HomeMy WebLinkAbout2017 Sales Tax Digest First Quarter
CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR
November 6, 2017
The Honorable City Council
Palo Alto, California
City of Palo Alto Sales Tax Digest Summary First Quarter Sales
(January - March 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. 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 first quarter sales for calendar year 2017, which are reported as
part of the City’s fiscal year 2017 revenue. In September 2017, ASD should receive information from the
state on aggregate sales and use tax receipts for the second 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 first quarter of 2017
increased by $880,000, or 14.1 percent, including pool allocations, compared to the first quarter
of 2016. Excluding one-time prior period adjustments of $590,000, the first quarter of 2017
increased by $290,000, or 4.7 percent, including pool allocations, compared to the first quarter
of 2016. For all Santa Clara County jurisdictions, sales and use tax revenue for the first quarter of
2017 decreased by $2.5 million, or 2.6 percent, compared to the first quarter of 2016.
•Statewide, most regions in California experienced an increase in sales and use tax revenue for
the year ending in March 2017, with a one-year statewide increase of 2.1 percent.
•Palo Alto’s sales and use tax revenue totaled $29.3 million for the year ending in March 2017, an
increase of 7.2 percent from $27.4 million during the prior one-year period. Most of this
revenue increase came from a small number of businesses.
1 See definitions of state and county pools on page 3.
Office of the City Auditor
Sales Tax Highlights – First Quarter Sales (January – March 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 first quarter of 2017 increased by 5.8 percent compared to the first
quarter of 2016 and increased by 4.6 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
June 2017 unemployment rate, which is not seasonally adjusted, was 3.5 percent in Santa Clara County
and 2.4 percent in Palo Alto.
Economic Category Analysis
MuniServices’ analysis of economic categories for the year ending March 2017 shows:
Economic category
Percent of Palo Alto’s sales
and use tax revenue
Percent Increase (Decrease)
compared to prior year
General retail 35.6% 4.9%
Food products 20.1% 5.1%
Business-to-business 18.1% 0.3%
Construction 3.2% (15.3%)
Miscellaneous 23.4% 10.9%
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 March 2017
(Amounts include tax estimates and exclude county pool allocations)
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 8.75 percent during the first quarter of 2017. Effective April 1, 2017, the sales and
use tax rate in Palo Alto changed to 9.0 percent.
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
Audit staff: Lisa Wehara
Attachment A
City of Palo Alto
Sales Tax Digest Summary
Collections through June 2017
Sales through March 2017 (2017Q1)
www.MuniServices.com (800) 800‐8181 Page 1
California Overview
The percent change in cash receipts from the prior year was 2.1% statewide, 2.7% in Northern California
and 1.6% 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 1st Quarter 2017 by
1.4% statewide, 1.2% in Southern California and 1.8% in Northern California.
City of Palo Alto
For the year ended 1st Quarter 2017, sales tax cash receipts for the City increased by 7.2% from the
prior year. On a quarterly basis, sales tax revenues increased by 14.1% from 1st Quarter 2016 to 1st
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 4.6% for the year ended 1st Quarter 2017 from the prior year. On
a quarterly basis, sales tax activity increased by 5.8% in 1st Quarter 2017 compared to 1st 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 35.6 / 4.9 28.1 / 0.8 26.3 / ‐0.3 27.6 / 1.9 31.4 / 5.7 28.8 / ‐0.2 27.0 / 3.2 28.5 / 1.9 31.4 / ‐5.7
Food Products 20.1 / 5.1 21.0 / 3.9 22.4 / 3.7 17.2 / 4.6 16.8 / 4.3 22.3 / 4.1 17.4 / 3.7 18.8 / 3.6 30.0 / ‐8.3
Construction 3.2 / ‐15.3 9.4 / ‐0.5 9.5 / 1.5 11.6 / 4.2 11.9 / 1.7 8.3 / 1.1 10.7 / ‐11.0 13.5 / 4.6 8.6 / ‐11.7
Business to Business 18.1 / 0.3 16.5 / 1.3 19.6 / ‐0.8 13.9 / 1.3 12.4 / ‐0.7 16.2 / 1.6 16.2 / 6.2 8.2 / ‐2.1 6.6 / 1.5
Miscellaneous/Other 23.4 / 10.9 25.0 / 0.8 22.2 / 2.7 29.7 / 3.0 27.4 / 1.7 24.3 / ‐0.9 28.7 / 2.6 31.0 / 1.1 23.4 / 0.0
Total 100.0 / 4.6 100.0 / 1.4 100.0 / 1.3 100.0 / 2.9 100.0 / 3.1 100.0 / 1.0 100.0 / 1.8 100.0 / 2.0 100.0 / ‐5.3
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 17.7 / 4.2 15.0 / 5.0 16.0 / 4.1 16.5 / 5.3 13.3 / 1.8 18.5 / ‐57.9 11.6 / 6.3 12.2 / 9.3 21.7 / ‐8.8
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 15.7 / 16.2 11.4 / 4.2 11.3 / 5.7 11.4 / 2.5 11.0 / 6.2 14.5 / ‐32.6 11.2 / 5.0 10.9 / 4.3 10.6 / 20.6
3rd Largest Segment Miscellaneous
Retail
Department
Stores
Department
Stores
Department
Stores Restaurants Auto Sales ‐
New
Department
Stores
Department
Stores Misc. Retail
% of Total / % Change 11.2 / 24.6 9.3 / ‐0.8 7.6 / ‐2.1 9.0 / ‐1.3 10.9 / 5.6 11.8 / 11.8 10.3 / 0.2 10.7 / ‐1.3 10.4 / ‐8.4
*** Not specified to maintain confidentiality of tax information
CITY OF PALO ALTO
ECONOMIC CATEGORY ANALYSIS FOR YEAR ENDED 1ST QUARTER 2017
ECONOMIC SEGMENT ANALYSIS FOR YEAR ENDED 1ST QUARTER 2017
BENCHMARK YEAR 2017Q1 COMPARED TO BENCHMARK YEAR 2016Q1
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 1st Quarter 2017: $29,330,293
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2017Q1 BMY is sum of 2017 Q1, 2016 Q4, Q3, & Q2)
Restaurants
15%
Miscellaneous Retail
9%
Department Stores
7%
Apparel Stores
6%
Electronic Equipment
4%
Food Markets
2%
Recreation Products
1%
All Other
39%
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 1st Quarter 2017. The Top 25 Sales/Use Tax contributors generate 40.1%
of Palo Alto’s total sales and use tax revenue.
