HomeMy WebLinkAboutStaff Report 7096
CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR
June 27, 2016
The Honorable City Council
Palo Alto, California
City of Palo Alto Sales Tax Digest Summary Fourth Quarter Sales
(October - December 2015)
The following files are attached for this informational report for which no action is required.
ATTACHMENTS:
Attachmenta: Attachment A: Sales Tax Digest Summary - Background and Discussion
(PDF)
Attachmentb: Attachment B: MuniServices Sales Tax Digest Summary (PDF)
Attachmentc: Attachment C: Economic Categories and Segments (PDF)
Attachmentd: 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 about $27.6 million, or 15 percent, of projected General Fund revenue in
the City’s adopted operating budget for fiscal year 2016. 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 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.
We share the information provided by MuniServices with the Administrative Services Department (ASD)
for use in revenue forecasting and budgeting and coordinated this report with them.
DISCUSSION
MuniServices prepared the attached report (Attachment B) covering calendar year 2015 fourth quarter
sales (October through December 2015). These funds are reported as part of the City’s fiscal year 2016
revenue. In June, ASD should receive information from the state on aggregate sales and use tax receipts
for the first quarter of 2016.
Following are some highlights of the sales and use tax information:
Palo Alto’s overall sales and use tax revenue (cash receipts) for the fourth quarter of 2015
increased by about $432,000, or 5.8 percent, including pool allocations, compared to the fourth
quarter of 2014. For all Santa Clara County jurisdictions, sales and use tax revenue for the fourth
quarter of 2015 increased by $6.2 million, or 5.8 percent, compared to the fourth quarter of
2014.
Statewide, almost every region in California experienced an increase in sales and use tax
revenue for the year ending in December 2015, with a one-year statewide increase of
3.2 percent.
Palo Alto’s sales and use tax revenue totaled $27.1 million for the year ending in
December 2015, an increase of 5.8 percent from $25.6 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 Digest Summary – Fourth Quarter Sales (October – December 2015)
Attachment A
Excluding pool allocations and adjusting for prior-period and late payments, Palo Alto’s sales and
use tax revenue for the fourth quarter of 2015 increased by 4.2 percent compared to the fourth
quarter of 2014 and increased by 3.9 percent compared to the prior year.
More detailed information is shown in Attachment B.
Economic Influences on Sales and Use Tax
In its Economic News & Trends (Attachment D), MuniServices discusses economic influences, including
national and state economic trends, e-commerce, and auto and retail sales, that may affect the City’s
sales and use tax revenue.
Preliminary estimates from the California Employment Development Department show that the March
2016 unemployment rate, which is not seasonally adjusted, is 3.8 percent in Santa Clara County and
2.6 percent in Palo Alto.
Economic Category Analysis
MuniServices’ analysis of economic categories for the year ending December 2015 shows:
Economic category
% of Palo Alto’s sales
and use tax revenue
% Increase (Decrease)
compared to prior year
General retail 36.3% (1.4%)
Food products 19.8% 6.3%
Business-to-business 17.2% 17.0%
Construction 3.9% 25.9%
Miscellaneous 22.8% (0.8%)
The following chart shows sales and use tax revenue by geographical area, based on information
provided by MuniServices.
Exhibit 1 – Palo Alto’s Sales and Use Tax Revenue by Geographical Area
For the Year Ending December 2015
(Amounts include tax estimates and exclude pool allocations)
Stanford Shopping
Center
$5.7 million, 25%
Stanford Research
Park
$3.0 million, 13%
Downtown/University Avenue
$3.4 million, 15%
California Ave/Park Blvd/Lambert Ave
$1.5 million, 7%
Town & Country
$0.6 million, 3%
All Other Areas
$8.6 million, 37%
Attachment A
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 is 8.75 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 for some other reason does not collect California tax; 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 are consumers of materials used in the improvement of real property and whose job
site is regarded as the place of business, out-of-state sellers who ship goods directly to consumers in the
state from inventory located outside the state, and California sellers who ship goods directly to
consumers in the state from inventory located outside the state.
Other examples of taxpayers who report use tax through the pools include auctioneers, construction
contractors making sales of fixtures, catering trucks, itinerant vendors, 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 State Board of Equalization
California Employment Development Department
City of Palo Alto Fiscal Year 2016 Adopted Operating Budget
Audit staff: Lisa Wehara
Attachment A
City of Palo Alto
Sales Tax Digest Summary
Collections through March 2016
Sales through December 2015 (2015Q4)
www.MuniServices.com (800) 800-8181 Page 1
California Overview
The percent change in cash receipts from the prior year was 3.2% statewide, 3.2% in Northern California
and 3.2% 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 4th Quarter 2015 by
2.6% statewide, 2.4% in Southern California and 2.8% in Northern California.
City of Palo Alto
For the year ended 4th Quarter 2015, sales tax cash receipts for the City increased by 5.8% from the
prior year. On a quarterly basis, sales tax revenues increased by 5.8% from 4th Quarter 2014 to 4th
Quarter 2015. 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 3.9% for the year ended 4th Quarter 2015 from the prior year. On
a quarterly basis, sales tax activity increased by 4.2% in 4th Quarter 2015 compared to 4th Quarter
2014.
