HomeMy WebLinkAbout2017 Sales Tax Digest Second Quarter
CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR
March 5, 2018
The Honorable City Council
Palo Alto, California
City of Palo Alto Sales Tax Digest Summary Second Quarter Sales (April
- June 2017)
The following files are attached for this informational report for which no action is required.
ATTACHMENTS:
Attachment A: Sales Tax Highlights (PDF)
Attachment B: MuniServices Sales Tax Digest Summary (PDF)
Attachment C: Economic Categories and Segments (PDF)
Attachment D: MuniServices Economic News and Trends (PDF)
Department Head: Harriet Richardson, City Auditor
Page 2
Informational Report to the City Council
BACKGROUND
Sales and use tax represents $29.2 million, or 15 percent, of projected General Fund revenue in the
City’s adopted operating budget for fiscal year 2017. Actual sales and use tax revenue was $29.9 million
for fiscal year 2017. This revenue includes sales and use tax for the City of Palo Alto and pool allocations
from the state and Santa Clara County.1
We contract with MuniServices LLC (MuniServices) for sales and use tax recovery services and
informational reports. We use the recovery services and informational reports to help identify
misallocation of tax revenue owed to the City, and to follow up with the California Department of Tax
and Fee Administration (formerly the State Board of Equalization) to ensure that the City receives
identified revenues. We include sales and use tax recovery information in our quarterly reports to the
Policy and Services Committee.
The California Revenue and Taxation Code, Section 7056, requires that sales and use tax data remain
confidential. Therefore, the City may not disclose amounts of tax paid, fluctuations in tax amounts, or
any other information that would disclose the operations of a business. This report, including the
attached Sales Tax Digest Summary, includes certain modifications and omissions to maintain the
required confidentiality of taxpayer information.
MuniServices prepares the Sales Tax Digest Summary and Economic & News Trends report (Attachments
B and D), which we share with the Administrative Services Department (ASD) for use in revenue
forecasting and budgeting. Sales tax information is reported on a calendar-year basis.
DISCUSSION
The Sales Tax Digest Summary covers second quarter sales for calendar year 2017, which are reported as
part of the City’s fiscal year 2018 revenue. In December 2017, ASD should receive information from the
state on aggregate sales and use tax receipts for the third quarter of 2017. Following are some highlights
of the sales and use tax information:
•Palo Alto’s overall sales and use tax revenue (cash receipts) for the second quarter of 2017
decreased by $470,000, or 6.3 percent, including pool allocations, compared to the second
quarter of 2016. Excluding one-time prior period adjustments of $182,000, the second quarter
of 2017 decreased by $288,000, or 3.9 percent, including pool allocations, compared to the
second quarter of 2016. For all Santa Clara County jurisdictions, sales and use tax revenue for
the second quarter of 2017 decreased by $2.3 million, or 2.1 percent, compared to the second
quarter of 2016.
•Statewide, most regions in California experienced an increase in sales and use tax revenue for
the year ending in June 2017, with a one-year statewide increase of 2.8 percent.
•Palo Alto’s sales and use tax revenue totaled $28.9 million for the year ending in June 2017, an
increase of 2.5 percent from $28.1 million during the prior one-year period.
1 See definitions of state and county pools on page 3.
Office of the City Auditor
Sales Tax Highlights – Second Quarter Sales (April – June 2017)
Attachment A
Office of the City Auditor | Sales Tax Highlights 2
•Excluding pool allocations and adjusting for prior-period and late payments, Palo Alto’s sales and
use tax revenue for the second quarter of 2017 decreased by 3.5 percent compared to the
second quarter of 2016 and increased by 1.8 percent compared to the prior year.
Economic Influences on Sales and Use Tax
The Economic News & Trends report discusses economic influences, including national and state
economic trends, auto, gasoline, retail, e-commerce, restaurant and grocery trends, that may affect the
City’s sales and use tax revenue.
Preliminary estimates from the California Employment Development Department show that the
September 2017 unemployment rate, which is not seasonally adjusted, was 3.3 percent in Santa Clara
County and 2.2 percent in Palo Alto.
Economic Category Analysis
MuniServices’ analysis of economic categories for the year ending June 2017 shows:
Economic category
Percent of Palo Alto’s sales
and use tax revenue
Percent Increase (Decrease)
compared to prior year
General retail 34.9% 0.6%
Food products 19.2% (1.4%)
Business-to-business 20.0% 5.1%
Construction 2.9% (20.6%)
Miscellaneous 23.3% 7.9%
The following chart shows sales and use tax revenue by geographic area:
Palo Alto’s Sales and Use Tax Revenue by Geographic Area
For the Year Ending June 2017
(Amounts include tax estimates and exclude county pool allocations)
Stanford
Shopping Center
$5.5 million,
23%
Stanford Research Park
$3.4 million, 14%
Downtown/University Avenue
$4.0 million, 17%
California Ave/Park Blvd/Lambert Ave
$1.5 million, 6%
Town & Country
$0.6 million, 3%
All Other Areas
$9.1 million,
38%
Attachment A
Office of the City Auditor | Sales Tax Highlights 3
DEFINITIONS
In California, either sales tax or use tax may apply to a transaction, but not both. The sales and use tax
rate in Palo Alto was 9.0 percent during the second quarter of 2017.
Sales tax – imposed on all California retailers; applies to all retail sales of merchandise (tangible personal
property) in the state.
Use tax – generally imposed on consumers of merchandise (tangible personal property) that is used,
consumed, or stored in this state; purchases from out-of-state retailers when the retailer is not
registered to collect California tax or does not collect California tax for some other reason; and leases of
merchandise (tangible personal property).
Countywide/statewide pools – mechanisms used to allocate local tax that cannot be identified with a
specific place of sale or use in California. Local tax reported to the pool is distributed to the local
jurisdiction each calendar quarter using a formula that relates to the direct allocation of local tax to each
jurisdiction for a given period.
Examples of taxpayers who report use tax allocated through the countywide pool include:
•Construction contractors who consume materials used when improving real property and whose
job site is regarded as the place of business
•California or out-of-state sellers who ship goods directly to consumers in the county from
inventory located outside the state
•Auctioneers, catering trucks, itinerant vendors, and vending machine operators and other
permit holders who operate in more than one local jurisdiction but are unable to readily identify
the particular jurisdiction where the taxable transaction takes place
Respectfully submitted,
Harriet Richardson
City Auditor
Sources: MuniServices
California Department of Tax and Fee Administration
California Employment Development Department
City of Palo Alto Fiscal Year 2017 Adopted Operating Budget
City of Palo Alto Fiscal Year 2017 Comprehensive Annual Financial Report
Audit staff: Lisa Wehara
Attachment A
City of Palo Alto
Sales Tax Digest Summary
Collections through September 2017
Sales through June 2017 (2017Q2)
www.MuniServices.com (800) 800‐8181 Page 1
California Overview
The percent change in cash receipts from the prior year was 2.8% statewide, 2.2% in Northern California
and 3.3% in Southern California. The period’s cash receipts include tax from business activity during the
period, payments for prior periods and other cash adjustments. When we adjust for non‐period related
payments, we determine the overall business activity increased for the year ended 2nd Quarter 2017 by
1.9% statewide, 1.8% in Southern California and 2.0% in Northern California.