Anderson Honda Integrated Archive Systems The Pace Gallery
Apple Stores Macy's Department Store Tiffany & Company
Audi Palo Alto Magnussen's Toyota Urban Outfitters
Bloomingdale's Neiman Marcus Department Store USB Leasing
Bon Appetit Management Co. Nordstrom Department Store Varian Medical Systems
Eat Club Space Systems Loral Volvo Cars Palo Alto
Fry's Electronics Stanford University Hospital CVS
Hewlett‐Packard Tesla Lease Trust
Houzz Shop Tesla Motors
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 2017Q1 Benchmark Year 2016Q1
Attachment B
City of Palo Alto
www.MuniServices.com (800) 800‐8181 Page 4
Historical Analysis by Calendar Quarter
Economic Category % 2017Q1 2016Q4 2016Q3 2016Q2 2016Q1 2015Q4 2015Q3 2015Q2 2015Q1 2014Q4 2014Q3
General Retail 23.6% 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 1,994,264
Miscellaneous/Other 19.5% 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 1,400,415
Food Products 16.7% 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 1,054,462
Business To Business 17.4% 1,240,962 1,004,883 1,027,730 1,140,526 974,162 1,428,210 888,609 833,370 757,827 885,327 596,226
Net Pools & Adjustments 22.8% 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 1,178,482 945,653
Total 100.0% 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 5,991,020
Economic Se gments % 2017Q1 2016Q4 2016Q3 2016Q2 2016Q1 2015Q4 2015Q3 2015Q2 2015Q1 2014Q4 2014Q3
Miscellaneous/Other 40.7% 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 2,211,697
Restaurants 14.6% 1,043,747 1,071,053 1,068,101 1,068,502 1,005,688 1,029,733 1,019,505 1,045,011 942,709 962,018 936,160
Miscellaneous Retail 6.1% 435,757 1,002,389 581,831 681,345 469,360 714,151 478,994 479,298 415,270 628,099 508,061
Department Stores 5.5% 392,565 641,541 491,433 546,629 435,470 714,831 553,325 595,374 503,590 750,481 548,595
Apparel Stores 5.2% 372,033 553,250 398,170 444,383 337,880 519,318 397,534 428,100 370,810 507,843 398,747
Service Stations 1.7% 119,552 130,396 138,155 144,735 123,004 140,758 173,082 181,582 148,902 166,861 203,484
Food Markets 1.8% 131,676 145,179 126,755 109,108 104,676 116,778 113,092 106,818 104,856 117,245 105,600
Business Services 0.6% 43,548 102,095 47,066 65,510 51,647 76,156 51,885 120,003 103,773 131,505 66,163
Recreation Products 0.9% 61,392 61,328 72,885 60,737 52,422 62,406 71,844 68,246 57,836 58,042 66,860
Net Pools & Adjustments 22.8% 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 1,178,482 945,653
Total 100.0% 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 5,991,020
*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 2016Q1 to 2017Q1
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Campbell ‐0.7% 3.0%‐2.8% 2.5% 9.3% 2,168,648 2,123,453 2.1% Restaurants Business Services Bldg.Matls‐Retail Furniture/Appliance
Cupertino ‐2.7% 13.8%‐22.8% 20.5% 8.0% 5,589,716 4,962,144 12.6% Office Equipment Business Services Bldg.Matls‐Whsle Department Stores
Gilroy ‐2.6% 6.2% 0.9% 5.1% 23.2% 3,415,420 3,187,426 7.2% Auto Sales ‐ New Misc. Vehicle Sales Apparel Stores Bldg.Matls‐Whsle
Los Altos ‐1.2% 1.0%‐7.0% 544.1% 12.1% 645,283 516,701 24.9% Office Equipment Service Stations Furniture/Appliance Bldg.Matls‐Whsle
Los Gatos ‐5.3%‐0.6%‐9.9%‐3.1% 1.6% 1,482,477 1,502,881 ‐1.4% Auto Sales ‐ New Service Stations Miscellaneous Other Furniture/Appliance
Milpitas ‐3.8% 3.7% 18.8% 69.8% 8.3% 5,512,241 4,522,982 21.9% Office Equipment Electronic Equipment Light Industry Apparel Stores
Morgan Hill 16.8% 8.3% 0.4% 19.7% 2.4% 1,843,374 1,702,478 8.3% Electronic Equipment Furniture/Appliance Auto Parts/Repair Light Industry
Mountain View ‐4.1%‐1.2%‐26.6%‐52.7% 4.8% 3,462,490 4,392,629 ‐21.2% Service Stations Auto Sales ‐ New Office Equipment Business Services
Palo Alto 0.5% 5.5%‐25.3% 27.2% 1.8% 5,510,398 5,210,069 5.8% Leasing Office Equipment Bldg.Matls‐Whsle Department Stores
San Jose ‐2.6% 5.2%‐5.6%‐19.4% 5.4% 34,783,010 36,239,144 ‐4.0% Restaurants Service Stations Light Industry Office Equipment
Santa Clara ‐1.3%‐1.2% 2.6% 8.7% 5.2% 10,755,900 10,262,401 4.8% Office Equipment Business Services Electronic Equipment Health & Government
Santa Clara Co.‐7.8%‐2.4%‐36.6%‐44.7% 5.9% 205,884 215,928 ‐4.7% Auto Parts/Repair Light Industry Electronic Equipment Miscellaneous Retail
Saratoga ‐5.8% 2.1%‐20.0%‐21.4%‐3.6% 5,413,432 6,072,404 ‐10.9% Service Stations Restaurants Electronic Equipment Bldg.Matls‐Retail
Sunnyvale ‐1.2% 5.3%‐5.0%‐6.2%‐13.1% 851,986 877,922 ‐3.0% Restaurants Heavy Industry Health & Government Miscellaneous Retail
Attachment B
City of Palo Alto
www.MuniServices.com (800)800‐8181 Page 6
2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1
El Camino Real 2,563,317 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
Town and Country 570,860 590,134 624,333 629,346 637,224 644,288 636,497 639,830 642,372 632,157 645,939 634,372 629,484
Midtown 185,472 185,910 187,120 188,251 192,122 194,028 195,907 192,190 193,066 207,568 206,960 206,327 201,948
East Meadow Area 107,316 109,171 114,419 104,735 117,701 172,602 166,805 161,897 173,019 185,564 192,748 191,467 199,789
Charleston Center 84,760 86,432 86,288 87,413 88,622 89,612 90,642 91,711 91,991 92,121 91,914 92,495 92,258
City of Palo Alto ‐ Selected Geographic Areas of the City
Benchmark Year 1st Quarter 2017
$‐
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1
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 (2017Q1 BMY is sum of 2017 Q1, 2016 Q4, Q3 & Q2)
Attachment B
City of Palo Alto
