As we noted earlier this week, Davis, probably not surprisingly, is near the bottom in terms of per capita retail sales tax, with the city generating about $8400 in a year per person in retail sales. That puts them in the same ballpark as other college towns like Isla Vista, Berkeley, Merced, and Claremont, but trailing all of them and well behind some regional comparisons.
This chart compares Davis’ per capita retail sales to a number of other college towns, and also to some regional neighbors like Dixon, West Sacramento, Woodland, and Walnut Creek.
While some of these cities have some huge built-in advantages, such as Palo Alto with a booming tech market and San Luis Obispo with tourism and a regional hub, others have advantages that are far less clear cut.
For instance, Woodland, West Sacramento and Dixon are really not that different from Davis in terms of tourism and geography, and yet they are racking up 2.5 to 3.5 times more per capita in retail sales.
That doesn’t mean we should necessarily aspire to be like our regional neighbors nor does it mean we should attempt to replicate what San Luis Obispo or Palo Alto have done. However, even if we aspired to have our tax base look like that of Woodland or Isla Vista, we might be in far better shape.
As we noted in the previous article, the short-term picture is slightly improved over where we were five years ago. Nevertheless, the growth picture seems relatively weak for the next ten years – heavily reliant on the economy to continue to grow and the community to renew the sales tax.
At the same time, barring another major revenue measure, the city is going to have difficulty generating revenue to repair its infrastructure and keep up with its obligations to retirees in the face of increasing health care and pension costs.
For years, the city has talked in terms of sales tax leakage to other communities. Davis built a Target as one way to plug that leakage, but it is fairly obvious that West Sacramento, Woodland and Dixon, with far more in the way of retail options, are doing markedly better than Davis.
Davis, however, has resisted adding peripheral retail and big box other than Target, and if it wants to continue that policy, it has to look for other ways to generate sales tax.
That is where the notion of innovation centers and tech transfer came into the thinking. The idea was that the university has raised over a billion dollars for new research. Much of that research has at least the possibility of becoming monetized and transferred from the university setting into the private market.
The investment of technology and capital infrastructure into existing or new facilities would increase the value of the property and thus increase property tax rolls. Moreover, as new technology is developed, there would be the potential for point of sales revenue for the city.
While we can see from this chart that a more developed retail sector would lead to more sales tax, there are questions as to whether we could do it in a way that doesn’t simply lead to peripheral retail, a continued decline in the core of downtown, and a decline of our native business base.
We will be taking a closer look at San Luis Obispo in the next week or so. When I moved out of San Luis Obispo, 20 years ago, the population was only about 2000 people fewer than it is now. What has greatly expanded is its retail base, adding a number of big ticket stores from Costco to Target to Home Depot and the like. At the same time it has developed on the Ag-tech front – something that Davis would have liked to have done in MRIC (Mace Ranch Innovation Center) and other proposed innovation centers.
San Luis Obispo, of course, has some advantages over Davis. It is the largest population center in its country – although some of the big box and other retail is duplicated to the north and south.
It has a huge tourism base that draws people into the area year-round and allows for a greater number of purchases than a city of its size otherwise might have.
But, as we can see, while San Luis Obispo might be unique, certainly West Sacramento, Dixon and Woodland have done better than Davis in terms of retail sales.
Another possibility is virtual tourism. One person told the Vanguard that a huge amount of people flow into a city like Palo Alto every day to work in R&D (research and development) and the high-tech field. That means they purchase their food and potentially small goods in Palo Alto, adding to their sales tax base.
In Davis, while there is an influx of people into the city, many are students who are already tapped out in terms of purchase power. Can an innovation center focusing around Ag-tech, Med-tech and other high-tech production lead to more people in Davis each day who are then purchasing food at restaurants or buying products at local retailers?
These are concepts that bear more exploration. What is clear is that right now, with a huge unfunded liability and unmet needs, we need to find ways to increase our very meager sales tax intake, and I think most people would like to do so without a huge influx of big box and other peripheral retail.
—David M. Greenwald reporting
Correction: the original version inaccurately identified the statistic as per capita sales tax rather than per capita retail sales