City of Palo Alto
For the year ended 2nd Quarter 2017, sales tax cash receipts for the City increased by 2.5% from the
prior year. On a quarterly basis, sales tax revenues decreased by ‐6.3% from 2nd Quarter 2016 to 2nd
Quarter 2017. The period’s cash receipts include tax from business activity during the period, payments
for prior periods and other cash adjustments.
Excluding state and county pools and adjusting for anomalies (payments for prior periods) and late
payments, local sales tax increased by 1.8% for the year ended 2nd Quarter 2017 from the prior year. On
a quarterly basis, sales tax activity decreased by ‐3.5% in 2nd Quarter 2017 compared to 2nd Quarter
2016.
Regional Overview
This seven‐region comparison includes estimated payments and excludes net pools and adjustments.
% of Total / % Change
City of Palo
Alto
California
Statewide
S.F. Bay
Area
Sacramento
Valley
Central
Valley South Coast Inland
Empire North Coast Central
Coast
General Retail 34.9 / 0.6 28.1 / 0.9 26.2 / ‐0.7 27.4 / 1.2 31.4 / 6.4 28.8 / 0.0 27.1 / 3.4 28.4 / 0.2 31.1 / ‐6.2
Food Products 19.2 / ‐1.4 21.1 / 4.0 22.4 / 3.1 17.2 / 4.8 16.9 / 4.8 22.4 / 4.4 17.6 / 4.5 18.7 / 2.4 30.8 / ‐7.4
Construction 2.9 / ‐20.6 9.4 / ‐1.2 9.5 / 1.2 11.6 / 2.8 11.9 / 1.7 8.3 / 0.8 10.5 / ‐12.9 13.7 / 2.7 8.3 / ‐16.6
Business to Business 20.0 / 5.1 16.4 / 1.4 19.4 / ‐1.9 14.0 / 0.7 12.4 / 1.3 16.2 / 2.2 16.3 / 6.9 8.0 / ‐5.2 6.3 / ‐3.8
Miscellaneous/Other 23.3 / 7.9 25.1 / 2.8 22.5 / 4.7 29.8 / 3.8 27.5 / 3.8 24.4 / 1.3 28.6 / 4.3 31.2 / 1.8 23.6 / 2.7
Total 100.0 / 1.8 100.0 / 1.9 100.0 / 1.3 100.0 / 2.7 100.0 / 4.2 100.0 / 1.7 100.0 / 2.4 100.0 / 1.0 100.0 / ‐5.5
City of Palo
Alto State Wide S.F. Bay
Area
Sacramento
Valley
Central
Valley South Coast Inland
Empire North Coast Central
Coast
Largest Segment Restaurants Restaurants Restaurants Restaurants Department
Stores
Service
Stations Restaurants Auto Sales ‐
New Restaurants
% of Total / % Change 17.0 / ‐1.8 15.0 / 4.8 16.0 / 3.1 16.5 / 5.3 13.2 / 2.0 18.6 / ‐55.5 11.6 / 6.2 12.2 / 6.1 22.0 / ‐7.9
2nd Largest Segment Auto Sales ‐
New
Auto Sales ‐
New
Auto Sales ‐
New
Auto Sales ‐
New
Auto Sales ‐
New Restaurants Auto Sales ‐
New Restaurants Auto Sales ‐
New
% of Total / % Change 15.5 / 8.1 11.4 / 4.6 11.4 / 6.8 11.3 / 2.8 11.0 / 7.1 14.6 / ‐32.2 11.1 / 4.7 10.9 / 3.0 10.9 / 18.9
3rd Largest Segment Miscellaneous
Retail
Department
Stores
Department
Stores
Department
Stores Restaurants Auto Sales ‐
New
Department
Stores
Department
Stores Misc. Retail
% of Total / % Change 10.2 / 3.1 9.2 / 0.0 7.5 / ‐1.2 8.9 / ‐0.7 10.9 / 5.4 12.0 / 10.1 10.3 / 2.2 10.6 / ‐2.1 10.3 / ‐8.5
*** Not specified to maintain confidentiality of tax information
CITY OF PALO ALTO
ECONOMIC CATEGORY ANALYSIS FOR YEAR ENDED 2nd QUARTER 2017
ECONOMIC SEGMENT ANALYSIS FOR YEAR ENDED 2nd QUARTER 2017
BENCHMARK YEAR 2017Q2 COMPARED TO BENCHMARK YEAR 2016Q2
Attachment B
City of Palo Alto
www.MuniServices.com (800) 800‐8181 Page 2
Gross Historical Sales Tax Performance by Benchmark Year and Quarter (Before Adjustments)
$‐
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
BENCHMARK YEAR QUARTERLY
Net Cash Receipts for Benchmark Year 2nd Quarter 2017: $28,860,004
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2017Q2 BMY is sum of 2017 Q2, Q1, 2016 Q4 & Q3)
Restaurants
14%
Miscellaneous Retail
8%
Department Stores
7%
Apparel Stores
6%
Electronic Equipment
4%
Food Markets
2%
Recreation Products
1%
All Other
41%
Net Pools &
Adjustments
17%
Attachment B
City of Palo Alto
www.MuniServices.com (800) 800‐8181 Page 3
TOP 25 SALES/USE TAX CONTRIBUTORS
The following list identifies Palo Alto’s Top 25 Sales/Use Tax contributors. The list is in alphabetical order
and represents the year ended 2nd Quarter 2017. The Top 25 Sales/Use Tax contributors generate
51.1% of Palo Alto’s total sales and use tax revenue.