www.MuniServices.com (800)800‐8181 Page 7
2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1
Stanford Shopping Ctr 5,647,210 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
Stanford Research Park 4,299,015 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
Downtown 3,108,592 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
San Antonio 2,234,235 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
California Avenue 1,104,237 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
City of Palo Alto ‐ Selected Geographic Areas of the City
Benchmark Year 1st Quarter 2017
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4
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
2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1
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
2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1
Stanford Shopping Ctr Stanford Research Park Downtown San Antonio California Avenue
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2017Q1 BMY is sum of 2017 Q1, 2016 Q4, Q3 & Q2)
Attachment B
City of Palo Alto
www.MuniServices.com (800)800‐8181 Page 8
2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1
Valley Fair 6,885,378 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
Stanford Shopping Ctr 5,647,210 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
Oakridge Mall 3,934,469 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
Hillsdale 2,374,185 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
Santana Row 2,453,638 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
City of Palo Alto ‐ Regional Shopping Mall Comparison
Benchmark Year 1st 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
2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1
Valley Fair Stanford Shopping Ctr Oakridge Mall Hillsdale Santana Row
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2017Q1 BMY is sum of 2017 Q1, 2016 Q4, Q3 & Q2)
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 July 18, 2017
ECONOMIC NEWS & TRENDS
Attachment D
ECONOMIC NEWS & TRENDS July 18, 2017
HIGHLIGHTS
GDP: Real GDP increased at an annual rate of 1.4% in
1Q2017. In 4Q2016, the GDP increased 2.1%.
U.S. Sales for Retail and Food Services, June 2017: Sales
were down 0.1% from May 2017, and up 3.0% from last
year. Non‐store retailers were up 9.2% from June 2016.
Restaurants dropped 0.6% in June, department stores fell
0.7% and 1.3% for service stations. Spending improved
0.4% at non‐store retailers (also on‐line outlets), building
materials up 0.5% and auto dealers and furniture sales
gained (0.1%). Auto dealers (includes purchases of rental
cars) fell 3% in June.
California Retail Sales and Use Tax for June: $2.32 billion
were $57.2 million, or 2.5% higher than May.
E‐Commerce Results for 1Q2017: 8.50% for 1Q2017, up
from 8.20 from last quarter or a 3.66% change.
Retail Trends Nationwide: Macy’s closed 68 stores this
year. Another 34 stores are planned to close in the next 4
years. At the end of this month, JC Penny will begin to close
138 stores. Sears and Kmart are closing 72 more stores
after announcing that more than 180 stores will close.
Companies Creating Shopping Holidays: Amazon’s 2017
Prime Day is a big hit and further its retail dominance.
Starting July 10 at 9 p.m. ET, Amazon offered deals to
Prime members for 30 hours. Walmart and others will have
deals on Prime Day. And China‐based Alibaba has its own
shopping holiday on 11/ 11.
Auto Sales Forecast for 2017: 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.
Used Vehicles: A jump in leasing that started several years
ago means more late‐model autos coming off lease.
California Retail Car Registrations for 1Q2017: Changed by
‐9.3% (254,409 from 280,616 in 2016). After seven years of
increasing sales, the market has fully recovered from the
low point in 2009, and as a result, pent up demand is
easing. In addition, interest rates are increasing, used ve‐
hicle prices are weakening, and incentives are on the rise,
all signs of a market that has likely reached its peak.
Gasoline Prices: AAA shows (July 16, 2017) the national
average price of self‐serve regular at $2.25 per gallon
which is four cents less than one week and one month ago,
and 14 cents more than the same date last year.
California Gas Average: $2.91 (July 16, 2017): $2.94 (May
10, 2017); $2.79 (May 10, 2016).
California Home Sales: The median home price in May was
$550,200, up 2.3%, and up 5.8% from May 2016. April
2017 was $537,920.
Fine Dining and Upscale Casual Show Strength for
2Q2017: Affluent restaurant consumers continue to
respond positively to brands that provide experience‐
driven dining occasions.
Amazon‐Whole Foods: Amazon in June acquired Whole
Foods (over 460 stores). It was also granted a patent for
future technology that would prevent brick‐and‐mortar
shoppers from online price checking.
Wireless Telephone Service: Fell 13.2% over the past year
Logistics: The rise of e‐commerce means big business for
the warehouse industry as more retailers invest in
distribution centers to facilitate fast delivery of goods.
Sharing Economy: Uber, Airbnb lead the way as sharing
economy expands. 56.5 million people will use sharing
economy service this year; this is over a quarter (26%) of
U.S. adult internet users.
Construction in May 2017: 4.5% above the May 2016
estimate. During the first 5 months of this year,
construction spending amounted to $469.2 billion, 6.1%
above the $442.4 billion for the same period in 2016.
