Big Box Stores Are Keeping City's Economy Afloat

Rohnert Park needs to diversify its business sector if it's going to keep sales tax dollars coming in. Even though an economic report released this week shows the city's sales taxes grew 11.1 percent from December 2009 to December 2010, the lion's share of the growth is in one sector: retail.

Construction has taken a nose-dive, long-term business-to-business sales are weak and companies are closing left and right.

However, the 11 percent sales tax climb is three times as much when compared with overall state growth. 

State sales taxes for one year came in 3.7 percent higher than previous years. Sonoma County’s overall growth was 4.4. A closer city-level look shows Santa Rosa was on track with the state, also coming in at 3.7; Petaluma recorded a -11.9 percent sales tax decline, Sonoma came in a 7.4, Cotati at 1.8 and Healdsburg at 37.4. These numbers do not include Christmas sales, where historically sales skyrocket higher than any other month in the year.

“Sales taxes are our biggest revenue generator for the general fund,” said Sandy Lipitz, Rohnert Park’s finance manager. “From July to December it [sales tax increase] was 7.2, and before that it was 1.2, so really what this tells us is that the pace of sales tax is picking up.”

For good or for worse, if it weren’t for big box stores — Costco, WalMart, Target and Home Depot, for example — Rohnert Park would be a lot worse off, said City Council members early this week.

“Would that be a fair assumption that our big boxes are helping us,” Councilmember Joe Callinan asked Lipitz. “We’re having WalMart expanding in the grocery store; and I think a lot of people are against the big boxes, but that’s what’s keeping us afloat.”

“The actions of big box stores undoubtedly played some role in the demise of Pacific Market on the north side of town,” said Vice Mayor Jake Mackenzie. “We have holes to fill in our city now.”

The per capita breakdown comes to $132 of sales taxes per person, compared to the state, at $113.

“What this shows is a heavy concentration in retail sales,” Lipitz said. “The primary source for sales tax is our department stores. What we’re lacking compared to fellow cities and the state is business to business and transportation.”

The report details where the city’s weaknesses and strengths are. The majority of sales taxes here are generated from “general retail.” Those numbers are up 7.3 percent. Food sales were down for the year, at -2.4 percent; construction also declined to -10.7 percent and business-to-business shot up to 93.2 percent.

The business-to-business sales came from one main product: SmartMeters, and those are a one-time purchase, so those numbers aren’t expected to stay the same for the upcoming year’s statistics.

In addition, big box retailers don't separate retail sales from food sales, so when stores such as Target, and soon WalMart, are selling food, that can skew the numbers.

Lipitz went on to point out that light and heavy industry sales decreases are projected in the next couple years. 

Councilmember Amy Ahanotu, branch manager at Redwood Credit Union in Rohnert Park, is a numbers guy. Recently he provided some insight on what the sales tax numbers mean for the future of economic development in the city.

He said Measure E, the voter-approved half-cent sales tax increase, is where the increase is coming from.

“But also, the business climate is getting a little bit better,” Ahanotu said. “We have a good retail base, but what we need I think is a mix of business to weather this economy. We can’t put all of our eggs in one basket.”

“What I mean is we need to talk about attracting new businesses to Rohnert park; we need to focus on brining technology-based business; more high-paying jobs,” he added. “We cannot be focused on big box sales, we need a mix of industries in order to continue the progress we’ve made."