Last week, the Vanguard presented data on per capita retail revenue, and it was not completely surprising to find Davis at the bottom of the list of cities on that particular list. But it was surprising to see that San Luis Obispo ranked just below Palo Alto in terms of per capita retail sales.
I have spent the last week in San Luis Obispo and, in a lot of ways, it is a mirror image of Davis. San Luis Obispo is a town of 45,000 people, and it has only grown by less than 2000 people in the 20 years since I graduated from Cal Poly and moved out. At this point, they have a one percent growth cap and project a population of about 57,000 by 2035.
San Luis Obispo is the home of Cal Poly, a CSU university that is remarkably similar to UC Davis in a lot of ways, although it has about 20,000 students. However, there are similar issues about student housing and an agreement by the university to take on additional growth and provide those new students with on-campus housing.
San Luis Obispo, like Davis, is buoyed by stable employers. In addition to Cal Poly, they have Cuesta Community College, Diablo Canyon nuclear power plant (which has announced its closure by 2025 and figures to be a huge $12 million hit on the local schools), and the California Men’s Colony, a medium security prison.
San Luis Obispo survived the economic downtown because of tight growth control policies that left the real estate market and values intact. That meant that, without overbuilding the supply of housing, the bounce back in the economy did not need to go so far on growth.
San Luis Obispo, like Davis, has a vital downtown area – in fact, in a lot of ways it is a lot bigger, although in many ways finding similar challenges with holding onto retail as it has been becoming more restaurant- and entertainment-oriented, even though retail remains a vital hub of the city’s sales tax revenue.
And yet, in the end, San Luis Obispo in many ways is thriving in terms of its sales tax base while Davis is struggling. On Thursday, the Vanguard met with San Luis Obispo Assistant City Manager Derek Johnson to get a better understanding as to why.
It did not take long to figure out a big piece of the puzzle. A remarkable 72 percent of sales tax for San Luis Obispo comes from people who live outside of the city. San Luis Obispo and the majestic central coast are a magnet for tourists. They have hotels and restaurants that draw people to stay in the city and visit the nearby coast.
The second piece of the puzzle is that, unlike Davis, San Luis Obispo is a regional center for retail. People in the south and north parts of the county drive to San Luis Obispo to do a lot of their shopping.
While Mr. Johnson could not break down the percentage of sales tax coming from tourism versus coming from inside of the county, this is clearly driving the economic vitality of San Luis Obispo.
The city draws $8200 annually in sales tax per capita. The Vanguard was not able to get the sales tax per capita for the city of Davis for comparison. They have a standard 7.75 percent state sales tax with an additional half cent district tax.
Davis, by contrast, is underdeveloped in terms of retail, which leads to people going to Dixon, Woodland, West Sacramento and the like for a lot of their shopping. While San Luis Obispo draws people into their city, Davis is pushing people out of town for shopping.
Derek Johnson told the Vanguard that the biggest sales tax area for the city is what they call the Los Osos Valley Corridor. This includes a traditional auto mall area. There are also hotels near the major highway, but there is also a new section of commerce that was not there 20 years ago. There is a Costco, a Home Depot, a Target, and a Dick’s Sporting Goods, along with countless smaller stores.
What is interesting is that commerce and revenue seem to be thriving even as key areas of town are struggling. For instance, the Madonna Plaza has seen the departure of some major anchor tenants. Gottschalks went under during the recession; it was replaced by Forever 21, which is now gone. Staples is gone. Sports Authority is gone.
Mr. Johnson downplayed this. He said that natural cycles are occurring everywhere. He said, at this point in time, the vacancies aren’t alarming and there are active efforts to re-tenant those places. The landscape overall is shifting in general. More and more consumers are going online for their commerce and that places a high need for creating authentic and social local retail experiences.
The downtown is the second highest area in retail activity. But it too has some struggles. There are vacant stores along the main drag and the downtown closely resembles that of Davis. Sure, there is more retail and places like the Apple Store – which Davis has attempted to get but has been unsuccessful, but much of downtown looks like Davis, with bars, restaurants, coffee shops and the like.
Economic development is a big part of the current strategy. San Luis Obispo has an Economic Development Strategic Plan and is working closely with the Center for Innovation and Entrepreneurship in Cal Poly.
Like Davis, there is a focus on agriculture, but also an emerging tech startup culture. They have built over 100,000 square feet of R&D and other startups over the last four years. Derek Johnson noted the emergence of Mind Body and iFix It, as well as Amazon. He said that there are a number of other high-tech firms that have interest in coming to San Luis Obispo, as they flee the Bay Area’s housing crisis.
Derek Johnson explained that the community has been very deliberate about their economic development strategy and how they have grown their city. Cal Poly has one of the best planning programs in the country and has been deliberate about how they grow retail. This has left them in a fairly strong position to avoid huge vacancies when there is a market disruption.
The bottom line is that, while in a lot of ways San Luis Obispo and Davis are similar. San Luis Obispo is thriving primarily because they have the retail in place to take advantage of tourism and of being a regional center. Davis, on the other hand, does not have that retail in place and lacks the advantages of San Luis Obispo.
—David M. Greenwald reporting