reduction to their
benefits. Not only have significant reductions in City services and programs been
mandated by the decreasing revenues, but City reserves are also being depleted with no
future alternative but to eliminate services, programs, and people even further. Without
alternative sources of revenues or revenue enhancements, this dire fiscal situation is
expected to continue into the unforeseeable future with recovery for the state and local
economy months, if not years away.
However, with the current development proposals of the Deer Creek Village and
East Washington Place Shopping Centers under consideration, Petaluma's fiscal
condition could be improved with an injection of much needed additional revenues
through increased sales taxes. Under the FEIA's analysis, capturing the leakage of retail
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dollars already spent by Petaluma residents (in other cities with a greater variety of retail
choices), could result in nearly $~.7 million in additional sales tax revenues.
Chart 5
Capture of Retal! Leakaee Impact on Sales Taxes
$1d,oDD,IJQD 513,331.D~~~~
$13,5DO,oDO -
$12,SOD,00D 41~.1E1,
$11,000,o0D 51165•.:.= _
$1o,oCI~0,D~0~o ~ _
$9,500,OD0 _
F§"2~7;~ctuHl F§'2DD8Actual F§'2t~'v9Est.,4ct~Anl F"~2~31i5
-~-Current fProjected
Chart 5 graphically represents the difference in potential versus actual Sales
Taxes collected by the City of Petaluma in just the last three fiscal years. Had the Deer
Creek Village and East Washington Place Shopping Centers been opened in any of the
last three fiscal years, Sales Taxes in Petaluma would have remained stronger. Rather
than a dramatic zo.z% reduction from FYzoo8 to FYzo~o, there would have been a slight
5.7% decline.
Moreover, our independent Taxable Retail Sales analysis which solely focuses
upon the potential additional benefits of opening both a Lowe's store and a Target
store could also result-- at a minimum-- in over $550,000 in new sales tax just from those
two stores.
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Chart 6
Addition of Target & Lawe's Impact on Sales Taxes
$12,SDD,ODD -
.qi
$11 C_
$lU,SDD,®~D . _ _
1D 5~~,~,. ~ ,ED,
$io,'DDO,DDO
$9,5DD,DDD _ _
$9,ODa,a~D ,
F"e'2i~7Attual F1'2~E.A~cual FY2E3t.~:tual F~'2S31D
-f-Current fPrajected
~ --_-_-._.___.__.....___.v-____-_~____._._..__.__._.._,
Chart 6 represents the alternative range of increased Sales Taxes to the City from
the opening of a Lowe's or Target store during any of the last three fiscal years. Simply
by opening the Lowe's and Target stores, at the very least the City would be able to
save three police officer positions and two firefighter positions slated to be eliminated
or left vacant in the FYzo~o budget. With the greater revenue enhancement projected in
the FEIA's of Deer Creek Village and East Washington Place, at best the City could have
saved the previously eliminated 37 positions in Community Development, Parks and
Recreation, and other important program areas with the additional $550,000 to $~.7
million in annual added sales tax revenues.
VI. Summary of Analysis
Based upon our analysis of the available data and information, we believe that the
current fiscal crisis faced by the City of Petaluma will remain challenging for the foreseeable
future. Revenues will remain stagnant or continue to decline resulting in further reductions
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in City expenditures, programs, and personnel. Without dramatic changes to the City's
revenue streams and/or resurgence in the local economy, the City will be faced with ongoing
budgetary problems and further difficult decisions.
However, these fiscal difficulties could be remedied with the opening of the
proposed Deer Creek Village and/or East Washington Place Shopping Centers. Painful fiscal,
programmatic and personnel decisions by the Petaluma City Council could have been greatly
lessened, delayed, or more likely, averted. Deer Creek Village and East Washington Place
would inject increased sales tax revenues into the City of Petaluma by diversifying the retail
base and available choices for consumers. These sales tax revenues would come mainly
from retail expenditures already being made by Petaluma residents, but elsewhere in other
cities. Most importantly, by providing greater retail choices for its residents, Petaluma will
not only benefit from improved convenience and efficiency, but it will also benefit from
greater sales tax revenues which will ensure the protection of essential City services and
programs during a critical period of budgetary and economic uncertainty.
All in all, the results of this analysis clearly indicate that the City of Petaluma would be
better off financially and commercially with greater retail availability.
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