Attachment D
ECONOMIC NEWS & TRENDS July 18, 2017
3 www.MuniServices.com
SECTION 1: U.S. ECONOMY
U.S. Economy and Indicators
https://bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm (June 29, 2017); www.bls.gov/news.release/pdf/cpi.pdf ;
https://www.bls.gov/news.release/cpi.htm; www.usa.today (July 14, 2017); https://www.census.gov/economic‐indicators/
GDP: Real GDP increased at an annual rate of 1.4% in 1Q2017. In 4Q2016, real GDP increased 2.1%.
June 2017 Snapshot: Sales for Retail and Food Services: Consumers account for roughly 70% of the U.S. economic activity.
Sales were down 0.1% from May 2017, and up 3.0% from last year. Non‐store retailers were up 9.2% from June 2016, while
sporting goods, hobby, book, & music stores were down 8.9% from last year. Restaurants dropped 0.6% in June,
department stores fell 0.7% and 1.3% for service stations. Spending improved 0.4% at non‐store retailers (also on‐line
outlets), building materials up 0.5% and auto dealers and furniture sales gained (0.1%). Auto dealers (includes purchases of
rental cars) fell 3% in June.
Construction in May 2017: 4.5% above the May 2016 estimate. During the first 5 months of this year, construction
spending amounted to $469.2 billion, 6.1% above the $442.4 billion for the same period in 2016.
Income for May: Personal: Increased 0.4% in May. Disposable: Increased 0.5%.
Consumer Price Index (CPI) for June 2017
https://www.bls.gov/news.release/cpi.nr0.htm (July 14, 2017)
U.S. CPI for June 2017: Unchanged. Decreased 0.2% in
May.
Gasoline: Declined 2.8% in June; declined 6.4% in May.
Food: Unchanged in June. Rose 0.2% in May.
Shelter: Increased 0.2% in June and May.
Apparel (from proceeding month): For January 2017
(1.4%); February 2017 (.6%); March 2017 (‐.7%); April (‐
.3%); May (‐.8%); June (‐0.1%).
Rent: Increased 0.3% in June and 0.2% in May.
Tobacco: Decreased 4% in June. April 2017 is the largest
increase (4.2%) since April 2009.
Alcohol: Increased 0.2% in June.
New Vehicles (from proceeding month): For January
2017 (.9%); February 2017 (‐.2%); March 2017 (‐.3%);
April (‐.2%); May (‐.2%); June (‐.3%).
Used Cars and Trucks (from proceeding month): For
January 2017 (‐.4); February 2017 (‐.6); March 2017 (‐.9);
April (‐.5%); May (‐.2%); June (‐.7%).
Car and Truck Rental: Increased 9.9% in June and 2.3%
in May.
Wireless Telephone Service: Fell 13.2% over the past
year.
Lodging Away from Home: Fell 1.9% in June. Rose 2.1%
in April after declining 2.4% in March.
Services Sector for 1Q2017
https://www.census.gov/services/qss/qss‐current.pdf (June 8, 2017)
Services Sector Total Revenue: 1Q2017 was $3,569.6
billion (‐1.3%); in 4Q2014 was $3,616.9 billion (+2.4%).
Utilities: $148.2 billion, an increase of 6.2% from 4Q2016
and up 2.8% from the 1Q2016.
Transportation and Warehousing: Decrease of 3.9%
from the 4Q2016 and up 3.3% from 1Q2016.
Real Estate and Rental and Leasing: Decrease of 4.0%
from 4Q2016 and up 8.1% from 1Q2016.
Accommodation: $58.9 billion, an increase of 1.4% from
4Q2016 and up 6.6% from 1Q2016.
Attachment D
ECONOMIC NEWS & TRENDS July 18, 2017
4 www.MuniServices.com
Economic Outlook
http://www.kiplinger.com/tool/business/T019‐S000‐kiplinger‐s‐economic‐outlooks/index.php (July 2017)
GDP Outlook: 2.1% pace in 2017; 2.4% in 2018.
Interest Rates: 10‐year T notes at 2.5% by end of 2017.
Inflation: 1.6% in 2017, down from 2.1% in 2016.
Energy: Crude trading from $40 to $45 barrel in
September 2017.
Gasoline: $2.10 to $2.30 in September 2017.
Retail Sales: Growing by 3.5% n 2017 (excluding gas)
falling below its 3.8% pace in 2016.
E‐commerce: Will grow 15% this year, compared with
13% in 2016. The flip side of strong e‐commerce gains is
that in‐store sales will pick up only gradually, at about a
2% rate.
Consumer Price Changes for 12/ 2016 to 12/17: Food
1.6% (more competitive); Gasoline at ‐4.8% (down slightly
in second‐half of 2017); Cell Plans at 1.9%.
Total Inflation: Picking up a bit in second half of 2017 as
energy stabilizes (1.3%).
Employment / Wages
http://dof.ca.gov/Forecasting/Economics/Economic_and_Revenue_Updates/documents/2017/Jun‐17.pdf; www.bls.com
U.S. Unemployment: 4.4% in June. Employment increased in health care, social assistance, financial activities, and mining.
The unemployment is the lowest for the US economy since the Great Recession ended in 2009, when unemployment
peaked at 10%. (BLS)
California’s Unemployment: Fell by 0.1% to 4.7% in May, below the pre‐recession low of 4.9% in December 2006 and
tying with the historic low of 4.7% in November‐December 2000. California’s labor force rate is at a new low of 62%. (DOF)
Sector Gains and Losses in May: Largest gain is from local government, information, trade, transportation, and utility,
other services, financial activities, educational and health services. Losses from leisure and hospitality. (DOF)
U.S. Allows More Season‐Worker Visas: The Department of Homeland Security announced it would make 15,000 more
visas for seasonal workers available, increasing the current amount by 50%. The currently shortfall has left hotels,
restaurants, and other businesses in demand for workers.
