The City of Gilroy recently released its second quarter sales tax update for this fiscal year, demonstrating “significant” gains for new automobile sales and miscellaneous vehicle sales, along with a 1.9 percent increase in cash receipts for the City overall.
Sales tax revenues saw a meager .3 percent increase between April 1 and June 30 of this year, compared to the same time frame during 2012.
“We’ve had (roughly) nine consecutive quarters of positive growth, so it all bodes well for an indication of the City’s local economy and consumer confidence having rebounded somewhat throughout the country,” said President Tammy Brownlow of the Gilroy Economic Development Corporation. “Since Gilroy is a retail destination within the region due to the power centers and the outlets, we reap the benefit because we’re a sales tax capture community – and a lot of communities aren’t.”
The largest declines noted in the report show decreasing sales tax revenue from Gilroy’s apparel stores and gas stations. Brownlow said she attributes the declining sales tax revenue from the Gilroy Premium Outlets – a 6.2 percent decrease from second quarter of this year compared to the second quarter of 2012 – to the opening of a competing outlet center in Livermore last year.
“I think we saw a decline there because people are more curious and they want to check out the new stores; it is a different mix of stores,” Brownlow said.
But national shopping mall and real estate giant Simon Property Group – which owns the Gilroy Premium Outlets – acquired the Livermore outlet center shortly after it opened.
“The expectation now is that Simon Properties – they are obviously the experts at what they do as one of the largest retail real estate property owners in the country – will position both of those centers so one doesn’t cannibalize the other,” Brownlow said.
Local gas stations saw a more significant decrease of nearly 12 percent during the second quarter of this year, compared to the second quarter of 2012.
Between April and June, a gallon of gasoline hovered above $3.89 and even jumped above $4.03 in May across the San Jose area. Right now, the average cost of a gallon of gas sits at $3.51, which is $.25 higher than the average price across the country.
“Sales tax is impacted by the price of the fuel itself,” Brownlow said.
By contrast, a portion of downtown Gilroy, dubbed the downtown economic incentive area, saw significant gains during the second quarter of 2013. In the zone spanning from First to 10th streets along Monterey and Eigleberry streets, first established in 2003 as a way to encourage businesses to move downtown by waiving certain development impact fees, businesses saw a 16.6 percent increase in sales tax revenue.
The eight-block area garnered $64,846 in sales tax revenue between April and June of 2013 – exceeding the $55,595 collected during the second quarter of 2012. Since it’s creation, the economic incentive area has seen significant growth, according to Brownlow.
“It’s an incentive for businesses to come into the downtown and there are impact fee waivers that the City will make if a business locates within an incentive area,” she explained, adding that the City waived water, sewer, public transportation and other impact fees for businesses in the zone prior to June 2012.
City Ordinance 2007-17, which renewed the economic incentive area for the downtown corridor since its creation in 2003, is set to sunset on Dec. 31 according to Gilroy Community Development Director Lee Butler.
But those fees did not just disappear, he says. The City simply picked up the tab and taxpayers are now on the hook.
“It did have significant implications in terms of the taxpayer liability that occurred because the City took on the costs to subsidize the private development downtown,” Butler said. “It was intended to facilitate development and it did that.”
“That significant upward trend is nothing new,” Butler added. “Sales have been significantly improving for a number of years now and I think there are a number of reasons for that: existing businesses are doing better but new businesses are filling vacant spaces.”
New business has been attracted as a result of the economic incentive too, Brownlow says, pointing to a list of businesses that have opened – or reopened – in recent years.
“We’ve had the coffee shop reopen; the Amaretto Boutique moved over to Monterey Street from a block over; the Bella Viva wine bar opened and the Old City Hall restaurant reopened,” she noted.
Those new businesses have been steadily increasing sales tax revenues available for the City to use, according to sales tax records.
“All those things are contributing to increased activity and increased sales downtown,” Butler said. “The upward trend will hopefully continue and the City is looking to do what we can to make that continue.”