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 36.3 / -1.4 28.4 / 3.1 26.8 / 2.2 27.7 / 3.8 30.8 / 3.4 29.3 / 3.0 26.6 / 4.5 28.2 / 3.2 31.5 / 1.7
Food Products 19.8 / 6.3 20.3 / 5.6 21.7 / 6.3 16.9 / 5.6 16.4 / 4.6 21.4 / 5.4 17.1 / 6.0 18.4 / 3.2 31.0 / 3.4
Construction 3.9 / 25.9 9.5 / 8.0 9.5 / 8.1 11.3 / 9.2 12.1 / 8.1 8.3 / 6.2 11.8 / 12.5 13.6 / 11.5 9.3 / 3.8
Business to Business 17.2 / 17.0 16.5 / -1.2 19.7 / 2.3 14.4 / 7.3 13.0 / -9.5 16.1 / -3.8 15.6 / 2.5 8.6 / -3.0 6.2 / 20.5
Miscellaneous/Other 22.8 / -0.8 25.3 / 0.3 22.3 / -0.5 29.7 / 2.3 27.7 / -0.4 25.0 / 0.1 28.9 / 2.1 31.3 / -1.0 21.9 / -2.5
Total 100.0 / 3.9 100.0 / 2.6 100.0 / 3.0 100.0 / 4.7 100.0 / 1.2 100.0 / 1.9 100.0 / 4.6 100.0 / 2.4 100.0 / 2.4
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 Service
Stations Restaurants
% of Total / % Change 17.6 / 6.2 14.3 / 7.1 15.4 / 7.4 15.6 / 6.8 13.7 / 1.8 26.5 / -7.1 11.1 / 7.6 11.4 / -14.4 22.3 / 3.3
2nd Largest Segment ***Auto Sales -
New
Auto Sales -
New
Auto Sales -
New
Auto Sales -
New Restaurants Auto Sales -
New
Auto Sales -
New Misc. Retail
% of Total / % Change *** / ***11.1 / 8.8 10.7 / 8.8 11.3 / 7.6 10.8 / 10.4 13.0 / 5.0 11.0 / 11.7 11.2 / 13.1 10.5 / 9.7
3rd Largest Segment Department
Stores
Department
Stores
Department
Stores
Department
Stores Restaurants Food
Markets
Department
Stores
Department
Stores
Department
Stores
% of Total / % Change 10.4 / 0.1 9.6 / 1.0 8.0 / -0.4 9.4 / 0.9 10.5 / 7.4 8.4 / -0.7 10.7 / 2.8 11.1 / 1.7 8.7 / -1.7
*** Not specified to maintain confidentiality of tax information
CITY OF PALO ALTO
ECONOMIC CATEGORY ANALYSIS FOR YEAR ENDED 4th QUARTER 2015
ECONOMIC SEGMENT ANALYSIS FOR YEAR ENDED 4th QUARTER 2015
BENCHMARK YEAR 2015Q4 COMPARED TO BENCHMARK YEAR 2014Q4
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 4th Quarter 2015: $27,079,275
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2015Q4 BMY is sum of 2015 Q4, Q3, Q2 & Q1)
Restaurants
15%Department Stores
9%
Miscellaneous Retail
8%
Electronic Equipment
7%
Bldg.Matls-Whsle
3%
Food Markets
2%
Leasing
2%Recreation Products
1%
All Other
37%
Net Pools &
Adjustments
16%
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 4th Quarter 2015. The Top 25 Sales/Use Tax contributors generate 49.5%
of Palo Alto’s total sales and use tax revenue.
Anderson Honda Hewlett-Packard Tesla Lease Trust
Apple Stores Integrated Archive Systems Tesla Motors
Audi Palo Alto Loral Space Systems Tiffany & Company
Bloomingdale's Macy's Department Store USB Leasing
Bon Appetit Management Co.Magnussen's Toyota Varian Medical Systems
Critchfield Mechanical Neiman Marcus Department Store Volvo Cars Palo Alto
CVS/Pharmacy Nordstrom Department Store Wilkes Bashford
Eat Club Pottery Barn Kids
Fry's Electronics Stanford University Hospital
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 2015Q4 Benchmark Year 2014Q4
Attachment B
City of Palo Alto
www.MuniServices.com (800) 800-8181 Page 4
Historical Analysis by Calendar Quarter
Economic Category % 2015Q4 2015Q3 2015Q2 2015Q1 2014Q4 2014Q3 2014Q2 2014Q1 2013Q4 2013Q3 2013Q2
General Retail 32.2%2,526,551 1,935,178 2,009,743 1,797,756 2,591,589 1,994,264 2,032,155 1,791,298 2,585,931 1,945,413 1,959,201
Miscellaneous/Other 19.0%1,491,158 1,609,541 1,564,157 1,400,769 1,655,225 1,400,415 1,437,507 1,283,210 1,553,169 1,196,569 2,974,293
Food Products 14.9%1,166,195 1,146,174 1,167,014 1,061,755 1,096,087 1,054,462 1,051,681 972,997 1,009,848 950,359 966,208
Business To Business 18.2%1,428,210 888,609 833,370 757,827 885,327 596,226 970,762 858,119 1,268,059 848,634 800,341
Net Pools & Adjustments 15.6%1,226,261 1,060,979 1,039,250 968,777 1,178,482 945,653 786,945 1,013,633 1,095,801 924,963 1,227,552
Total 100.0%7,838,375 6,640,481 6,613,534 5,986,884 7,406,710 5,991,020 6,279,050 5,919,257 7,512,808 5,865,938 7,927,595
Economic Segments % 2015Q4 2015Q3 2015Q2 2015Q1 2014Q4 2014Q3 2014Q2 2014Q1 2013Q4 2013Q3 2013Q2
Miscellaneous/Other 41.3%3,237,983 2,720,241 2,549,852 2,370,361 2,906,134 2,211,697 2,577,014 2,328,959 3,184,808 2,230,000 3,943,660
Restaurants 13.1%1,029,733 1,019,505 1,045,011 942,709 962,018 936,160 940,540 870,158 890,739 833,865 845,107
Miscellaneous Retail 9.1%714,151 478,994 479,298 415,270 628,099 508,061 514,133 481,305 661,268 458,124 471,954
Department Stores 9.1%714,831 553,325 595,374 503,590 750,481 548,595 591,500 472,857 762,760 574,389 603,773
Apparel Stores 6.6%519,318 397,534 428,100 370,810 507,843 398,747 429,748 365,777 515,296 400,201 404,202
Service Stations 1.8%140,758 173,082 181,582 148,902 166,861 203,484 215,162 184,185 177,096 214,276 196,568
Food Markets 1.5%116,778 113,092 106,818 104,856 117,245 105,600 98,705 90,272 104,592 104,815 106,760
Business Services 1.0%76,156 51,885 120,003 103,773 131,505 66,163 62,060 63,768 61,832 57,139 67,759
Recreation Products 0.8%62,406 71,844 68,246 57,836 58,042 66,860 63,243 48,343 58,616 68,166 60,260
Net Pools & Adjustments 15.6%1,226,261 1,060,979 1,039,250 968,777 1,178,482 945,653 786,945 1,013,633 1,095,801 924,963 1,227,552
Total 100.0%7,838,375 6,640,481 6,613,534 5,986,884 7,406,710 5,991,020 6,279,050 5,919,257 7,512,808 5,865,938 7,927,595
*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 2014Q4 to 2015Q4
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Campbell 5.5%4.4%-1.2%-3.6%-10.6%2,414,177 2,420,570 -0.3%Restaurants Recreation Products Service Stations Business Services
Cupertino -10.9%2.2%-47.1%-24.7%-13.1%6,159,871 8,201,480 -24.9%Office Equipment Electronic Equipment Business Services Bldg.Matls-Whsle
Gilroy 0.8%4.3%10.3%3.4%13.3%3,781,110 3,597,640 5.1%Auto Sales - New Misc. Vehicle Sales Service Stations Apparel Stores
Los Altos 14.4%11.9%35.7%16.5%-6.4%634,841 578,259 9.8%Restaurants Liquor Stores Food Processing Eqp Service Stations
Los Gatos -2.4%0.5%-11.5%-8.6%-9.0%1,788,513 1,873,503 -4.5%Auto Sales - New Restaurants Miscellaneous Other Service Stations