Anderson Honda Integrated Archive Systems Tesla Motors
Apple Stores Lucile Packard Children's Hosp The Pace Gallery
Audi Palo Alto Macy's Department Store Urban Outfitters
Bloomingdale's Magnussen's Toyota USB Leasing
Bon Appetit Management Co. Neiman Marcus Department Store Varian Medical Systems
CVS/Pharmacy Nordstrom Department Store Volvo Cars Palo Alto
Fry's Electronics Space Systems Loral Wilkes Bashford
Magnussen's Toyota Stanford University Hospital
Houzz Shop Tesla Lease Trust
Sales Tax from Largest Non‐Confidential Economic Segments
$‐
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
Benchmark Year 2017Q2 Benchmark Year 2016Q2
Attachment B
City of Palo Alto
www.MuniServices.com (800) 800‐8181 Page 4
Historical Analysis by Calendar Quarter
Economic Category % 2017Q2 2017Q1 2016Q4 2016Q3 2016Q2 2016Q1 2015Q4 2015Q3 2015Q2 2015Q1 2014Q4
General Retail 28.1% 1,952,490 1,684,023 2,784,731 1,983,231 2,141,794 1,673,846 2,526,551 1,935,178 2,009,743 1,797,756 2,591,589
Miscellaneous/Other 18.8% 1,301,138 1,392,756 1,621,044 1,727,134 1,617,307 1,413,133 1,491,158 1,609,541 1,564,157 1,400,769 1,655,225
Food Products 17.1% 1,189,257 1,192,662 1,235,801 1,213,382 1,194,369 1,126,103 1,166,195 1,146,174 1,167,014 1,061,755 1,096,087
Business To Business 18.5% 1,284,056 1,240,962 1,004,883 1,027,730 1,140,526 974,162 1,428,210 888,609 833,370 757,827 885,327
Net Pools & Adjustments 17.4% 1,210,511 1,631,125 1,351,709 831,377 1,313,745 1,072,794 1,226,261 1,060,979 1,039,250 968,777 1,178,482
Total 100.0% 6,937,452 7,141,528 7,998,168 6,782,854 7,407,741 6,260,038 7,838,375 6,640,481 6,613,534 5,986,884 7,406,710
Economic Se gments % 2017Q2 2017Q1 2016Q4 2016Q3 2016Q2 2016Q1 2015Q4 2015Q3 2015Q2 2015Q1 2014Q4
Miscellaneous/Other 43.1% 2,986,873 2,910,133 2,939,228 3,027,081 2,973,047 2,607,097 3,237,983 2,720,241 2,549,852 2,370,361 2,906,134
Restaurants 15.3% 1,058,606 1,043,747 1,071,053 1,068,101 1,068,502 1,005,688 1,029,733 1,019,505 1,045,011 942,709 962,018
Miscellaneous Retail 6.5% 452,135 435,757 1,002,389 581,831 681,345 469,360 714,151 478,994 479,298 415,270 628,099
Department Stores 7.4% 510,561 392,565 641,541 491,433 546,629 435,470 714,831 553,325 595,374 503,590 750,481
Apparel Stores 6.5% 449,402 372,033 553,250 398,170 444,383 337,880 519,318 397,534 428,100 370,810 507,843
Service Stations 2.3% 159,371 119,552 130,396 138,155 144,735 123,004 140,758 173,082 181,582 148,902 166,861
Food Markets 1.6% 112,566 131,676 145,179 126,755 109,108 104,676 116,778 113,092 106,818 104,856 117,245
Business Services 1.1% 75,722 43,548 102,095 47,066 65,510 51,647 76,156 51,885 120,003 103,773 131,505
Recreation Products 1.1% 76,514 61,392 61,328 72,885 60,737 52,422 62,406 71,844 68,246 57,836 58,042
Net Pools & Adjustments 15.2% 1,055,702 1,631,125 1,351,709 831,377 1,313,745 1,072,794 1,226,261 1,060,979 1,039,250 968,777 1,178,482
Total 100.0% 6,937,452 7,141,528 7,998,168 6,782,854 7,407,741 6,260,038 7,838,375 6,640,481 6,613,534 5,986,884 7,406,710
*Net Pools & Adjustments reconcile economic performance to periods’ net cash receipts. The historical amounts by calendar quarter: (1) include
any prior period adjustments and payments in the appropriate category/segment and (2) exclude businesses no longer active in the current
period.
Attachment B
City of Palo Alto
www.MuniServices.com (800)800‐8181 Page 5
Quarterly Analysis by Economic Category, Total and Segments: Change from 2016Q2 to 2017Q2
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Campbell 1.4% 0.8%‐1.0% 18.1%‐6.0% 2,403,817 2,334,694 3.0% Business Services Electronic Equipment Miscellaneous Retail Light Industry
Cupertino ‐14.3% 22.8%‐47.4% 16.1%‐5.9% 5,813,970 5,340,710 8.9% Business Services Office Equipment Bldg.Matls‐Whsle Furniture/Appliance
Gilroy 1.0% 4.4% 3.4%‐11.0% 53.7% 3,864,283 3,638,654 6.2% Auto Sales ‐ New Misc. Vehicle Sales Heavy Industry Recreation Products
Los Altos 2.9% 3.2%‐1.1%‐8.2%‐9.5% 587,545 573,188 2.5% Miscellaneous Retail Restaurants Recreation Products Bldg.Matls‐Whsle
Los Gatos ‐3.5%‐4.9%‐12.1% 2.1%‐15.4% 1,573,720 1,633,168 ‐3.6% Auto Sales ‐ New Light Industry Miscellaneous Other Food Processing Eqp
Milpitas ‐3.5% 4.9%‐3.7% 45.6% 16.9% 5,558,434 4,975,863 11.7% Office Equipment Auto Sales ‐ New Recreation Products Bldg.Matls‐Whsle
Morgan Hill 7.1% 6.5% 5.0% 42.6%‐20.5% 2,142,445 1,966,188 9.0% Electronic Equipment Food Markets Auto Parts/Repair Chemical Products
Mountain View ‐14.3% 1.0% 15.3%‐3.7% 37.0% 4,279,202 4,455,098 ‐3.9% Furniture/Appliance Liquor Stores Miscellaneous Retail Business Services
Palo Alto ‐9.2%‐1.6%‐31.4% 12.9% 3.3% 5,881,749 6,093,509 ‐3.5% Leasing Furniture/Appliance Miscellaneous Retail Auto Sales ‐ New
San Jose ‐1.8% 1.8% 4.1%‐15.2% 12.2% 38,679,856 38,764,694 ‐0.2% Auto Sales ‐ New Service Stations Light Industry Electronic Equipment
Santa Clara 3.3%‐5.4% 9.7% 4.6%‐25.1% 11,412,285 11,040,018 3.4% Light Industry Auto Sales ‐ New Restaurants Office Equipment
Santa Clara Co.‐15.8%‐6.4%‐2.7% 11.7% 8.0% 227,587 239,933 ‐5.1% Business Services Food Processing Eqp Restaurants Miscellaneous Retail
Saratoga ‐4.4% 6.2%‐11.3%‐26.5%‐1.3%5,773,247 6,624,087 ‐12.8% Restaurants Light Industry Electronic Equipment Auto Sales ‐ New
Sunnyvale 16.5% 9.0% 27.0% 21.3% 1.4% 1,131,961 1,023,548 10.6% Bldg.Matls‐Retail Bldg.Matls‐Whsle Service Stations Light Industry
Attachment B
City of Palo Alto
www.MuniServices.com (800)800‐8181 Page 6
2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2
El Camino Real 1,084,815 1,108,045 1,102,757 1,105,340 1,090,236 1,088,571 1,140,412 1,188,495 1,210,148 1,258,506 1,282,296 1,261,233 1,241,270
Town and Country 590,134 624,333 629,346 637,224 644,288 636,497 639,830 642,372 632,157 645,939 634,372 629,484 629,271
Midtown 185,910 187,120 188,251 192,122 194,028 195,907 192,190 193,066 207,568 206,960 206,327 201,948 206,422
East Meadow Area 109,171 114,419 104,735 117,701 172,602 166,805 161,897 173,019 185,564 192,748 191,467 199,789 194,377
Charleston Center 86,432 86,288 87,413 88,622 89,612 90,642 91,711 91,991 92,121 91,914 92,495 92,258 92,657
City of Palo Alto ‐ Selected Geographic Areas of the City
Benchmark Year 2nd Quarter 2017
$‐
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2
El Camino Real Town and Country Midtown East Meadow Area Charleston Center
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2017Q2 BMY is sum of 2017 Q2, 2017 Q1, 2016 Q4 & Q3)
Attachment B
City of Palo Alto
www.MuniServices.com (800)800‐8181 Page 7
2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2
Stanford Shopping Ctr 5,685,894 5,713,169 5,726,273 5,769,236 5,775,751 5,765,715 5,670,796 5,501,966 5,464,490 5,371,067 5,309,725 5,425,743 5,487,406
Stanford Research Park 4,027,889 3,724,671 3,304,003 3,082,331 2,869,143 2,411,043 2,953,900 2,924,944 3,119,427 3,257,664 2,999,685 3,177,058 3,371,781
Downtown 3,124,224 3,189,273 3,220,248 3,251,198 3,318,323 3,351,331 3,399,758 3,445,331 3,672,532 3,838,501 4,144,463 4,202,364 3,990,498
