Retail weakness is crippling city finances

<p>It’s no secret that times are tough at City Hall. Faced with sharply declining tax revenues over the last year, the city has been forced to drastically reduce services, cut back to a four-day work week and lay off dozens of workers.</p><!-- Nothing to do. The paragraph has already been output --><p>If that weren’t enough, last week the city got more bad financial news. Petaluma is one of 15 cities statewide that will not receive checks this month from the state Board of Equalization because its recent sales tax revenues dropped far below projections. The city’s sales tax revenues for the first quarter were a whopping 24 percent less than what it had projected. The temporary loss of the anticipated $375,000 payment is certainly not good news, but what’s far worse is the strong probability that the downward tax revenue spiral will continue well into 2010. </p><p>Compounding Petaluma’s sales tax problem was news last week that the assessed value of property in Sonoma County dropped for the first time ever. Petaluma’s hit will be a 2.2 percent reduction in what it budgeted in property taxes, the city’s second-largest revenue source behind sales tax. </p><p>Together, the reduced tax revenues are estimated to punch a half-million-dollar hole in city revenues for the new fiscal year, and inevitably lead to further layoffs and service reductions.</p><p>The recession is certainly hurting all cities in California. But there is no question that Petaluma’s weak retail sector is further undermining the city’s fiscal health. With local residents continuing to drive out of town for a host of goods and services not generally available in Petaluma, the city collects far fewer sales tax dollars than it would if it had a more fully developed retail sector.</p><p>For too many years, and despite a 2003 study that showed Petaluma was losing millions in sales tax leakage due to a lack of adequate shopping opportunities, the city has continued to hang its fiscal hat on the auto mall in terms of sales tax revenues. But now, as the recession cuts deeply into auto sales, the fiscal situation for Petaluma has grown more perilous. Having failed to cultivate a more robust and diverse local economy, especially on the retail side, Petaluma is paying the price for a profound lack of action in the area of economic development.</p><p>The city’s General Plan, unanimously approved by the City Council last year after seven years of debate, includes the important goal of expanding and diversifying Petaluma’s weak retail sector by attracting new stores to broaden the city’s limited retail opportunities at specifically designated sites long planned and zoned for shopping centers. </p><p>Two developers are ready, willing and eager to help fill that void. Regency Centers, which plans to build a Target-anchored shopping center at the old Kenilworth Junior High property, and Merlone Geier Partners, a firm proposing to build a retail center anchored by a large home-improvement store on North McDowell Boulevard, have completed the city’s required FEIAs (fiscal and economic impact assessments) and are waiting to complete the necessary hearings in the city’s dubious development approval process.</p><p>Unfortunately, foot-dragging by the City Council and the planning department hampered the ability to get these projects approved and built earlier. The Regency project, for example, is in its sixth year of city review, and comments and actions by members of the new City Council majority indicate that further unnecessary delays lie ahead.</p><p>The council’s recent actions, such as appointing an anti-big box store activist to the newly reconstituted Planning Commission, app-ear to contradict and potentially subvert the Economic Health and Sustainability section of the General Plan referencing the well-documented need to attract “large format” retailers in the categories of general merchandise (such as Target), house-and-home (such as Lowe’s or Friedman Brothers) along with electronics/ home entertainment and others.</p><p>The plan also notes the city’s commitment to “provide jobs for un- and under-employed segments of the work force” which, at this time, includes many people in the retail and construction trades who would benefit directly by the shopping centers’ construction.</p><p>But instead of taking action to bring jobs to the city and correct the sales tax leakage problem, the council majority has openly discounted the wealth of information showing the two projects would provide millions of dollars in desperately needed property and sales tax revenues along with a net increase of 1,100 permanent jobs and 700 temporary construction jobs. </p><p>In a recent Press Democrat article, Mayor Pam Torliatt said building stores alone would not solve the city’s worsening fiscal problem. “If you have a retailer and don’t have anyone with a job, it doesn’t really matter,” she said. “People have no money to shop.”</p><p>If you find the mayor’s statements troublingly short-sighted, you are not alone. </p><p>The economy will recover eventually, but if the city is to meet its economic, fiscal and employment goals on a long term basis, it must be willing to make room for the types of stores identified in the General Plan. For that to happen, the projects need to be approved without any unnecessary delays. </p><p>Only by being proactive in implementing General Plan goals can city leaders ensure that tax revenues will eventually catch up with the city’s unmet needs in the areas of road repairs, park maintenance, transportation improvements, law enforcement and other underfunded municipal services.</p>