Milpitas 4.2%9.2%18.2%18.7%-0.9%5,099,316 4,683,481 8.9%Electronic Equipment Bldg.Matls-Whsle Service Stations Bldg.Matls-Retail
Morgan Hill 4.7%4.8%7.9%2.0%5.6%1,847,531 1,759,592 5.0%Auto Sales - New Light Industry Electronic Equipment Service Stations
Mountain View -3.4%10.7%10.6%-4.0%-8.9%4,165,632 4,197,294 -0.8%Restaurants Business Services Light Industry Service Stations
Palo Alto -3.5%4.8%-38.3%60.8%-8.0%6,612,113 6,345,269 4.2%Electronic Equipment Leasing Furniture/Appliance Bldg.Matls-Whsle
San Jose 1.7%4.6%4.6%2.0%9.5%40,965,029 39,328,074 4.2%Misc. Vehicle Sales Light Industry Office Equipment Service Stations
Santa Clara 4.6%1.2%10.2%31.7%-1.4%12,418,424 10,885,502 14.1%Office Equipment Electronic Equipment Service Stations Health & Government
Santa Clara Co.40.4%8.1%34.5%31.1%-8.5%1,155,395 990,475 16.7%Health & Government Miscellaneous Retail Closed Acct-Adjustmt Leasing
Saratoga -10.1%3.7%54.2%83.2%-7.8%257,862 250,861 2.8%Office Equipment Restaurants Miscellaneous Retail Service Stations
Sunnyvale 0.7%6.6%11.1%-2.3%-2.3%6,914,546 6,873,684 0.6%Bldg.Matls-Whsle Restaurants Health & Government Electronic Equipment
Attachment B
City of Palo Alto
www.MuniServices.com (800) 800-8181 Page 6
2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4
El Camino Real 1,143,951 1,090,870 1,055,524 1,049,438 1,038,409 2,563,317 1,084,815 1,108,045 1,102,757 1,105,340 1,090,236 1,088,571 1,140,412
Town and Country 509,180 522,374 523,504 525,116 550,852 570,860 590,134 624,333 629,346 637,224 644,288 636,497 639,830
Midtown 181,654 183,780 184,646 185,301 185,348 185,472 185,910 187,120 188,251 192,122 194,028 195,907 192,190
East Meadow Area 67,124 74,680 77,869 100,045 103,590 107,316 109,171 114,419 104,735 117,701 172,602 166,805 161,897
Charleston Center 74,683 76,315 78,734 81,455 90,116 84,760 86,432 86,288 87,413 88,622 89,612 90,642 91,711
City of Palo Alto - Selected Geographic Areas of the City
Benchmark Year 4th Quarter 2015
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4
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 (2015Q4 BMY is sum of 2015 Q4, Q3, Q2 & Q1)
Attachment B
City of Palo Alto
www.MuniServices.com (800) 800-8181 Page 7
2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4
Stanford Shopping Ctr 5,388,747 5,519,326 5,501,836 5,508,513 5,637,256 5,647,210 5,685,894 5,713,169 5,726,273 5,769,236 5,775,751 5,765,715 5,670,796
Stanford Research Park 4,362,778 5,995,489 5,075,848 7,949,998 7,307,557 4,299,015 4,027,889 3,724,671 3,304,003 3,082,331 2,869,143 2,411,043 2,953,900
Downtown 3,013,183 3,007,123 3,027,279 3,022,194 3,068,553 3,108,592 3,124,224 3,189,273 3,220,248 3,251,198 3,318,323 3,351,331 3,399,758
San Antonio 2,114,306 2,047,925 1,997,654 2,106,291 2,122,586 2,234,235 2,393,463 2,453,548 2,495,915 2,504,156 2,465,311 2,483,850 2,476,949
California Avenue 1,034,151 1,058,098 1,072,925 1,078,153 1,104,341 1,104,237 1,109,685 1,119,047 1,120,996 1,113,385 1,108,904 1,106,175 1,097,493
City of Palo Alto - Selected Geographic Areas of the City
Benchmark Year 4th Quarter 2015
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3
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
2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4
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
$8,000,000
$9,000,000
2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4
Stanford Shopping Ctr Stanford Research Park Downtown San Antonio California Avenue
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2015Q4 BMY is sum of 2015 Q4, Q3, Q2 & Q1)
Attachment B
City of Palo Alto
www.MuniServices.com (800) 800-8181 Page 8
2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4
Valley Fair 6,855,987 6,865,443 6,808,919 6,815,517 6,883,838 6,885,378 6,958,214 7,108,448 7,455,179 7,588,546 7,273,028 7,282,265 7,248,371
Stanford Shopping Ctr 5,388,747 5,519,326 5,501,836 5,508,513 5,637,256 5,647,210 5,685,894 5,713,169 5,726,273 5,769,236 5,775,751 5,765,715 5,670,796
Oakridge Mall 3,957,195 3,972,739 3,974,067 3,954,094 3,924,360 3,934,469 3,972,556 4,005,370 4,040,521 4,159,367 4,236,080 4,215,653 4,158,194
Hillsdale 2,348,668 2,367,315 2,356,855 2,367,935 2,387,185 2,374,185 2,401,370 2,438,295 2,450,278 2,494,792 2,513,866 2,470,404 2,434,086
Santana Row 1,819,616 1,795,942 1,938,742 2,156,984 1,765,101 2,453,638 2,523,193 2,525,349 2,565,665 2,634,908 2,706,867 2,735,522 2,834,796
City of Palo Alto - Regional Shopping Mall Comparison
Benchmark Year 4th Quarter 2015
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4
Valley Fair Stanford Shopping Ctr Oakridge Mall Hillsdale Santana Row
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2015Q4 BMY is sum of 2015 Q4, Q3, Q2 & Q1)
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
ECONOM
MIC NEWS &
& TRENDS
ECO
NOMIC NNEWS &
April 20
& TREND
0, 2016
DS
Attachment D
CONTENTS
Section 1: U.S. Economy (Financial markets, CPI, employment data, “gig” economy, trends and outlook) Page 1
Section 2: California’s Economy (2015 CAFR, forecast, employment trends, forecast and real estate) Page 3
Section 3: California Travel and Tourism (Trends and economic impact) Page 5
Section 4: California’s Minimum Wage (SB 3, perspectives, regional impact and analysis) Page 5
Section 5: The Shared Economy and On-Line Platforms (SB 1102/ TOT revenues) Page 7
Section 6: E Commerce & the Changing Economy (Data, NCSL legislation, and shopping local resource) Page 7
Section 7: California Auto Sales (Outlook and sales of diesel cars) Page 8
Section 8: Gasoline (Trends as of April 18, 2016) Page 8
Section 9: Grocery Stores (Supplier news and trends) Page 9
Section 10: Retail News (Online vs. retail, changes, “snacking”, spending and trends) Page 10
Section 11: Restaurant News (Cocktail vs. wine, and trends) Page 12
HIGHLIGHTS
U.S. GDP: Increased at an annual rate of 1.4% in 4Q2015; 2.3% growth for 2016, down slightly from 2015.