San Antonio 2,393,463 2,453,548 2,495,915 2,504,156 2,465,311 2,483,850 2,476,949 2,517,603 2,451,491 2,414,093 2,448,764 2,420,850 2,174,308
California Avenue 1,109,685 1,119,047 1,120,996 1,113,385 1,108,904 1,106,175 1,097,493 1,091,796 1,090,901 1,073,085 1,048,035 1,034,377 1,050,195
City of Palo Alto ‐ Selected Geographic Areas of the City
Benchmark Year 2nd Quarter 2017
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1
Stanford Shopping Ctr Downtown #REF!San Antonio California Avenue
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2
Stanford Shopping Ctr Downtown San Antonio California Avenue
$‐
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2
Stanford Shopping Ctr Stanford Research Park Downtown San Antonio California Avenue
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2017Q2 BMY is sum of 2017 Q2, 2017 Q1, 2016 Q4 & Q3)
Attachment B
City of Palo Alto
www.MuniServices.com (800)800‐8181 Page 8
2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2
Valley Fair 6,958,214 7,108,448 7,455,179 7,588,546 7,273,028 7,282,265 7,248,371 7,228,310 7,063,549 7,053,562 6,851,598 6,714,146 6,660,544
Stanford Shopping Ctr 5,685,894 5,713,169 5,726,273 5,769,236 5,775,751 5,765,715 5,670,796 5,501,966 5,464,490 5,371,067 5,309,725 5,425,743 5,487,406
Oakridge Mall 3,972,556 4,005,370 4,040,521 4,159,367 4,236,080 4,215,653 4,158,194 4,075,061 3,871,802 3,909,043 3,831,354 3,625,692 3,650,856
Hillsdale 2,401,370 2,438,295 2,450,278 2,494,792 2,513,866 2,470,404 2,434,086 2,410,095 2,363,729 2,363,729 2,251,467 2,197,768 2,167,994
Santana Row 2,523,193 2,525,349 2,565,665 2,634,908 2,706,867 2,735,522 2,834,796 2,807,754 2,754,804 2,933,889 3,005,007 3,047,779 3,057,404
City of Palo Alto ‐ Regional Shopping Mall Comparison
Benchmark Year 2nd Quarter 2017
$‐
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2
Valley Fair Stanford Shopping Ctr Oakridge Mall Hillsdale Santana Row
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2017Q2 BMY is sum of 2017 Q2, 2017 Q1, 2016 Q4 & Q3)
Attachment B
Economic Categories and Segments
Economic Category Economic Segment Description
Business to Business - sales of
tangible personal property from
one business to another business
and the buyer is the end user.
Also includes use tax on certain
purchases and consumables.
Business Services Advertising, banking services,
copying, printing and mailing
services
Chemical Products Manufacturers and wholesalers
of drugs, chemicals, etc.
Electronic Equipment Manufacturers of televisions,
sound systems, sophisticated
electronics, etc.
Energy Sales Bulk fuel sales and fuel
distributors and refiners
Heavy Industry Heavy machinery and
equipment, including heavy
vehicles, and manufacturers and
wholesalers of textiles and
furniture and furnishings
Leasing Equipment leasing
Light Industry Includes, but is not limited to,
light machinery and automobile,
truck, and trailer rentals
Office Equipment Businesses that sell computers,
and office equipment and
furniture, and businesses that
process motion pictures and film
development
Construction Building Materials – Retail Building materials, hardware,
and paint and wallpaper stores
Building Materials - Wholesale Includes, but is not limited to,
sheet metal, iron works, sand
and gravel, farm equipment,
plumbing materials, and
electrical wiring
Food Products Food Markets Supermarkets, grocery stores,
convenience stores, bakeries,
delicatessens, health food stores
Food Processing Equipment Processing and equipment used
in mass food production and
packaging
Liquor stores Stores that sell alcoholic
beverages
Restaurants Restaurants, including fast food
and those in hotels, and night
clubs
Attachment C
Economic Categories and Segments
Economic Category Economic Segment Description
General Retail – all consumer
focused sales, typically brick and
mortar stores
Apparel Stores Men’s, women’s, and family
clothing and shoe stores
Department Stores Department, general, and variety
stores
Drug Stores Stores where medicines and
miscellaneous articles are sold
Florist/Nursery Stores where flowers and plants
are sold
Furniture/Appliance Stores where new and used
furniture, appliances, and
electronic equipment are sold
Miscellaneous Retail Includes, but is not limited to,
stores that sell cigars, jewelry,
beauty supplies, cell phones, and
books; newsstands, photography
studios; personal service
businesses such as salons and
cleaners; and vending machines
Recreation Products Camera, music, and sporting
goods stores
Miscellaneous/Other Miscellaneous/Other Includes but not limited to
health services, government,
nonprofit organizations, non-
store retailers, businesses with
less than $20,000 in annual gross
sales, auctioneer sales, and
mortuary services and sales
Transportation Auto Parts/Repair Auto parts stores, vehicle and
parts manufacturing facilities,
and vehicle repair shops
Auto Sales - New New car dealerships
Auto Sales - Used Used car dealerships
Miscellaneous Vehicle Sales Sale and manufacture of
airplanes and supplies, boats,
motorcycles, all-terrain vehicles,
trailers and supplies
Service stations Gas stations, not including
airport jet fuel
Attachment C
ECONOMIC NEWS & TRENDS October 31, 2017
ECONOMIC NEWS & TRENDS
Attachment D
ECONOMIC NEWS & TRENDS October 31, 2017
2 www.MuniServices.com
HIGHLIGHTS
GDP: Real GDP increased at an annual rate of 3.0% in
3Q2017 (was 3.1% in 2Q2017, 1.4% in 1Q2017, and 2.1%
in 4Q2016). The increase in real GDP in 3Q2017 reflected
positive contributions from personal consumption
expenditures (PCE), private inventory investment,
nonresidential fixed investment, exports, and federal
government spending. These increases were partly offset
by negative contributions from residential fixed
investment and state and local government spending.
September was the Fastest Consumer Growth Rate
Since 2009: Includes spending from post hurricane.
U.S. Sales for Retail and Food Services for September
2017: Increased 1.6% to $483.9 billion; increased 4.4%
from September 2016. California Retail Sales and Use
Tax for September: $5 million above the month’s
forecast of $1.898 billion.
Services Sector Total Revenue: 2Q2017 was $3,684.6
billion (3.2% increase from 1Q2017); up 6.2% from
2Q2016.
U.S. E‐Commerce Results for 2Q2017: Percent of Retail
Sales: Increase of 4.8% for 2Q2017 from 1Q2017. Total
Sales for 2Q2017: 8.9%. California’s e‐commerce sales
comprise approximately 13‐14% the total sales, based on
California’s portion of the national economy.
Millennials Savings: Are cutting spending to put
emphasis on savings. (Bankrate.com)
Amazon’s Impact on Whole Foods Sales and Traffic: In
the first month of acquiring Whole Foods, Amazon.com
has sold $1.6 million more in store‐brand items; Third
party data shows increase in traffic to stores; August
traffic was up 10% from the year’s monthly average.
Starbucks Closes On‐Line Shop: Closed October 1 and
will focus on in‐person experience.
U.S. Unemployment: Fell by 0.2 percentage point to
4.2% in September.
