The Economic Development Board received the second-quarter sales tax report for 2014 on Wednesday and learned the Industrial Park is struggling mightily.
Economic Development Manager Mario Giuliani reminded the board that members had requested to hear about “areas of opportunity” first a couple reports ago, so he started with the Industrial Park.
The second-quarter sales tax for 2014, which spans the months of April through June, came in at $763,466 — $104,839 lower than the second-quarter sales tax of 2013. Giuliani said the steep dropoff can be blamed on the city experiencing a “delay in the recession” from the Valero Improvement Project that ended in 2009.
“In 2011 we were inching our way back, 2012 sort of climbing out, 2013 we’re actually mirroring what we saw in the worst part of the recession,” he said.
“In 2014 it was even worse.”
“The second quarter of this year is far worse than any time we had in the recession,” Giuliani said. “Not a good thing.”
He hearkened back to the first-quarter report, which the EDB heard at its August meeting, noting that 75 percent of revenue from the Industrial Park came from the top 15 businesses. However, “It changes a little bit in the second quarter, primarily because a couple of those top businesses did not have good quarters,” he said.
In the second quarter those 15 businesses were responsible for just 68 percent of city sales tax income, Giuliani said, meaning the share from the rest of the companies went up from 25 percent to 32 percent.
The breakdown:
• 17 repair shop and sales equipment businesses are responsible for 3 percent of the sales tax;
• 43 contractors bring in 8 percent;
• 12 electrical equipment companies bring in 2 percent;
• 15 petroleum product and equipment companies bring in 5 percent;
• 38 heavy industrial companies bring in 22 percent;
• 40 light industrial companies are responsible for 10 percent; and
• The remaining 216 businesses are responsible for the other 50 percent of the sales tax in the Industrial Park.
In the other major shopping centers, Giuliani said Southampton Shopping Center’s second quarter continues to show promise at $66,654, up from around $56,000 in 2013; Solano Square continues to be a “model of consistency,” with a 2014 second quarter at about $45,661, above its 2013 total of $43,500; and Columbus Parkway also showed improvement at $44,984 for the second quarter of 2014, up from about $44,000 in 2013.
Transient Occupancy Tax, derived from hotel, motel and other overnight stays, also continues to show an upward trend: $100,631, up from approximately $82,000 in the second quarter of 2013. “We are really doing a good job, and continuing to see growth in TOT,” Giuliani said.
Downtown’s totals were also an improvement at $51,924, over last year’s $48,264.
Of the 265 downtown businesses, 37 are restaurants and bars that make up 14 percent of the total businesses in the downtown area; they brought in 75 percent of the sales tax revenue.
“It’s really the restaurants and bars that are driving our sales tax and driving our foot traffic on First Street,” Giuliani said.
But while other areas are showing growth, the Industrial Park is still the city’s main driver, making its situation all the more troubling, Giuliani said. “It highlights the meaning of why we need to focus on the Industrial Park, it just dwarfs everything else, and why our attention is geared toward the Industrial Park,” he said.
He gave the EDB a vacancy report showing about 300,000 square feet of vacant space of the designated 3,870,641 feet in the Industrial Park. “We’re talking just a handful of buildings,” he said. “For the entire year of 2014 there hasn’t been any flex space for research and development available.”
However, “Our Industrial Park is nearly 90 percent occupied, but it is being occupied by warehouse space, and is not producing sales tax.”
Giuliani said the city is working with Chabin Concepts, the consulting firm that helped the city put together its Business Development Action Plan that was approved in October 2011 by the City Council and EDB.
Looking at areas that can be targeted to attract new businesses, he said the city’s planned investment in road infrastructure, made possible by the passage in November of Measure C, is a priority. “We have a million dollar road project in 2017,” Giuliani said. He also cited a broadband project that is slated for 2015.
“Making those investments in the Industrial Park to try to recruit those businesses, that will create sales tax,” he said.
In other business, EDB Chair John Johnsen was named to stay in the position for 2015, while Ann Lindsey was named vice chair. Duane Oliveira, Sean Finn and Dennis Cullen will be the EDB’s members of the Business Retention, Expansion and Attraction Committee.
The EDB’s next meeting is tentatively scheduled for Jan. 20.
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