E-commerce sales in the U.S: 4Q2015 accounted for 7.5% of total sales.
CPI components that rose: Shelter, recreation, medical care, education, tobacco, and personal care (March, 2016).
CPI components that declined: Apparel, airline fares, communication, household furnishings and operations, and used
cars and trucks (March, 2016).
Imports and exports: Year-to-date goods and services increased $13.1 %, from the same period in 2015. Exports
decreased 5.5%; Imports decreased 2.1%.
U.S. automobile dealers’ sales: Dropped 2.1% in March, the biggest decrease since February 2015. Purchases of cars and
light trucks grew at a 16.5 million annualized rate in March, the slowest in more than a year.
2015 California new car dealer results: Total sales: $117.36 billion; Total taxes collected or paid: $9.63 billion; Total
spent for products and services from other California businesses: $2.571 billion.
Barrel trading: Continued trading between $35 and $40 per barrel in coming weeks (April 15, 2016).
California’s ranking: Is the eighth largest in the world with a 2015 GDP of $2.3 trillion; ranks third among 50 states in the
2014 State New Economy Index (Controller’s CAFR, March, 2016)
California sales and use tax year to date: Sales tax cash (includes final payment for fourth quarter 2015 sales) and the
first prepayment for the 1Q 2016 sales is $122 million below forecast. The Controller in April, 2016 reported for the first
nine months of the fiscal year, the sales tax is lagging by 0.9% for the fiscal year, to date.
California’s unemployment: Decreased to 5.4% and nonfarm payroll jobs increased by 4,200 (April 15, 2016)
Hotel occupancy rates: Increased to 74.7% in 2015, driving growth in revenue per available room of 10.5% (Controller’s
CAFR, March, 2016).
CLIENT SERVICE TEAM
Patricia.Dunn@MuniServices.com (Contracts)
Julia.Erdkamp@MuniServices.com (Client Service Manager)
Mary.Flynn@MuniServices.com (Client Service Manager)
Robert.Hamud@MuniServices.com (Client Service Manager)
Bret.Harmon@MuniServices.com (AVP Client Innovation)
Doug.Jensen@MuniServices.com (Senior Vice President, Client Services)
Fran.Mancia@MuniServices.com (Vice President, Government Relations)
Brenda.Narayan@MuniServices.com (Government Relations, Report Editor)
Marina.Sloan@MuniServices.com (Client Service Manager)
Attachment D
ECONOMIC NEWS & TRENDS April 20, 2016
1 www.MuniServices.com
SECTION 1 - U.S. ECONOMY
Financial Market and Economies (1Q2016)
https://www.morningstar.com/news/dow-jones/washington-wire/TDJNDN_201604015131/economy-chugs-on-despite-
fears.html (04/01/16); Wall Street Journal (02/17/16);
http://www.federalreserve.gov/newsevents/press/monetary/20160406a.htm
U.S. economy: Grew at a rate of 2.1% in 2015; U.S GDP growth rate in 2016 will remain between the 2-3% ideal range.
Industrial production: A broad measure of everything made by manufacturers, mines and utilities jumped 0.9% in January
from a month earlier. Production hadn’t expanded by more than that in a single month since May 2010.
Odds of a recession: The economy has been expanding at a steady but moderate pace since emerging from the recession in
mid-2009. The odds of recession in the next 12 months have climbed to 21% (based on WSJ economist survey from
February, 2016).
Housing: Housing has remained a bright spot in the U.S. economy, supported by low interest rates and ongoing job
creation. Soaring rents in hot job markets make home purchase more appealing for those who can afford a down payment.
New-home construction: U.S. housing starts fell 3.8% from a month earlier to a seasonally adjusted annual rate of 1.099
million in January, 2016 (Commerce Department), the lowest rate since October, 2015.
Starts: Single-family homes (2/3rds market) fell to a rate of 731,000 from December’s revised 761,000; multifamily units,
which include apartments and condominiums, fell to 368,000.
Impact from shortage of land and labor: Leading to delays in projects’ completion. Those delays often serve to push prices
up so the builder can recoup costs.
Jobs: U.S. employers’ added 215,000 jobs in March, 2016 with growth in just about every domestically oriented sector.
Unemployment: The unemployment rate, obtained from a separate survey of U.S. households, edged up to 5% in March,
2016, but that was largely due more Americans joining the labor force.
Wage: Relatively moderate wage growth suggests the labor market still has considerable room to bring in more workers
without spurring high inflation. Wages were up 2.3% from a year earlier, slightly slower than the 2.6% year-over-year wage
growth in December that marked the strongest improvement since 2009.
U.S. manufacturing activity: The Labor Department reports the manufacturing sector shedding 29,000 jobs in March, 2016
on top of February's loss of 18,000, the worst-hit major sector of the economy.
The mining-and-logging: A category that includes energy firms lost 12,000 jobs in March, 2016. The industry has cut
185,000 jobs since its peak in September 2014.
Auto dealerships: Contributed 5,000 new jobs as car sales remained elevated due to low interest rates and cheap gasoline.
Low interest rates: Helped sectors such as housing and boosting construction jobs.
Consumer Price Index (CPI)
http://www.bls.gov/news.release/cpi.nr0.htm (next release is May 17, 2016); http://www.wsj.com/articles/u-s-consumer-
prices-rose-slightly-in-march-1460637302 (for March, 2016)
All urban consumers: Increased 0.1% in March, 2016 and 0.9 over the last 12 months.
Food index: Fell 0.2% after rising in February, 2016 as five of the six major grocery store food groups declined.
Energy index: Rose for the first time since November, with all of its major components except natural gas increasing.
Major component indexes that rose: Shelter, recreation, medical care, education, tobacco, and personal care.
Major component indexes that declined: Apparel, airline fares, communication, household furnishings and operations, and
used cars and trucks.
Attachment D
ECONOMIC NEWS & TRENDS April 20, 2016
2 www.MuniServices.com
Employment Data (March 2016)
http://www.bls.gov/news.release/empsit.nr0.htm (04/01/16)
Employment and unemployment: Total nonfarm payroll employment rose by 215,000 in March 2016; unemployment had
little change at 5.0% in March; employment gains occurred in several industries, led by retail trade, construction, and health
care; mining and manufacturing employment continued to decline.
Persons employed part time for economic reasons: Was unchanged in March at 6.1 million and has shown little movement
since November. These individuals, who would have preferred full-time employment, were working part-time because their
hours had been cut back or because they were unable to find a full-time job.
Persons not in the labor force that wanted work: In March, 1.7 million persons were marginally attached to the labor
force, down by 335,000 from a year earlier. These individuals had looked for a job sometime in the prior 12 months.