California’s Unemployment: September (5.1%); August
(5.1%); July (4.8%); June (4.7%); May (4.7%); April (4.8%)
Auto Sales: Will plateau after years of strong growth,
and sales of building materials will settle down to a more
normal pace of 5%. Sales of new vehicles will hit 17
million, versus 17.5 million in 2016; and the first
downturn since the recession of 2009. The market will
contract again in 2018; about 16.4 million sales.
New Retail Car Registrations for 2Q2017: Declined in
2Q2017 versus a year earlier. It was the first quarterly
drop since 3Q2010. Changed by ‐2.0% (1,047,380 in YTD
2016 from 1,026,882 in YTD 2017).
Used Cars for 2Q2017: Declined by 3.5%: Aging Market:
For 2Q2017: 4‐ to 6‐year‐old market has largest
percentage increase (10.9%); 3 years old or less (‐18.9%);
7 to 10 years old (‐10.3); older than 10 years old (2.5%).
National Gasoline Prices: AAA shows (October 25, 2017)
the national average price of self‐serve regular at $2.46
per gallon. The average price at the pump has fallen for
15 of the last 20 days, by 7 cents. California Gas
Average: $2.91 (July 16, 2017): $2.94 (May 10, 2017);
$2.79 (May 10, 2016).
New Residential Home Sales: New single‐family houses
in September 2017 were at 667,000. This is 18.9% above
the revised estimates of 561,000.
Tapping Homes for Cash is Back: Rising home prices are
making borrowers more comfortable.
Wireless Telephone Service: Increased 0.4% in
September, ending a streak of 14 consecutive declines.
From September 2016 to September 2017 (‐11.7%).
Restaurants: Mmoderately priced restaurants are losing
their edge as diners seek out fast food.
2017 Record for Store Closures: Since January 1, retailers
have announced plans to shutter more than 6,700 stores
in the U.S. That beats the 6,163 store closings in 2008
amid the financial meltdown. As many as 8,600 brick‐
and‐mortar stores are expected to close this year.
California Worker Adjustment and Retraining
Notification (WARN Notices): July 2017: 48 notices; 23
permanent closures; August 2017: 49 notices: 29
permanent closures; September 2017: 63 notices and 18
permanent closures; As of October 10, 2017: 10 notices
and 2 permanent closures.
http://www.edd.ca.gov/Jobs_and_Training/warn/WARN
_Report_for_7‐1‐2017_to_10‐10‐2017.pdf
Attachment D
ECONOMIC NEWS & TRENDS October 31, 2017
3 www.MuniServices.com
SECTION 1: 2017 HOLIDAY NEWS AND PREDICTIONS
Projected Holiday Sales: Sales during the holiday season are likely to increase 3% to 4%. Online holiday retail sales will
grow by 12% in 2017, accounting for over one‐quarter of total US eCommerce sales for the year. Brick‐and‐mortar sales will
dominate, accounting for about 85% of purchases. (Kiplinger, National Retail Federation and Deloitte,
https://www.forrester.com/report/US+Holiday+2017+Outlook+Digital+Sales+Grow+Boosting+Total+Retail/‐/E‐RES140075)
Holiday Sales: Shoppers plan to spend $728.40 each, on average, on gifts and other holiday‐related items. 96% of the
shoppers intend to make a purchase from a retailer with both a physical and an online presence, and 91%, and 92% of
Millennials plan to buy something at physical locations. Some 40% say they plan to buy items online and pick them up in the
store. (International Council of Shopping Centers, 2017 survey of 2000 shoppers)
Online Shoppers: Plan to spend 70% more than store shoppers this holiday. Non‐store sales, which include online sales
and those from kiosks, are expected to rise 11% to 15%, to roughly $140 billion. In 2016, those sales climbed 12.6%.
(https://www.npd.com/wps/portal/npd/us/news/press‐releases/2017/online‐shoppers‐plan‐to‐spend‐70‐percent‐more‐
than‐in‐store‐shoppers‐this‐holiday‐reports‐npd/)
Retail Landlords Taking a Black Friday Holiday: Some Thanksgiving Day closures include: Burlington; Cabela’s; Cost Plus
World Market; Costco; Crate and Barrel; DSW – Designer Shoe Warehouse; Ethan Allen; H&M; Hobby Lobby; Home
Depot; HomeGoods; IKEA; JOANN Fabric and Craft Stores; Jos. A. Bank; Lowe’s; Marshalls; Mattress Firm; Neiman
Marcus; Nordstrom; Nordstrom Rack; Office Depot and OfficeMax too); Petco; PetSmart; Pier 1 Imports; Sam’s Club;
Staples; Stein Mart; Sur La Table; The Container Store; TJ Maxx; and West Marine.
(https://bestblackfriday.com/blog/stores‐closed‐on‐thanksgiving‐day‐2017/As of October 24, 2017)
Swap (Holiday) Presents On‐Line Before Final Purchase: Target’s “GiftNow” is allowing online shoppers to send an email
to the recipient to see if they want something instead of what was initially selected as a gift.
Self‐Giving: About 70% of shoppers admit that they bought a gift or two for themselves during the holiday season last
year. One common self‐gifting strategy is to offer bonuses with gift cards and holiday purchases. (National Retailers
Federation)
Small Business Saturday / November 25, 2017: Since its inception (founded by American Express) in 2010, the Saturday
after Thanksgiving has become the biggest sales day of the year for many small companies. On Small Business Saturday in
2016, 112 million shoppers spent a reported $15.4 billion at small businesses. https://www.americanexpress.com/us/small‐
business/shop‐small/promote?extlink=SBS2017_SBO_PaidSearch_Bing
https://www.practicalecommerce.com/4‐predictions‐for‐the‐2017‐holiday‐shopping‐season
Holiday Hiring / 2017: Employers are recruiting seasonal help early as tight labor market sparks urgency, especially for
processing the surge in e‐commerce sales. Amazon increased staff by 77% to 541,900 full‐time employees, largely because
of its purchase of Whole Foods; this does include the more than 120,000 seasonal hires for the holidays.
2017 Holiday Play Book (National Federation of Retailers): Packed with research including weather implications and what
motivates shoppers during the holiday. For example, what convinces shoppers to make purchases: Limited time
promotions (50%); Ability to buy on line and pick up purchases (33%); Free give with purchase (25%); Helpful customer
services (24%). https://nrf.com/system/tdf/Documents/retail%20library/Holiday‐Planning‐Playbook‐WEB‐
FINAL.pdf?file=1&title=2017%20Retail%20Holiday%20Planning%20Playbook
Attachment D
ECONOMIC NEWS & TRENDS October 31, 2017
4 www.MuniServices.com
SECTION 2: U.S. ECONOMY
U.S. Economy and Indicators
https://bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm (September 28, 2017);
www.bls.gov/news.release/pdf/cpi.pdf (October 13, 2017);
https://bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm (October 27, 2017)
https://www.bls.gov/news.release/cpi.htm; https://www.census.gov/economic‐indicators/
GDP: Real GDP increased at an annual rate of 3.0% in 3Q2017 (was 3.1% in 2Q2017, 1.4% in 1Q2017, and 2.1% in 4Q2016).
Sales for Retail and Food Services for September 2017: Increased 1.6% to $483.9 billion; increased 4.4% from September
2016. Motor vehicles and parts dealers: Rose 3.6%. Gasoline stations: Rose 5.8%. Electronics & appliance stores:
Dropped 1.1%. Clothing shops: Rose 0.4%. Food & beverage stores: Rose 0.8%. General merchandise shops:
Increased 0.3%.