Share of Goods Through US Ports: Total California goods exports were up $0.2 billion from May 2016 (up 1.2%), the 8th
month in a row reporting year‐over‐year export growth. California remained in 2nd place with 11.32% of all US goods
exports (12 month moving total), behind Texas at 16.25%. US goods trade (exports and imports) through California ports
edged up to 18.43% (12 month moving total; up from 18.41% in April 2017). http://centerforjobs.org/
Travel and Tourism Spending Turned Up in the First Quarter: Spending: 0.4% increased for 1Q2017 after decreasing 2.7%
in 4Q2016. Related GDP for the nation increased 1.2% in 1Q2017 after a 2.1% increase in 4Q2016. Traveler
accommodations increased 5.3% after decreasing 5.9% in 4Q2016. Prices for all other transportation‐related goods and
services, which includes gasoline, increased 7.0% in 1Q2017 after increasing 16.8% in 4Q2016. Total Tourism‐Related
Output: $1.6 trillion in 1Q 2017, comprising 58% of direct tourism spending and 42% of indirect tourism‐related spending.
https://bea.gov/newsreleases/industry/tourism/2017/tour117.htm
Attachment D
ECONOMIC NEWS & TRENDS July 18, 2017
5 www.MuniServices.com
SECTION 2: CALIFORNIA ECONOMY / FISCAL FOCUS
http://www.sco.ca.gov/Files‐EO/07‐17summary.pdf
http://dof.ca.gov/Forecasting/Economics/Economic_and_Revenue_Updates/documents/2017/Jun‐17.pdf
California GDP: Increased by 1.2% in 1Q2017. California’s economy in 2016 was the sixth largest economy in the world as
measured by GDP, just behind the United Kingdom and ahead of France. (DOF, June 2017)
Retail Sales and Use Tax for June: $2.32 billion were $57.2 million, or 2.5% higher than May estimates. For FY 2016‐17,
total receipts of $24.71 billion missed the Budget Act projections by $1.03 billion.
Personal Income Tax for June: $10.94 billion lagged by $161 million, or 1.5. (Controller)
Corporation Tax for June: $2.42 billion were 12.5% lower than assumptions in the May Revision. (Controller, July 2017)
June State Government Revenues: $16.63 billion which fell short of projections in the 2017 Budget by 2.5%. (Controller,
July 2017)
California Home Sales: Median existing single‐family sales price increased by 2.3% to $550,200 in May compared with
April. This was $44,330 lower than the pre‐recession peak of $594,530 in May 2007. For the first five months of 2017, the
year‐over‐year median home price growth was 6.1%, which follows 5.6% year‐over‐year growth for all of 2016. In May, the
number of existing homes sold was 430,060, 5.4% higher than April, and 2.6% higher than May of 2016. (DOF, July 2017)
California Wages and Salaries: Comprised 51% of the total personal income of $2.25 trillion in 1Q2017. Wages and salaries
increased 4.9% while supplements to wages and salaries increased 4.5%. (DOF, July 2017)
Tax Expenditures (Revenue Loss) for Fiscal Year 2016‐17
http://dof.ca.gov/Forecasting/Economics/Tax_Expenditure_Reports/documents/Tax_ExpenditureReport_2016‐17.pdf
Sales and Use Tax: About $10 billion. Examples include food; prescription medicines; gas, electricity, and water delivered
through mains; farm equipment; and fuel sold to common carriers. Local Property Taxes: Excess of $100 million
Corporation Tax: Over $6 billion. Examples include provisions for research and development, interest on state and local
government obligations, and provisions for water’s edge election. Personal Income Tax: Estimated at more than $41
billion. Other Taxes: Estimated by over $100 million annually; from aircraft jet fuel used by common carriers and the
armed services, and diesel fuel used by transit districts and schools. Expenditures that cannot be quantified include
livestock, meals furnished by institutions, property tax exemptions for intangibles and air carrier ground time.
SECTION 3: AUTO SALES
California Car Sales Covering 1Q2017
http://www.cncda.org/CMS/Pubs/CA%20Auto%20Outlook%201Q%202017.pdf
After seven years of increasing sales, the market has fully
recovered from the low point in 2009, and as a result,
pent up demand is easing. In addition, interest rates are
increasing, used vehicle prices are weakening, and
incentives are on the rise, all signs of a market that has
likely reached its peak.
The state new vehicle market is expected to plateau and
decline slightly over the next several years, but sales
should remain strong, based on historical standards.
Retail Car Registrations for 1Q2017: Changed by ‐9.3%
(254,409 from 280,616 in 2016).
New vehicles sold: YTD for 2017 is 506,745; Total:
1,927,640 (2016); 2,052,750 (2015); 1,848,254 (2014).
Attachment D
ECONOMIC NEWS & TRENDS July 18, 2017
6 www.MuniServices.com
Auto Trends / Forecast
Sources: Kiplinger; Wall Street Journal; Federal Reserve
Auto Sales in 2017: 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.
Used Vehicles: A jump in leasing that started several
years ago means more late‐model autos coming off lease.
Discounts and Incentives: Discounts average $3,550, up
10% from a year ago; BMW, Mercedes and Nissan will
exceed $4,000.
Expect deals to get better in the second half of 2017.
There will be offers on pickup trucks and SUVs.
Impact on Manufacturing: GM, Ford and Honda have
already announced short‐term plant shutdowns. GM
moving some jobs from Mexico to the U.S.
Pay to go: Such service could capture 20% of consumer
spending on transportation. In California, Los Angeles is
considered a risky regulatory market, San Francisco a
likely launch market, yet risky, and San Diego, risky.
Auto Financing During and After the Great Recession
https://www.federalreserve.gov/econres/notes/feds‐notes/auto‐financing‐during‐and‐after‐the‐great‐recession‐
20170622.htm (June 22, 2017)
In 2007, before funding of finance companies dried up, U.S. households bought about 16 million new cars at an annual rate.
When the financial crisis hit, retail auto sales collapsed to 7.9 million at an annual rate in 2009. A considerable share of
consumer credit is originated by nonbanks that rely on short‐term funding markets. During the financial crisis, counties in
which consumers historically relied most on nonbank financing for auto purchases exhibited the largest drop in auto sales.
SECTION 4: GASOLINE
Prices: AAA shows (July 16, 2017) the national average price of self‐serve regular at $2.25 per gallon which is four cents less
than one week and one month ago, and 14 cents more than the same date las year. MuniServices’ May 16, 2017 report
noted $2.35 per gallon and in December 16, 2016 $2.15. MuniServices’ February 17, 2017 report noted $2.26 per gallon
and in December 16, 2016 $2.15. California Average: $2.91 (July 16, 2017): $2.94 (May 10, 2017); $2.79 (May 10, 2016).