Discouraged workers: Among the marginally attached, there were 585,000 discouraged workers in March, down by
153,000 from a year earlier. Discouraged workers are persons not currently looking for work because they believe no jobs
are available for them. The remaining 1.1 million persons marginally attached to the labor force in March had not searched
for work for reasons such as school attendance or family responsibilities.
Retail: Retail trade added 48,000 jobs in March. Employment gains occurred in general merchandise stores (+12,000),
health and personal care stores (+10,000), building material and garden supply stores (+10,000), and automobile dealers
(+5,000). Over the past 12 months, retail trade has added 378,000 jobs.
Construction: Added 301,000 jobs over the last year (March 2015 to March 2016).
Professional and business services industry: Added an average of 52,000 jobs per month in 2015.
Employment in manufacturing: Declined by 29,000 in March 2016.
Health care: Increased by 503,000 (March 2015 to March 2016).
“Gig Economy”
http://www.marketwatch.com/story/gig-economy-jobs-mostly-supplement-income-2016-02-18
Since 2005, the number of workers in alternative arrangements has climbed by more than half, rising to nearly 16% of
the workforce from 10% a decade ago. The on-demand workforce or gig economy employs only about 600,000 people,
or less than 0.5% of the workforce.
Nearly 1% of U.S. adults earned income in September 2015 via one of the growing number of firms that are part of the
sharing or gig economy. The average monthly income for someone who provided labor via one of the platforms was
$533, representing a third of total income.
At 2.5 million, the sharing labor force is roughly equivalent to the number of teachers and others that work for public
schools in the U.S., though the study finds that people driving for Lyft or selling crafts on eBay typically have other
sources of income.
Attachment D
ECONOMIC NEWS & TRENDS April 20, 2016
3 www.MuniServices.com
U.S. Trends and Outlook
https://www.census.gov/retail/marts/www/marts_current.pdf (04/13/16);
http://bea.gov/newsreleases/international/trade/tradnewsrelease.htm; (04/05/16);
http://www.bls.gov/news.release/empsit.nr0.htm (04/01/16);
http://bea.gov/newsreleases/national/GDP/GDPnewsrelease.htm (03/25/16)
http://urbanland.uli.org/development-business/six-global-trends-commercial-real-estate-watch-2016/
Gross Domestic Product (GDP): Increased at an annual rate of 1.4% in 4Q2015; in 3Q2015 the real GDP increased 2.0%;
2.3% growth for 2016, down slightly from 2015.
U.S. manufacturing: Production will grow 2.6% in 2016, 3.0% in 2017, and 2.8% in 2018.
Interest rates: The Federal Reserve Board raised the Federal funds rate to 0.5% in December 2015.
Business spending: Increasing by 4% in 2016.
Inflation: 2.4% in 2016; up from 0.7% rise in 2015. Helping to restore overall inflation to more normal levels of around 2%
this year is an end to sharp declines in energy prices, including gasoline prices, which ended last year below $2 a gallon. The
recovery is likely to be small, perhaps only to $2.25 a gallon for gasoline, but enough to push total inflation above 2%.
Food sales: $446.8 billion in March 2016 (an increase of 1.7% from March 2014).
Retail sales: Core retail sales, excluding cars, gas, building materials and food and drink, will increase by 3.8% in 2016, down
from 4.6% from 2015. Building material and garden equipment and supplies dealers were up 10.8% from March 2015,
while gasoline stations were down 15.6% from last year.
Imports and exports: Year-to-date goods and services increased $10.8 billion, or $13.1 %, from the same period in 2015.
Exports decreased $20.5 billion or 5.5%; Imports decreased $9.7 billion or 2.1% (decrease in consumer goods).
Issues affecting real estate: Demographic shifts; excess capital supply; rising interest rates; global instability and currency
devaluation; urbanization; energy; gap between rich and poor; infrastructure; real estate technology and crowd funding;
and the changing retail model.
SECTION 2 - CALIFORNIA’S ECONOMY
Comprehensive Annual Financial Report for Fiscal Year Ended June 2015
http://www.sco.ca.gov/Files-ARD-Local/LocRep/cafr15web.pdf (released March, 16, 2016)
California’s economy: Eighth largest in the world with a 2014-15 fiscal year GDP of $2.3 trillion.
Sales and use tax: Year-to-date, sales tax cash (includes final payment for fourth quarter 2015 sales) as well as the first
prepayment for the first quarter of 2016 sales is $122 million below forecast. The Controller in April, 2016 reported for the
first nine months of the fiscal year, the sales tax is lagging by 0.9% for the fiscal year, to date.
Ranking in the U.S.: California ranked third among 50 states in the 2014 State New Economy Index - an index that evaluates
a state’s economy based on factors related to innovation and knowledge based industries.
Exports: In 2014 exported $174.1 billion in products (top five are computers and electronic products, transportation
equipment, machinery (except electrical), manufactured commodities and chemicals.
Visitor impact on the economy: Attracted visitors spent more than $1.7 billion in 2014.
Recovery: Completed its sixth year of recovery as it ended the fiscal year on June 30, 2015.
Personal income: Increased by 5.5% during the year, compared to the 4.6% increase posted for the U.S.
Auto registrations: A 9.9% increase in registrations occurred (this is an increase from the 6.6% year-over-year)
Home value and sales: As of June 2015 prices for existing single family homes were 7.0% higher and sales up by 11%
compared to the prior year.
Employment: For June 2015 rose to 17.8 million jobs, a gain of more than 481,000 jobs from June 2014.
Attachment D
ECONOMIC NEWS & TRENDS April 20, 2016
4 www.MuniServices.com
California Forecast
http://www.mercurynews.com/business/ci_29732433/job-growth-slow-california-but-no-recession-horizon; UCLA Anderson
Forecast (04/06/16)
Growth in California: Slowing, but the tech boom and the sturdy job market in Silicon Valley and the Bay Area should help
the state ward off a recession until at least 2018, economic forecasters predicted.
Supply of labor, products and services: Does not appear to have outstripped the demand for those. This means that the
kinds of severe imbalances that tend to cause recessions have yet to sprout.
Job growth: California jobs grew by 3.0% in 2015. Anderson predicts that will slow to 2.4% growth in 2016.
Unemployment: Expected to improve over the next two years; should fall to an average of 5% in 2017, before rising to 5.1%
during 2018. As of February, the statewide jobless rate was 5.5%. In February 2015, the statewide jobless rate was 6.7%.
Personal income: Adjusted for inflation, personal income rose 4.5% during 2015 in California, and is expected to increase
3.6% during 2016. But in 2017, should rise 3.2% and in 2018, 3.0%.
Retail sales: Expected to increase over the next few years, retail sales also are predicted to soften.