Unemployment for September: Declined to 4.2%.
Consumer Price Index (CPI) (From Proceeding Month)
https://www.bls.gov/news.release/cpi.nr0.htm (October 13, 2017)
U.S. CPI for Sep 2017: Rose 0.5%.
Gasoline: From September 2016 to September 2017
(19.3%). March (‐6.2%); April (1.2%); May (‐6.4%); June
(‐2.8%); July (.0%); August (6.3%); Sep 2017 (13.1%)
Food: Sep (.1%); August (.1%); Food at home: August (‐
.2%); September (‐.2%); Food away from home increased
.3% each in August and September
Apparel Sep (‐.1%); August (.1%), July (.3%).
Shelter: Sep (.3%); August (.5%); July (.1%).
Tobacco: Increased 0.4% in Sep. From September 2016
to September 2017 (6.3%).
Alcohol: Increased 0.4% in September.
New Vehicles in 2017: March (‐.3%); April (‐.2%); May
(‐.2%); June (‐.3%); July (‐.5%); August (.0%); Sep (‐.4%)
Used Cars & Trucks: March (‐.9); April (‐.5%); May (‐.2%);
June (‐.7%); July (‐.5%); August (‐.2%); Sep (‐.2%)
Wireless Telephone Service: Increased 0.4% in Sep,
ending a streak of 14 consecutive declines. From
September 2016 to September 2017 (‐11.7%).
Lodging Away from Home: Increased 1.5% in Sep and
4.4% in August.
Services Sector for 2Q2017/ Contributions to Percentage Change in GDP
https://www.census.gov/services/qss/qss‐current.pdf (September 7, 2017)
https://bea.gov/newsreleases/national/gdp/2017/pdf/gdp3q17_adv.pdf
3Q2017 GDP Contribution from Previous Quarter:
Services (up .70%); Household Consumption
Expenditures (up .67%).
Services Sector Total Revenue: 2Q2017 was $3,684.6
billion (3.2% increase from 1Q2017); up 6.2% from
2Q2016.
Utilities: Decrease of 7.8% from 1Q2017 and up 6.3%
from the 2Q2016.
Transportation and Warehousing: Increase 7.9% from
1Q2017 and up 4.9% from the 2Q2016.
Real Estate and Rental and Leasing: Increase 8.8% from
1Q2017 and up 8.1% from the 2Q2016.
Accommodation: Increase 10.3% from 1Q2017 and up
4.5% from the 2Q2016.
Real Estate and Rental and Leasing: Increase 8.8% from
1Q2017 and up 8.1% from the 2Q2016
Attachment D
ECONOMIC NEWS & TRENDS October 31, 2017
5 www.MuniServices.com
SECTION 3: CALIFORNIA ECONOMY
http://www.sco.ca.gov/Files‐EO/10‐17summary.pdf
http://dof.ca.gov/Forecasting/Economics/Economic_and_Revenue_Updates/documents/2017/Oct‐17.pdf
Retail Sales and Use Tax for September: $5 million above the month’s forecast of $1.898 billion. September represents the
second prepayment for third quarter taxable sales. Year‐to‐date revenues are $247 million above forecast.
Personal Income Tax for September: $9 million above the month’s forecast of $7.622 billion. Withholding receipts were
$75 million above the forecast of $4.689 billion. Other receipts were $38 million lower than the forecast of $3.354 billion.
Refunds issued in September were $29 million above the forecasted $284 million.
Corporation Tax for September: $125 million above the month’s forecast of $931 million. Prepayments were $36 million
above the forecast of $957 million and other payments were $101 million higher than the $124 million forecast.
Additional Revenues: Revenues from the estate, alcoholic beverage, tobacco taxes, and pooled money interest came in $4
million above the month’s forecast of $49 million, and are up $17 million year‐to‐date. "Other" revenues were $6 million
above the month’s forecast of $31 million, and are up $52 million year‐to‐date.
Home Sales/ Housing Crisis / Impact on Economy
http://www.sco.ca.gov/Files‐EO/08‐17summary.pdf; https://www.scribd.com/document/361954559/Monthly‐Housing‐
Market‐Outlook‐2017‐09#download&from_embed
California Home Sales Continue to Grow Annually: September 2017 Sales: 436,920 Units, +2.6% YTD, +1.7% YTY
California Median Price Expected to Grow YTT: September 2017: $553,490, ‐2.1% MTM, +7.2% YTY
Rent Burden: More than half of California renters are “rent burdened,” paying more than 30% of income in rent. In the
state’s 10 highest‐cost metropolitan areas, half of renter households earning less than $75,000 are rent burdened. (CDHCD,
2017 Draft Housing Plan)
SECTION 4: AUTO SALES
California Car Sales Covering 2Q2017
http://cncda.org/CMS/Slides/Auto%20Outlook%20CA%202017%20Q2.pdf
New Retail Car Registrations for 2Q2017: Declined in
2Q2017 versus a year earlier. It was the first quarterly
drop since 3Q2010. Changed by ‐2.0% (1,047,380 in YTD
2016 from 1,026,882 in YTD 2017).
New Vehicles Sold YTD for 2017: 512,627 or ‐10.8% (for
cars) and 514,255 or 8.8% (for light trucks)
2017 Forecast: Registrations likely exceeding 2 million.
Total Cars History: 1,927,640 (2016); 2,052,750 (2015);
1,848,254 (2014).
Used Cars for 2Q2017: Declined by 3.5%: Aging Market:
For 2Q2017: 4‐ to 6‐year‐old market has largest
percentage increase (10.9%); 3 years old or less (‐18.9%);
7 to 10 years old (‐10.3); older than 10 years old (2.5%).
Attachment D
ECONOMIC NEWS & TRENDS October 31, 2017
6 www.MuniServices.com
Auto Financing and Sales Trends
https://www.federalreserve.gov/econres/notes/feds‐notes/auto‐financing‐during‐and‐after‐the‐great‐recession‐
20170622.htm (June 22, 2017)
National September Auto Sales: Discounting, demand following hurricane drive monthly performance. From a year
earlier: GM (12%); Toyota (15%); Ford (8.9%); Honda (6.8%) FCA (10%); Nissan (9.5%).
Loan Trends: Twice a Month Payments: Starting in December, MotoLease LLC will roll out a twice‐a‐month payment
structure for subprime lessors. Cutting Back on 84 Month Loan: U.S. Bank has been cutting back on its 84‐month loan
offerings. The company has seen an uptick in 30‐to‐89‐day delinquencies.
Hurricane Impact: “Moderate impact” on auto delinquencies in 3Q2017 due to the recent hurricanes; auto loans 30 to 59
days past due rose 87% to $71 million from the same time the year prior. The increase was primarily due to higher
delinquencies in the auto, home equity, and credit card portfolios in hurricane‐affected states. (Financial Services Group)
Auto‐Part Retailers: Underperformance is in part from a lull in new car sales in 2008 to 2010, which lessened the demand
for replacement parts. CarMax fared better than Advanced Auto Parts, Auto Zone and O’Reilly Automotive. Instead of
servicing or repairing vehicles, CarMax sells new and used cars and offers financing.
Recreation Vehicles/ Outdoor Experience: The nation’s largest network of RV‐centric retail locations, Camping World, will
actively seek opportunities to acquire quality dealerships.
