Sales tax numbers a sign of brighter times?

The line to enter to the Coach handbags store at the Gilroy

Gilroy’s reputation as a retail Mecca may be pulling it out of the Great Recession.

A new report shows sales tax revenues are on the rise in Gilroy, jumping more than 9 percent – roughly $250,000 – from July through September compared to that same period in 2010. It’s the latest chapter in an upward swing for Gilroy, which has experienced steadily growing returns of much-needed revenues over the last 20 months. And coupled with slowing foreclosures and the lowest unemployment rate in three years, things could be looking up for the Garlic Capital.

“It confirms what we’re seeing locally, regionally and at the national level. Things are finally getting better,” City Councilman Perry Woodward said. “It wasn’t so lucky during the downturn. We’re now starting to see that money come back into the city coffers and that’s encouraging.”

City tax revenues make up three-fourths of the city’s $37 million general fund, and almost half of all those tax revenues come from sales, according to a city budget summary. The city’s also sitting on roughly $25 million in reserves.

Adding to the recent good news: The Bureau of Labor Statistics reports Gilroy’s unemployment rate – 13.1 percent this past December – was its lowest in the last three years, peaking at 17.5 percent in January 2010. The last time it was below 13 percent was in December 2008, when it was 11.4. And while one in every 182 homes in Gilroy received a foreclosure notice in July 2011, that figure now is  one in every 203, according to housing trends website RealtyTrac.

Woodward said he’ll remain cautious about the positive trends in revenues, foreclosures and unemployment, but agrees they’re good signs.

“Those are all leading indicators that economists look at to determine which direction the economy is headed,” he said.

Sales at Gilroy auto dealers jumped a hearty 35 percent, while service stations (30 percent) and the Gilroy Premium Outlets (13 percent) also fueled the growing sales tax revenues. Even retailers in Gilroy’s recovering downtown saw a sales spike of 11 percent.

“It’s gradually picking up,” said Lem Hymes, general manager at South County Chrysler-Jeep-Dodge. “Overall, I’d say business has picked up. And it looks like it’s going to continue to climb.”

Hymes said he expects more South County drivers to ditch their older-model cars over the coming year in favor of newer rides. He says the average car on the road is 8 years old – “the highest in years,” he said.

“The increase should be slight, but it keeps pushing forward,” Hymes said. “We can work with climbing. When it goes the other way, that’s what we don’t like to see.”

But despite the increased revenues, city leaders and residents shouldn’t get ahead of themselves, two Council members said.

“This does not mark the opening of the flood gates for city spending. It’s cautiously optimistic news, and we should treat it as such,” Woodward said. “There’s a lot of pent up desire for things we haven’t been able to afford. We ought to think about where we are and what could happen next.”

While the city still needs to pull in more property taxes and is “not out of the woods yet” when it comes to budget woes, Gary Muraoka, City of Gilroy chapter president of the American Federation of State, County and Municipal Employees, says hopes of adding some employees to the Gilroy Police Department is “actively being discussed,” though no formal talks have taken place.

“I’m looking forward to seeing some of my old co-workers come back,” Muraoka said.

In the meantime, Woodward says city officials need to begin talks on a possible sales tax stabilization fund, which would be used to set aside money each year for important city endeavors that may arise.

“In the good times, you put away some of this surplus sales tax, so in the bad times the peaks aren’t so high and the valleys aren’t so low,” Woodward.

Although Councilwoman Cat Tucker said she’s “happy to see the numbers up,” she agreed the city should pause before spending. Like Woodward, Tucker said the city should be setting money aside each year to spend on much-needed projects or staffing upgrades. Tucker said she’d like to see the city hire more staff for its planning department, but added, “I don’t think we’ll be going on any kind spending sprees.”

Councilman Bob Dillon said he’s “very encouraged” by the new figures, especially the auto sales increases. The new figures don’t include official stats from October through December 2011, which are expected to feature a healthy Black Friday holiday spending spree. Gilroy saw a year-over-increase of 7.4 percent during that stretch in 2010, according to the city.

“Everybody seems to have grown a little bit. We’re seeing a little wiggle in the economy,” said Dillon, who thinks the city should cough up a few bucks to further improve sidewalks.

“I actually will ask to investigate taking a look at sidewalk fund, see if we can put out some more money for that,” Dillon said. “It may be too early to tell, but I’d like to have the planning in place.”

As successful as Gilroy’s retail arms have been, the city still remains vulnerable if shopping trends slow or screech to a halt. But with Gilroy’s reputation as a “capture community” – the ability to bring cash in from non-residents on a constant basis – should see the city through any minor dips, said Jane Howard, executive director of the Gilroy Welcome Center.

“If the consumer truly stops spending, then we would see the impact of that. But we haven’t seen the impact that other communities have,” Howard said. “We’re at times driven strongly by the Outlets, and I think they’ve demonstrated they’re not as impacted as many other higher-end stores like a Macy’s or a Nordstrom’s.”

While Gilroy’s retail shops – to include Costco, Walmart and Target –are extremely successful regional draws, revenue boosts also are coming from an unlikely source, Howard said.

“We’ve been really impressed with the amount of international visitors who are coming to Gilroy,” Howard said. “It’s amazing to see the draw that retail has.”

City sales tax numbers were up 9.2 percent during July-Septembercompared with the same period in 2010
Gilroy Premium Outlets: 13.6 percent increase
Auto dealers: 35.1 percent increase
Service stations: 30.8 percent increase
Downtown retailers: 11.1 percent increase
Total revenue increase: $251,315

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