National Average: On July 3, 2017 the national average dropped to a low for 2017 at $2.23. On April 17, the national
average price for a gallon of regular unleaded gasoline was at a 2017 high at $2.41 which is 30 cents more than one year
ago. http://gasprices.aaa.com/
Attachment D
ECONOMIC NEWS & TRENDS July 18, 2017
7 www.MuniServices.com
SECTION 5: RETAIL TRENDS/ E‐COMMERCE
(Selection from May 16, 2017 to July 17, 2017)
Abercrombie & Fitch: 60 closures in 2017; opening five
new prototype stores including a Century City location.
Ascena Retail Group (Ann Taylor, Loft, Dress Bard, Lane
Bryant, Justice): 667 closures (268 by 2019).
Alfred Angelo: Largest bridal retailer in mid‐July closed
locations including those in California.
American Apparel: 110 closures in 2017.
Bennigans: Will open in Sacramento.
Burlington: Looking to grow store base; currently has
592 units and plans to expand to 1,000.
Bebe: 180 closures in 2017.
BCBG: 120 closures in 2017.
Chick‐fil‐A is the ‘hottest’ big chain in the country
expected to overtake Dunkin’ Donuts.
Coach: To acquire Kat Spade.
CVS: 70 closures in 2017.
Crocs: 160 closures in 2017.
Dollar General: Stores remodeled to include perishables.
Dave and Busters: Considers big box locations; opened
locations, including one in Carlsbad.
Dd’s Discounts: Launched in 2004 with 10 stores; in June
opened 7 new stores and now 200 locations.
Dicks: Opening two locations including Milpitas.
Elements: Fastest growing therapeutic massage to open
30 studios in 2017.
Family Christian: 240 closures in 2017.
Floor and Décor: Opening three stores including one in
California, which has 7.
Gamestop: 100 store closures.
Guess: 60 closures in 2017.
Goodwill: Will close 5 of its 42 retail stores by year end.
Gymboree: 350 closures (14 in California).
hhgregg: 88 closures in 2017.
Hollar: On‐line version of a Dollar Store; has two‐million
active monthly users.
Ikea: Sets up shop on Amazon.
JCPenny: 135 closures in 2017.
K‐Mart: 109 closures in 2017.
Luna Grill: San Diego fast casual chain to open as many
as two dozen restaurants by end of next year; now top
five fast casual chains in the country, outranking Shake
Shack and Starbucks.
Macys: 68 closures in 2017.
Nike: Experience deflating sales; starting pilot program
to sell sneakers through Amazon.
Nutella Café: Opening first store in Chicago.
Mountain Gender: 30 closures in 2017.
Michael Kors: 100 to 125 closures; to purchase Jimmy
Choo.
Payless: 400 closures in 2017.
Papa Murphys: To close 16 company‐owned restaurants;
will focus on franchises and on‐line ordering.
Pedego Electric Bikes: Opening 100th store, including a
San Diego location.
Pet Supplies Plus: Reached 75 franchises, expanded in six
states, including California.
Radio Shack: 550 closures in 2017.
Rue 21: 400 closures in 2017.
Staples: Staples: 70 closures in 2017.
Sprint: Expansion includes 78 new stores in Southern
California in 2017.
Sears: 41 closures in 2017.
The Limited: 250 closures in 2017.
Togos: Opening up to four locations in the Bakersfield
area.
T‐Mobile: Expects to open an additional 1,000 stores by
mid‐year, with 500 more by the end of the year.
Tiffany: About 45% of sales come from lower‐priced
items of $530 or less.
T.J. Maxx: Defying retail slump. Sales per square foot in
2017: TJX ($332) and Macys ($188).
True Religions: Closing 27 stores.
Vampire Penguin: Opened first store in Sacramento in
2013 and has 9 locations in Northern California.
Wet Seal: 170 closures in 2017.
Walgreens: Pulled from alliance to acquire Rite Aid.
Walmart: Remodeling hundreds of stores to ease in‐store
pickup.
William‐Sonoma: Opening “dual concept” stores in the
San Francisco area and Orange County.
Attachment D
ECONOMIC NEWS & TRENDS July 18, 2017
8 www.MuniServices.com
E‐Commerce Results for 1Q2017: U.S. E‐Commerce sales as percent of retail sales is 8.50% for 1Q2017, up from 8.20 from
last quarter or a 3.66% change. Represents an annualized growth rate of 14.63%. For the U.S. totaled $102.7 billion, an
increase of 1.9% from 3Q2016. Total retail sales for 1Q2017 were estimated at $105.7 billion, an increase of 4.1% from
4Q2016. California’s e‐commerce sales comprise approximately 13‐14% the total sales, based on California’s portion of the
national economy.
Marketplace Fairness Act – Allowing States to Collect Taxes from Residents on Goods Purchased Online: S.976, The
Marketplace Fairness Act (MFA), has a small‐seller exemption for annual sales of less than one million. H.R. 2193, The
Remote Transactions Parity Act (RTPA), also has a small seller exemption, but sets the threshold at $10 million per year.
Based on research by ICSC and the National Conference of State Legislatures, states lost an estimated $26 billion to the
online sales tax loophole in 2015.
“The 2017 Retail Fallout”
http://californiaforecast.com/july‐2017/ (July 2017)
Causes: Too many stores and shopping malls. Rents are expensive for retailers. Baby Boom generation is buying less
“stuff”, opting more for experiential purchases such as education and travel. The Millennials do not want stuff either, other
than phones, food, and craft beer; because they are not buying many homes, they are not having to furnish those homes.
Future of Retail: The Internet and the growth of the online retail experience continues to evolve as one of the most
disruptive forces in the economy. The transition from the current retail environment to a steady state retail economy
where rising rents for retail space do not exceed the growth in retail sales is ahead of us. This transition could span years.