SECTION 5: GASOLINE
National Gasoline Prices: AAA shows (October 25, 2017) the national average price of self‐serve regular at $2.46 per
gallon. The average price at the pump has fallen for 15 of the last 20 days, by 7 cents. This is 12 cents less than a month
ago and 24 cents more that over a year ago. California Gas Average: $2.91 (July 16, 2017): $2.94 (May 10, 2017); $2.79
(May 10, 2016).
Gas Station with Convenience Stores: A & W: Opening new franchises, including gas station / convenience store
locations in Berkeley and Hayward. 7‐Eleven/ Top Rated Coffee: California’s top‐rated store is 7‐Eleven.
According to the recent GasBuddy footfall report, more than half (56 percent) of Americans who have visited a convenience
store in the past three months feel that the convenience stores make coffee drinks as good as coffeehouses.
Attachment D
ECONOMIC NEWS & TRENDS October 31, 2017
7 www.MuniServices.com
SECTION 6: OPEN AND CLOSURES
(Selection from July 17, 2017 to October 25, 2017)
Applebee’s: Closing at least 135 locations in fiscal 2017.
A & W: Opening new franchises, including gas station /
convenience store locations in Berkeley and Hayward.
Aerosoles: Filed bankruptcy.
Bass Pro: Merged with Cabela.
Bebe: 180 closures in 2017.
BCBG: 120 closures in 2017.
Big Lots (“Jennifer”): About 20 stores will get a new look.
Giving a new name to create a friendly ‐ “Jennifer” the
nickname given to its target customer.
Bob’s Discount Furniture: Opening new locations in the
Los Angeles area in early 2018.
Chick‐fil‐A: ‘Hottest’ big chain in the country expected to
overtake Dunkin’ Donuts.
Chili’s: Cutting down menu 30% to 40% next year.
Coach: Changing its name to Tapestry at the end of
October hoping to broaden image after acquiring Kate
Spade and Stuart Weitzman brands.
CVS: 70 closures in 2017.
Crocs: 160 closures in 2017.
Dunkin’ Donuts: Franchise growth in the Bay Area.
Family Christian: 240 closures.
Gamestop: 100 store closures.
Gap, Inc: Plans to cut 200 Gap and Banana Republic stores
nationally, while adding 270 Old Navy and Athleta
Guess: 60 closures in 2017.
Goodwill: Will close 5 of its 42 retail stores by year end.
Gymboree: 350 closures (14 in California).
Habit: Shifts to adding drive‐thru feature.
hhgregg: 88 closures in 2017.
H&M: Seeing fewer shoppers; closing 90 stores in 2017.
Ikea: Sets up shop on Amazon. Plans to test “open‐source
design and showrooms
JCPenny: 135 closures in 2017; closing 400 of 1000 stores.
K‐Mart: 109 closures in 2017.
Le Macron: Plans for 15 California locations.
Lazy Boy: Opened 350th store.
Macys: 68 closures in 2017.
Mountain Gender: 30 closures in 2017.
Nordstrom Local: Opening in West Hollywood; one‐stop
hub for convenient time‐saving services.
Office Depot: Launching same day delivery
PetSmart: On track to open more than 70 locations in
2017 on top the 70 opened in 2016.
Ralph Lauren: Up to 25% of department store outlets
closing.
Radio Shack: 550 closures in 2017.
Ross Stores: Adding 40 new locations in 2017.
Rue 21: 400 closures in 2017.
See’s Candies: In response to outdoor malls and strip
centers, will have opened or relocated 10 shops in
California.
Staples: 70 closures in 2017.
Spirit Halloween: Taking space in more mall as retailers
vacate.
Sprint: Expansion includes 78 new stores in Southern
California in 2017.
Sears: 41 closures in 2017; will begin selling Kenmore on
Amazon.com.
Starbucks: Closed on‐line business.
Target: Plans to increase small‐format stores; next day
delivery. Launching four more house brands and plans to
launch 12 by the end of 2018.
The Limited: 250 closures in 2017.
Toys “R” Us: Filed bankruptcy; online presence increased.
T.J. Maxx and Marshalls: 70 and 65 new locations
True Religions: Closing 27 stores.
Wet Seal: 170 closures in 2017.
Walgreens: Scheduled to close 600 stores by Spring of
2018 in wake of its purchase of 1,932 Rite Aid stores.
Walmart: Is reported to partner with Lord and Taylor to
create an on‐line mall. Openings are fewest in 25 years;
part of strategy to fend off Amazon.com. Plans to increase
on‐line and grocery pick up at stores.
Attachment D
ECONOMIC NEWS & TRENDS October 31, 2017
8 www.MuniServices.com
SECTION 7: RETAIL TRENDS
U.S. Retail Mall Vacancies in 3Q2017: Rose to 8.3% due to confirmed closings, including Sears and JC Penny stores. Toys R
Us, The Gap, Teavana and True Religion Jeans. (Reuters)
Warehousing “Showrooming:” Will fuel demand for more logistics space and services. Nordstrom Local is opening in West
Hollywood. Shoppers try on clothes and the merchandise can be retrieved by a nearby Nordstrom or through the website.
Manicures, wine and coffee are available. (https://shop.nordstrom.com/c/nordstrom‐local)
Pop Up Short‐Term Rental Space: Modular spaces with rotating up‐and‐coming retailers offer one solution to fill the gaps.
Ditching the “M word”: 20% of malls have removed the word “mall” from their name since 2014 (common replacements
are “shoppes,” “village” and “towne center.” (JJL survey)
Breweries Anchoring Major Developments Around the U.S.: Craft beer production in the United States has nearly tripled
over the past decade; breweries have become valuable anchors for large mixed‐use projects. (www.bisnow.com)
Luring the 26 Year‐Old Shopper: Companies such as Scotts, Home Depot Inc., Procter & Gamble Co. , Williams‐Sonoma
Inc.’s West Elm and the Sherwin‐Williams Co. are hosting classes and online tutorials to teach such basic skills as how to
mow the lawn, use a tape measure, mop a floor, hammer a nail and pick a paint color. This generation, with its over‐
scheduled childhoods, tech‐dependent lifestyles, etc., is different from previous ones. (WSJ, October 10, 2017)
Outlets: One reason for the stronger performance of outlet centers, is that they’re not weighed down by sagging anchors
like J.C. Penney, Macy’s and Sears. Rather, outlet centers enjoy a relatively balanced mix of retailers, and they’ve largely
escaped the recent spate of store bankruptcies and shutdowns.
Ikea to Acquire “Gig Economy” TaskRabbit: TaskRabbit connects people with freelancers willing to do odd jobs, run
errands, and to assemble Ikea furniture; TaskRabbit is SF based and is available in 40 U.S. cities as well as London.
Consumption Habits Impact Retail Space: Industry is vulnerable to store closures. Americans a whole are consuming less
food on a per‐capita basis, while millennials are increasingly snacking their way through the day. (WSJ, August 1, 2017)
SECTION 8: E‐COMMERCE TRENDS
U.S. E‐Commerce Results for 2Q2017: Percent of Retail Sales: Increase of 4.8% for 2Q2017 from 1Q2017. Total Sales for
2Q2017: 8.9%. California’s e‐commerce sales comprise approximately 13‐14% the total sales, based on California’s portion
of the national economy. An estimated 40% of U.S. online spending goes to Amazon. (WSJ)
Luxury On‐Line Sales: The absence of high end products hampers Amazon’s push to be a force in the fashion industry;
estimated e‐commerce revenue for 2016: Burberry (8.5%); Tiffany (6%); Louis Vuitton (2.4%); Prada (1.2%).