Inflation: Expected to worsen. Consumer prices rose 1.5% statewide in 2015 and expected to rise by an annual pace of 2.3%
in 2016. In 2017, consumer prices are expected to jump 3.5%.
California Economic Outlook
Beacon Economics (March and April, 2016)
Hype: High taxes, over regulated, people and businesses fleeing. Reality: State outperforming, certain industries more
vulnerable than others, but others doing great, the enemy is California Environmental Quality Act (CEQA), and ‘dumb taxes.’
U.S. Recession: Coming in 2018.
Minimum wage: Only $1 out of $4 in increased payroll costs go to needy households; there are small employment effects
which mainly hit the most at-risk workers; increases in costs impact those on fixed incomes.
What not to worry about: The US dollar, asset bubbles, drought, income inequality, California business, taxes, California tax
levels, Central Valley, politics. What to worry about: China, bad financial regulation, water policy, useless wage floor
policies, California housing, lack of public investment, California tax structure, Sacramento, a lack of engagement. (Editor’s
note: See https://beaconecon.com for context.)
California Labor and Employment Trends
http://www.labormarketinfo.edd.ca.gov/Publications/Labor-Market-Analysis/calmr.pdf (February, 2016)
http://www.edd.ca.gov/About_EDD/pdf/urate201604.pdf (April, 2016)
Unemployment rate: Decreased to 5.4 and nonfarm payroll jobs increased by 4,200 (April 15, 2016).
Lowest unemployment rates: In February was 3.0% in San Mateo. Twelve other counties had rates below 5.0% in February:
Marin (3.2%); San Francisco (3.3%); Santa Clara (3.8%); Orange (4.0%); Sonoma (4.1%); Alameda (4.3%); San Luis Obispo
(4.3%); Contra Costa (4.5%); Napa (4.5%); Placer (4.6%); San Diego (4.7%) and Mono (4.8%).
Highest unemployment rate: In February was 21.6% in Colusa County.
Employment gains: Forty-eight of the 50 sub-state areas recorded year-over employment gains, with the Los Angeles-Long
Beach-Glendale showing the largest numerical job growth of 107,300 jobs (2.5%) and Alpine County showing the largest
percentage growth of 33.3% (270 jobs). Sierra County was the only area to show a decrease in employment over the year,
down 20 jobs (3.6%) since February 2015.
Attachment D
ECONOMIC NEWS & TRENDS April 20, 2016
5 www.MuniServices.com
California Real Estate
http://www.dof.ca.gov/finance_bulletins/2016/april/
Sales and Median Prices: The median price of homes sold in February was $446,460, down 3.8% from the February 2015
median. Sales of existing homes totaled 393,360 units at a seasonally adjusted annualized rate in February, an increase
from both the previous month and year by 2.6 percent and 6.4 percent, respectively.
SECTION 3 - CALIFORNIA TRAVEL AND TOURISM TRENDS AND ECONOMIC IMPACT
Tourism Trends
http://industry.visitcalifornia.com/media/uploads/files/editor/CA%20Forecast%20February%202016%20-%2020160210.pdf
(February, 2016)
Visitation to California: Forecast to grow by 2.3% in 2016, following a 2.6% expansion in 2015 which outperformed our
previous forecast. Visits to California from overseas will grow by 4.9% in 2016, on par with the previous year.
Domestic visitation: Will expand 2.2% in 2016 after outperforming expectation in 2015 with a gain of 2.6%.
Occupancy rates: California hotels increased to 74.7% in 2015, driving growth in revenue per available room of 10.5%.
Visitation to California: Grew 2.6% in 2015, kicking off a period of more moderate growth. Total visits will grow by 2.3% in
2016 before ticking up 2.4% in 2017 and settling to 2.0% in the outer years
Domestic business travel to California: Will outperform that of the U.S. in the near-term before tracking the nation more
closely over the forecast horizon.
Domestic leisure travel: Will outpace the state’s business segment and the nation as steady job and income growth in key
source markets and expansion at attractions, such as Disneyland’s Star Wars and Marvel theme parks, support travel
demand.
Visitor spending: While food and lodging prices advanced in 2015, lower transportation costs kept overall travel prices
subdued, tempering spending growth to 2.8%. There is an anticipated total visitor expenditures growth between 4.1% and
4.3% between 2018 and 2020.
SECTION 4 - CALIFORNIA’S MINIMUM WAGE
SB 3 (Leno) raises the State’s minimum wage to $10.50 per hour on January 1, 2017 for businesses with 26 or more
employees, and will rise each year until reaching $15 per hour in 2022. Small businesses (25 or fewer employees) are
allowed until 2023 to phase in the increases. The law phases sick leave for In-Home Supportive Services workers starting in
July 2018. Once the minimum wage reaches $15 per hour for all businesses, wages could then be increased each year up to
3.5% (rounded to the nearest 10 cents) for inflation as measured by the CPI. The Governor can act by September 1 of each
year to pause the next year's wage increase for one year if there is a forecasted budget deficit (of more than 1% of annual
revenue) or poor economic conditions (negative job growth and lower retail sales receipts).
Attachment D
ECONOMIC NEWS & TRENDS April 20, 2016
6 www.MuniServices.com
UC Berkeley Labor Center Analysis
http://laborcenter.berkeley.edu/wp-content/uploads/2016/03/CA-15-Min-Wage-Impacts.jpg;
http://www.irle.berkeley.edu/research/livingwage;
http://www.nytimes.com/2016/04/03/sunday-review/how-the-15-minimum-wage-went-from-laughable-to-viable.html
Workers impacted: Estimates that 5.6 million workers will receive wage increases. This does not include an additional
800,000 workers who will already receive wage increase due to $15 an hour a result of local policies; represents 37% of the
State’s workforce.
Affected workers throughout California’s economy: Retailers and restaurants account for more than a third of those who
would be affected by the wage increase.
Effects on businesses: Higher wages will be absorbed by employers. The adverse effects on charging slightly higher prices
are offset by the increased sales generated by the workers who receive raises. (Editor’s note: There is significant risk to
jobs all the way back to suppliers. This runs the risk of costing many workers their jobs and companies will not absorb the
costs.)
Workers by County Impacted
Alameda (211,000); Alpine, Amador, Calaveras, Inyo, Mariposa (24,000); Butte (39,000): Colusa, Glenn, Tehama, Trinity
(20,000); Contra Costa (117,000); Del Norte, Lassen, Modoc, Plumas, Siskiyou (17,000); El Dorado (22,000); Fresno
(193,000); Humboldt (24,000); Imperial (35,000); Kern (155,000); Kings (24,000) Lake, Mendocino (23,000); Los Angeles
(1,936,000); Madera (23,000); Marin (32,000); Merced (42,000); Monterey, San Benito (90,000); Napa (31,000); Nevada,
Sierra (14,000); Orange (605,000); Placer (56,000); Riverside (339,000); Sacramento (242,000); San Bernardino (331,000);
San Diego (522,000); San Francisco (144,000); San Joaquin (105,000); San Luis Obispo (51,000) ; San Mateo (100,000);
Santa Barbara (90,000); Santa Clara (271,000); Santa Cruz (47,000); Shasta (30,000); Solano (54,000); Sonoma (73,000);
Stanislaus (82,000); Sutter, Yuba (19,000); Tulare (94,000); Ventura (145,000) and Yolo (36,000).