Future of Online Stores: The biggest factor is the widespread and pervasive migration to online stores for many goods,
even clothing. Despite the view that shoppers prefer to try on clothing in physical stores, apparel and accessories are
expected this year to overtake computers and consumer electronics as the largest e‐commerce category as a percentage of
total online sales. And though total online sales account for only 9% of total retail sales in the U.S, the growth of online
purchasing is rising geometrically.
Sales in Stores: Comprise over 90% percent of all retail sales. Consequently, making the retail experience more compelling
will be the challenge to retailers.
What ‘s Ahead: To the extent that online shopping for goods and services becomes more mainstream among consumers
(as it threatens to be), more store closures are likely until the supply of stores is compatible with the demand for stores.
Retail Trends
Back to School Season All Year: Discounts seem modest, like the 10% off backpacks at Target; others run deep, like 60%
off school uniforms at JCPenney. Parents plan to spend an average of $501 per student; this is a projected total of $27
billion. Mark Cohen, Director of Retail Studies at Columbia University during a recent interview on back to school shopping
season spoke of his best memory as a retailer: “We very carefully calibrated our stores' inventory and staffing to coincide
with the actual school districts opening throughout the markets that Mervyn's served. And so, we were ready for it. And
that's the heart and soul of retailing. It's ringing the bell for the parade that you're going to put on for your customers. It's
the excitement of retail that I think, unfortunately, has diminished to some degree, especially in physical retailing.” USA
Today, July 13, 2017; https://www.marketplace.org/2017/07/17/economy/its‐back‐school‐season‐all‐year
Attachment D
ECONOMIC NEWS & TRENDS July 18, 2017
9 www.MuniServices.com
Companies Creating Shopping Holidays: Amazon’s 2017 Prime Day will be a big hit and further its retail dominance.
Starting July 10 at 9 p.m. ET, Amazon offered deals to Prime members for 30 hours. The day, started in 2015, rings up more
in sales for Amazon than does Black Friday or Cyber Monday, while also landing lots of customers for its $99‐per‐year
buying club. Other retailers are scrambling to respond. Walmart and others will have deals on Prime Day. And China‐based
Alibaba has its own shopping holiday on 11/ 11. (Kiplinger, July 7 and 11)
Furniture Sales: Furniture is one of the fastest growing segments of the U.S. online retailing, growing 18% in 2015, second
to groceries. About 15% of the $70 billion U.S. furniture market has moved online. (IBISWorld & Barclays)
High Debt Loads Shake Retailers: Sales at traditional retailers have come under pressure with the rising of online rivals, a
squeeze intensified by the heavy debt burden of many firms. The slowdown has made raising debt more difficult in the
sector. (Wall Street Journal, July 18, 2017)
On‐Line Challenge – Box Shopping: Giving shoppers reason not to visit stores. Amazon Prime members can try on clothes
at home under Prime Wardrobe. The service would let members fill a box with three or more eligible items to try on at
home for seven days and ship back what they don’t want for free.
Impact on Self‐Storage Industry: About 8% of the U.S. population uses a storage facility, up from 3% in 1980. Slowing
population growth and a shift from the consumption of storage goods towards services points to shift.
SECTION 6: RESTAURANT INDUSTRY
Weakest Segments for 2Q2017: Fast casual and the bar‐and‐grill sub‐segment within casual dining. “Quick service,” which
was the best‐performing segment in 2016, and among the top three segments in 2015, is now struggling to keep building on
rapid growth. A positive secular trend is a greater propensity of Millennials to eat away from home. Cyclically, rising
incomes and lower unemployment should help restaurant sales. Trends: Growth of the sale of meal kits by the likes of Blue
Apron; sales are insignificant now and estimated to have been $1.5 billion in 2016, compared with combined restaurant
and grocery sales of $1.2 trillion, but could be a major threat long term. As this niche grows, it is likely to take sales away
from restaurants. Growth of delivery is another trend, as well as Millennials’ greater propensity to eat out because of a lack
of cooking skills. http://www.nrn.com/finance/opinion‐what‐restaurants‐can‐learn‐retail‐s‐decline, June 26, 2017
Top Restaurant Segments by Share of Total Top 100 Sales: Burger (30.5%); Casual Dining (15.2%); Beverage/ Snack
(11.1%); Chicken (8.5%) and Pizza (8.1%). www.restaurant.org
California Restaurant Industry in 2017: Restaurant and Food Service Jobs: 10% of employment in the State, and by 2017
that is projected to grown by 10.6%; Projected Sales in California’s Restaurants: $82.2 billion.
U.S. Restaurant Industry in 2017: Sales: 4% of the U.S. GDP; Employment: 10% of the nation’s workforce; Share of the
Food Money: In 1955, 25% and 48% for the present time. Sales and Traffic for June: Same‐store sales and traffic fell in
June and in the second quarter of 2017. Year over year, same‐store sales have declined for the last six consecutive quarters.
Fine Dining and Upscale Casual Show Strength for 2Q2017: Fine dining was the best‐performing segment based on same‐
store sales growth in the second quarter, followed by upscale casual. The increased competition for dining occasions both
from within the industry (independent operators) and from other sectors (prepared food, meal kits, convenience stores and
food trucks) continue to steal additional share from traditional restaurant chains.
Attachment D
ECONOMIC NEWS & TRENDS July 18, 2017
10 www.MuniServices.com
SECTION 7: GROCERY INDUSTRY
Trends and News
http://www.theshelbyreport.com/ (from May 16, 2017 to July 17, 2017)
Amazon‐Whole Foods: Amazon in June acquired Whole Foods (over 460 stores). It was also granted a patent for future
technology that would prevent brick‐and‐mortar shoppers from online price checking.
Amazon Prepared Food Kits: Prior to the acquisition of Whole Foods, Amazon claimed the word mark “We do the prep.
You be the chef.” Amazon’s delivery service poses a major threat to Blue Apron. This is a relatively small market at $4
billion, and a total addressable market of $36 billion annually by 2026. The total US grocery market currently stands at $750
billion per year.
Sprouts/ Amazon Prime: Sprouts plans to more than double a current 10‐store e‐commerce business through a
partnership with Amazon Prime Now.