Shopping Allowance Application for On‐Line Sales: Amazon welcomes teens with new parent‐controlled shopping
allowance application. (Fox News)
Curbside Pickup: Retailers and numerous grocery stores are offering drive‐up pick up for online orders. Includes retailers
Toys R Us, Walmart, Nordstrom, CVS, Sears,
Attachment D
ECONOMIC NEWS & TRENDS October 31, 2017
9 www.MuniServices.com
Segment Survival ‐ Impacted by E‐Commerce
http://img04.en25.com/Web/JLLAmericas/%7B88537be6‐f837‐429d‐b8ee‐
6c702f665056%7D_JLL_Retail_POV_Screens_to_Stores_Report_FNL_LR.pdf
Diners: Meal subscription services are set to push consumers away from traditional in‐person dining to dining at home.
Ordering online and picking up takeout will be a factor in e‐commerce penetration. Online Outlook: The immediacy of
freshly prepared food will keep this category entrenched in bricks‐and‐mortar.
Off Price Retailers: Consumers look for value when making their purchases, so the unique model of off‐price retailers like
Ross and TJ Maxx/Marshalls makes it very profitable to operate in the physical space., respectively. Online Outlook: E‐
commerce penetration is a negligible; 1.0 percent in this retail category, while same‐store sales growth in 2016 was 3.4
percent.
Dollar Stores: Appeal lies in convenience and low prices, a universal attraction to shoppers across all income levels.
Households with an annual income of more than $100,000 make up 19.0 percent of the revenue at dollar store chains,
compared to 23.0 percent from households with an annual income of less than $25,0006. Retailers in this category
are aggressively expanding, planning 1,250 new stores in the next 12 months. Online Outlook: Dollar stores are all about
saving money, and consumers across income levels appreciate value. This category will continue to flourish in the bricks‐
and‐mortar space.
Sporting Goods: Largely been undone by intense competition from mass merchandisers, online retailers and department
stores. High e‐commerce penetration. Dick’s Sporting Goods remains the prime retail player in this market. Online
Outlook: While a little more than half (56.0 percent) of consumers prefer to buy sporting goods in person, this is a diluted
product category, with sales taking place at mass merchandisers and online, as well as in specialty store.
Toys and Children’s Goods: Shift online, though bricks‐and‐mortar still dominates. Toys and hobby products saw a 16.0
percent jump in e‐commerce from 2015 to 2016, with 13.0 percent of sales occurring online. Online Outlook: While toy
stores and children’s retailers offer the ability to interact with the products before purchasing, online retailers for this
category offer huge time savings for parents.
Office Supplies: Consolidate rather than differentiate. Seen closures along with mergers (Office Depot and Office Max),
reflecting a consolidation of physical space. In 2016 e‐commerce penetration has reached 13.7 percent. Online Outlook:
Office Depot/Office Max is closing 300 stores while Staples is shuttering 70. Online competition is strong for this category.
Electronics: Same‐store sales in the category fell 5.9 percent in 2016, while e‐commerce penetration is 9.5 percent. Best
Buy is a standout. Best Buy is also hiring hundreds of sales people to sit down with consumers in homes and recommend
electronics to buy, part of a fee services; hope to drive sales of TVs and gadgets at a time when few people are visiting
shopping centers. Online Outlook: Only 33% of consumers say they prefer to buy electronics in store. Retailers like Apple
and Best Buy offer high‐touch experiences for draw to physical locations. Will continue to move online.
Book Stores: Large‐format bookstores have already made the move online. Books, along with gifts, are number one for e‐
commerce penetration with 24.8 percent of sales happening online. Online Outlook: Like music and video, the availability
of books in digital format has pushed sales online.
Furniture Showrooms: Consumers want to see and try out furniture in person. Online Outlook: Same‐store sales up 0.5%
in 2016, while e‐commerce penetration is at 19%. Physical retail will continue to dominate the category.
Grocery: Click‐and‐collect and delivery are attractive options for daily needs purchases. Continues to move to an omni‐
channel format, with delivery or pick‐up options. Online Outlook: 93% of consumers prefer to buy food and groceries in
person.
Big Box: Big box discounters like Target remain very popular. Same‐store sales growth was 0.2 percent in 2016. E‐
commerce penetration is at 4.2 percent, and set to grow as major players invest more in their omni‐channel strategies.
Online Outlook: Consumers still prefer to purchase many of their products in‐store (e.g., apparel, household goods, pet
supplies and sporting goods). This category will maintain a strong presence in the physical space.
Attachment D
ECONOMIC NEWS & TRENDS October 31, 2017
10 www.MuniServices.com
SECTION 9: RESTAURANT INDUSTRY
3Q2017: Food and Beverages Purchased for Off Premises Consumption (up .16%); Food Services and Accommodations
(up .15%).
Projected Sales in California Restaurants in 2017: $82.2 billion
Moderate Price Restaurants Losing Edge: Higher food cost; Tight labor market; Expanding fast‐food menus; Rebounding
economy; Popularity of delivery services: (https://www.usatoday.com/story/money/2017/09/28/tight‐fisted‐diners‐flock‐
fast‐food‐not‐midprice‐restaurants/703328001/)
Restaurant Technology Trends for 2018: Facial recognition payment technology; Complete self‐service checkout; 3. Line
cutting because of technology. (https://upserve.com/restaurant‐insider/3‐hot‐restaurant‐technology‐trends‐watch‐2018/
Fast Food: McDonalds, Starbucks, Dunkin: Heightened focus is on low prices to compete
SECTION 10: GROCERY INDUSTRY TRENDS
http://www.theshelbyreport.com/ (from July 17, 2017 to October 25, 2017)
Grocery Among Fastest‐Growing Retail Segments: Grocery retailers as among the three fastest‐growing core retail
segments. The other two fastest‐growing core retail segments, were mass merchandisers and dollar stores and
convenience stores. www.progressivegrocery.com
Estimated U.S. Market Share of Food and Beverage Sales: Walmart (25%); Kroger (10%); Albertsons (7%); Costco (6%);
Whole Foods 2.0; Amazon (1.0). Noting the Amazon acquisition of Whole Foods will make Amazon even more competitive.
Smart & Final Stores Inc.: Launched its own delivery platform at shop.smartandfinal.com
Kroger Company: The largest traditional grocery, aims to sell its convenience stores; cites e‐commerce threats.
Amazon’s Impact on Whole Foods Sales and Traffic: In the first month of acquiring Whole Foods, Amazon.com has sold
$1.6 million in store‐brand items; August traffic was up 10% from the year’s monthly average.
Peapod / Meal Kits: A pioneer grocery delivery services is adding meal kits to its service; concerned with Amazon.com.
Trader Joes: Opened 14 new locations for 2017 bringing the total number of stores to 474.
Raley’s: Launched grocery delivery services in Alameda.
Walmart: Opened its 1,000th Online Grocery Pickup location in September.
Blue Apron/ Meal Kits: Announced laying off 6% (300 employees) months after IPO in June.
Costco Grocery Delivery: Expanding home delivery services as food becomes an increasingly competitive front in e‐
commerce; two‐day delivery on shelf‐stable food; free shipping on about 500 products for orders of at least $75. Instacart
will sell 1700 grocery products with same day delivery on orders of at least $35. (MarketWatch, October 7, 2017
Attachment D