University of the Pacific / Center for Business and Policy Research Analysis
http://www.pacific.edu/Documents/school-business/BFC/MinWage/CBPR_$15%20minimum%20wage%20fact%20sheet.pdf
In many counties, particularly those with a heavy dependence on agriculture and tourism, approximately 50% of current
jobs have wages that would be affected by the legislation. Overall, it is estimated that 36.9% of all jobs across the Northern
California mega region will be affected. The most affected industries are agriculture, restaurants, and retail while the least
affected industries are utilities, information, and finance. In the San Francisco and the Silicon Valley 25-30% of workers will
be affected, although many of these jobs will be impacted by local minimum wage ordinances even in the absence of
statewide action.
Cal Chamber Analysis
http://advocacy.calchamber.com/2016/04/01/minimum-wage-job-killer-goes-to-governor/
They increase pay for minimum wage impacts salaried employees’ compensation. In order for employees to qualify as
“exempt” under any of the six exemptions in California, they must meet the salary-basis test, which is two times the
monthly minimum wage. Under SB 3 that amount in January 2022 will rise from the current annual salary of $41,600 to at
least $62,400, which is an increased cost to employers of $20,800 per exempt employee. An increase in minimum wage will
drive up workers’ compensation costs, uniform/tool reimbursements, overtime, and consumer prices. (Editor’s note: This
seems to imply one out of three will lose their jobs due to the additional costs.)
Attachment D
ECONOMIC NEWS & TRENDS April 20, 2016
7 www.MuniServices.com
SECTION 5 - THE SHARED ECONOMY / ON-LINE PLATFORMS (SB 1102/ MCGUIRE)
Shared Economy - On-Line Platforms – Impact on TOT Revenues
http://leginfo.ca.gov/pub/15-16/bill/sen/sb_1101-1150/sb_1102_cfa_20160408_114832_sen_comm.html
SB 1102 (McGuire) was amended in early April to develop policy that would create a method that would allow online
platforms (“collecting platforms”) to elect to participate and collect TOT revenues and the return the revenue to locals. The
State Controller would be responsible for developing guidelines to implement the bill. There are provisions to note
including that local governments must notify the State Controller if they wish to be a “collecting jurisdiction”; “collecting
platforms” would be subject to an annual audit or review that is conducted by the Controller; local governments’ would
need to make a request of the Controller to allow locals or designated officer to review the Controller’s audit findings.
MuniServices is carefully vetting the legislation and implications for locals – we are especially concerned with the local
control implications that the bill presents.
SECTION 6 - E-COMMERCE AND CHANGING ECONOMY
Quarterly Retail E-Commerce Sales / 4th Q 2015/ Released February 17, 2016
https://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf (CB16-24) (next release is 05/17/16)
Estimate: Adjusted for seasonal variation for the fourth quarter of 2015, but not for price changes was $89.1 billion, an
increase of 2.1% from the third quarter of 2015.
Total retail sales: Estimated at $1,184.8 billion from the third quarter of 2015.
Increase in estimates: Increased 14.7% from the fourth quarter of 2014.
E-commerce sales: Fourth quarter of 2015 accounted for 7.5% of total sales.
How State Revenuers Are Going After E-Commerce
http://www.wsj.com/articles/how-state-revenuers-are-going-after-e-commerce-1457737547 (March, 2016)
In January a task force of the National Conference of State Legislatures (NCSL) voted to send out model legislation that
lawmakers could use to undermine current precedent. The NCSL’s president, Utah state Sen. Curtis Bramble, stated that
“states have the ability to enact legislation to overturn” the Quill decision. The state of Alabama has an effort to collect
millions of dollars of tax revenue from businesses beyond its borders. Alabama’s revenue commissioner, Julie Magee, is
putting forward an untested and suspect legal theory: The state claims that if its residents buy more than $250,000 a year
from a remote business, then the seller has an “economic presence” and should be treated the same as a brick-and-mortar
shop in Mobile or Birmingham.
Teaching and Learning the Benefits of Supporting the Local Economy
http://www.kidscoop.com/downloads/category/financial-literacy/
Please note that locals may use this resource: The Financial Literacy section of Kid’s Scoop includes a ‘shop local’ series and
asks the younger generation to consider: What happens to the money you spend in stores? Why is it important to support
small local businesses in your community? How do the community in turn benefit from those businesses? The January 15,
2016 edition, focus is on teaching children about sales tax, looks at some basic economic principles about the relationship
between exchanging money for goods and services. See http://www.kidscoop.com/downloads/sales-tax/.
Attachment D
ECONOMIC NEWS & TRENDS April 20, 2016
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SECTION 7 - AUTO SALES AND TRENDS
California Auto Outlook/ 4th Q 2015 / Released February 2016
http://www.cncda.org/CMS/pubs/CNCDA%20EIR%202016%20FINAL.pdf
2015 Vehicle Sales: New vehicles sold: 2,052,750; Used retail vehicles sold: 769, 500; Total: 2,822,250
New Car Registrations: New vehicle registration expects to remain above 2 million units in 2016; increased for the 6th
consecutive year.
Economic Impact Report: Annual contributions of the State’s new car dealers for 2015: Total sales: $117.36 billion; Total
taxes collected or paid: $9.63 billion; Total spent for products and services from other California businesses: $2.571 billion.
Sales of Diesel Cars Fall
http://www.nasdaq.com/article/sales-of-diesel-cars-tumble-in-the-us-20160219-00041 (02/19/16)
Sales of new, diesel-powered passenger cars have nearly disappeared in the U.S. on the heels of Volkswagen AG's diesel-
emissions cheating scandal, according to a U.S. automotive data provider. In January auto makers overall reported selling
fewer than 225 such passenger cars compared with between 4,800 and 9,500 a month through the first eight months of
2015 (WardsAuto.com). Auto makers sold 3,500 diesel cars in U.S. September of 2015, and sales fell below 800 in each of
the subsequent three months. There were 222 diesel-powered cars sold in the U.S. in January, a sharp decline from the
4,448 sold in the same period a year ago. January's U.S. sales were about a third of the 631 sold in December. Diesel car
sales for 2015 peaked in May, when 9,300 were sold.