Blue Apron: Trying to carve a slice of the $600 billion U.S. grocery market; on the verge of an IPO. Churning through
customers; 60% of customers stop using the service after 6 months. Amazon’s meal kit delivery service poses a threat.
Grocery Store Expansions: Expected to be robust. Amongst those include Kroger and Sprouts Farmers Markets as well as
Aldi and Lidl.
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.
SECTION 8: LOCAL REVENUES
Sweetened Beverage Tax: Tuft University in a June 2017 article notes “at the local level alone, there is potential for soda
taxes to spread to cover up to 40% of the US population.” Berkeley in 2015 became the first city in the U.S. to tax soda,
tacking on 20 cents to the cost of a 20‐ounce drink. http://now.tufts.edu/news‐releases/spread‐local‐taxes‐sugar‐
sweetened‐beverages‐likely. MuniServices is proud to note its partnership with the City of Berkeley in helping to implement
the sweetened beverage tax ordinance. The U.S. Conference of Mayors 2017 Best Practices book, Mayors and Businesses
Driving Economic Growth, features this partnership. http://www.usmayors.org/wp‐
content/uploads/2017/07/BestPracticesReport2017.pdf.; http://www.theshelbyreport.com/2017/04/18/nations‐first‐soda‐
tax‐study/
“Dark Store” Strategy – Big Box Retailers Battle Locals Over Property Taxes: It’s a series of rulings by the Michigan Tax
Tribunal that have allowed large retailers to reduce their property tax assessments, in many cases by as much as half. Big‐
box retailers argue that the market value of their commercial property should be the sale price of similarly sized but vacant
retail buildings. They point out that these buildings are extremely hard to sell as‐is once the retailer moves out. Thus, the
assertion is, they aren’t worth nearly as much as local tax assessors have traditionally assumed in valuing the property. This
appeals approach was first largely successful in the Detroit area following the recession, when nearly all retailers were
dealing with depressed property values. The assessment community has even given it a name, dubbing it the “dark‐store”
strategy. http://www.governing.com/topics/finance/gov‐big‐box‐retail‐property‐taxes.html
Attachment D
ECONOMIC NEWS & TRENDS July 18, 2017
11 www.MuniServices.com
“Who Pays the Local Tax Bill?”: Some creative‐class cities have become victims of their own success, unable to keep up
with demand for housing, local public services and livable‐wage jobs for the lower‐middle class. The result is a crisis of
affordability driven by huge spikes in home prices, rents and homelessness. In the past 18 months, Los Angeles, San
Francisco, Seattle, Silicon Valley in Santa Clara County, Calif., and other localities have proposed new local taxes to expand
affordable housing and bolster services for the homeless. As they grapple with this new challenge of affordability, they
must also confront an old question at the heart of local public finance: Who actually pays local taxes? There are two ways
to think about who pays. One is the “statutory incidence,” or who is required to remit a tax to the government. The other is
the “economic incidence,” or who pays a tax because they’re unable to avoid it.
http://www.governing.com/columns/public‐money/gov‐local‐sales‐property‐
taxes.html?utm_term=Who%20Pays%20the%20Local%20Tax%20Bill&utm_campaign=Uncertain%20of%20the%20Future%2
C%20States%20Save%20and%20Save%20Some%20More&utm_content=email&utm_source=Act‐
On+Software&utm_medium=email
SECTION 9: THE FUTURE OF RETAIL SPACE
Logistics: The rise of e‐commerce means big business for the warehouse industry as more retailers invest in distribution
centers to facilitate fast delivery of goods ordered online. The warehouse sector will add 50,000 jobs this year, more than
the number of jobs that brick‐and‐mortar stores will shed as traditional retailers keep struggling. Amazon broke ground
first fulfillment center in Fresno which is Amazon’s fifth fulfillment center in the Central Valley, with three operating
fulfillment centers located in Tracy and Patterson, and a fourth facility under construction in Sacramento. Other Amazon
California fulfillment facilities are in San Bernardino, Redlands, Moreno Valley, Rialto, Eastvale and Newark.
Food Hall/ Restaurants and Other Eateries Are More than 20% of Units in New and Redeveloped Shopping Centers: With
spending on eating out expected to grow over the next 10 years and consumers’ desire to enhance a shopping trip with
social and leisure experiences increasing, food and beverage is now critical to the success of any retail development, the
report asserts. Other concepts, such as the food hall, have evolved, while there’s also a move toward creating different
eating and drinking zones within shopping centers. https://www.cpexecutive.com/post/economy‐watch‐food‐beverage‐
sales‐may‐help‐ailing‐shopping‐centers/
International Council of Shopping Centers: The death of U.S. malls is being greatly exaggerated according to the ICSC.
Demographics: U.S. demographics could give a boost to malls in the coming years Millennials, who account for 27% of the
U.S. population, are entering their late 30s, an active phase of buying goods and services as they form families. Technology:
Artificial intelligence, robotics, 3‐D printing, virtual reality and drones will be used in the future. Consumers will have goods,
such as shoes, printed on demand by 3‐D machines while drones will move items around stores. Automated Purchases:
Recurring purchases of commodity items will become more automated and stores more social hubs.
https://www.reviewjournal.com/business/despite‐store‐closings‐us‐retail‐industry‐sees‐bright‐future/
SECTION 10: SHARED ECONOMY
Sharing Economy: Uber, Airbnb lead the way as sharing economy expands. 56.5 million people will use sharing economy
service this year; this is over a quarter (26%) of U.S. adult internet users. This year 16.9% of U.S. adult internet users are
expected to use their Airbnb account at least once (36.8 million people); 20.4% or 44 million people will book a ride on their
Uber account. Airbnb rolled out a program last fall that would give landlords who allow tenants to rent units a cut of the
revenue. (Source: www.emarketer.com, June 30, 2017)
Attachment D
ECONOMIC NEWS & TRENDS July 18, 2017
12 www.MuniServices.com
SECTION 11: “BATTLE BETWEEN KING KONG AND GODZILLA”
The battle between King Kong and Godzilla retail has moved to the cloud. Walmart is telling some technology companies
that if they want its business, they can’t run their application serving Amazon. (Wall Street Journal, June 22, 2017)
Attachment D