Car Sales / Luxury Car Sales Dropping
http://www.thetruthaboutcars.com/2016/03/luxury-car-sales-plunging-america-early-2016/ (March, 2016)
U.S. automobile dealers’ sales dropped 2.1% in March, the biggest decrease since February 2015. Purchases of cars and
light trucks grew at a 16.5 million annualized rate in March, the slowest in more than a year. Lost in the story of booming
auto sales volume in February 2016, the highest-volume February since 2001, was the underachieving premium market.
Auto sales jumped 7 percent in February, a gain of 86,000 units, but 19 premium brands, from sector-leading Mercedes-
Benz to one-model Alfa Romeo, combined for only a 1-percent year-over-year uptick during the same period.
SECTION 8 - GASOLINE
California Gas Prices and Gas Tax
http://energyalmanac.ca.gov/gasoline/index.html (as of 04/18/16)
After a short lived fall dropping for a week, regular is higher than last week’s price by a few cents.
The average price in California for regular gasoline increased 2.1-cents from the previous week. The average statewide
price for regular was $2.771.
The national average for self-serve regular is at $2.137, up 6.8 cents from the previous week; is 63.4 cents lower than
the price of regular in California.
Attachment D
ECONOMIC NEWS & TRENDS April 20, 2016
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National Gas Prices and Energy Prices
Kiplinger (04/15/16)
Barrel trading: Continued trading between $35 and $40 per barrel in coming weeks.
Increased national average: Prices for gas will keep rising; the national average price of regular unleaded gasoline hit
$2.11 per gallon week of 04/15/16, up 7 cents from a week ago. Diesel is moving higher; at $2.11 per gallon, the
national average price of diesel is tied with gasoline.
Natural gas prices: The benchmark gas futures contract continues to hold near our expected level of about $2. The
production is faltering because of a drop in drilling activity that should eventually push benchmark gas prices higher,
especially if the coming summer.
Wal-Mart’s Decision to Pump Its Own Gas
http://www.cspnet.com/fuels-news-prices-analysis/fuels-news/articles/behind-wal-mart-s-decision-pump-its-own-gas
(02/03/16)
Wal-Mart will build and operate its own gas stations. The shift is a sign that Wal-Mart is trying to profit as the retailer pours
billions into boosting e-commerce sales to fend off Amazon and improve slow sales growth at stores, and by raising
minimum wages for hourly employees to improve customer service. Like other retailers adding gas stations to parking lots,
Wal-Mart will lure more shoppers to stores so they buy other, higher-margin items in the main store.
SECTION 9 - GROCERY STORE/ SUPPLIER NEWS
Grocery Store Changes
http://www.theshelbyreport.com (January 2016 to April 2016)
Aldi: 45 stores in Southern California will open and nearly 2,000 coast to coast by the end of 2018
365: In May 2016 Whole Foods Market will open first 365 in Los Angeles
Yummy.com: Will open new stores in Hollywood, Los Angeles, Santa Monica, Silver Lake and Playa Vista
Barons: Opens in San Diego in Fresh & Easy location for a total of seven in Southern California
Woodlands Market: Opens in San Francisco
Vintage Grocers: Opens second store in Los Angeles; first location is in West Malibu
Save Mart: Closed two stores in Sacramento; and plans for closures in Stockton, San Jose and Santa Clara
Whole Foods Market’s: First North Orange County location opened in February in Brea
Grocery Outlet: Has 244 stores in six states; has opened 10 since December 2015 in Los Angeles and between 12 and 15
will open in Southern California
Attachment D
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SECTION 10 - RETAIL NEWS
Retailers / On-Line Trends
www.nreionline.com
Marketing: E-commerce is more of an opportunity than a threat to bricks-and-mortar retailing, bolstering marketing
outreach and customer engagement.
Environmental impact: Online shopping has an environmental impact that is 7% greater than mall shopping if shoppers
bought the same number of products at a mall as they did in an online store
Returns: 33% of online purchases are returned versus 7% of bricks-and-mortar purchases
Jobs: Physical retail generates five times more jobs than online shopping for the same value of sales.
Reasons why physical retailers are closing shop: Retailers are pouring “huge investments” into e-commerce,
determining their physical stores are too big to sustain. “E-commerce is growing 12-13% per year, physical stores 2-3%
per year, meaning there are less available dollars for physical retailers. (Source: McMillan Doolittle). In addition, while
consumer confidence started to increase in the past few years, consumers’ willingness and ability to spend on
discretionary purchases may not have had enough time to offset all the damage done by the Great Recession.
On-Line Shopping and Store Changes
www.nreionline.com; www.plainvanillashsell.com (January 2016 to April 2016)
Ambercrobie & Fitch: Closing 60 stores per year
Aeropostale: Closing 175 in the years ahead
Brookstone: Filed bankruptcy in 2014; expanding in China with three stores
Barnes and Noble: Closing 223 stores through 2023; 10 stores closing in fiscal 2017 while opening four new concept stores
Bargain Hunt: Takes over Office Depot space in Antioch; is the 46th store under the discount retail chain concept and one
of 20 planned openings nationwide this year
Dollar General: Approximately 1,000 new stores will open over the course of fiscal 2017
Radio Shack: In 2015 announced closing 1,784 of its 5,000 stores
J. Crew: Closing stores; opening discount namesake stores, J. Crew Factory and Madewell
Jos. A. Banks: Will close 250 stores this year (was purchased by Men’s Warehouse)
Walmart: Closing 154 stores in 2017, including 7 Southern California locations (overall 269 locations are being closed
worldwide)
Juice It Up!: Will develop throughout Southern California, opening a first location in Beaumont location with additional site
selections in progress
Kohl’s: 18 underperforming stores will close this year; half in California
Kmart: Will close 13 locations in March, 2016
Office Depot: Closed 56 stores in the final quarter of 2015 and planning 50 closings in 2016
Quiznos: Closed more than 300 stores; filed for bankruptcy in 2015; has less than 1,000 locations down from 5,000 in 2006
PacSun: Closed over 250 stores between January 2011 and September 2015
Petco: Opening stores throughout the Country including one in Los Angeles in April
Sports Authority: Will close 140 of 450 stores
Sports Chalet: Closing all California locations and stopped selling on-line
Staples: Staples closed between 242 stores between 2014 and 2015; another 50 is planned for 2016
Sears: Sears will close 50 locations in 2016
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Spending Trends: Retail Sales See Surprise Drop
http://www.retaildive.com/news/us-retail-sales-see-surprise-drop-as-consumers-remain-wary/417364/ (April, 2016)
2016);
http://www.bloomberg.com/news/articles/2016-04-13/retail-sales-unexpectedly-fall-as-u-s-spending-loses-
momentum(April, 2016)
Wary consumers: The Commerce Department’s March 2016 shows a snapshot of the American spender. Although
employment has been steady or improving for months and wage gains are happening, middle and lower incomes still
must rise for Americans to widen their wallets.
U.S. retail and food services sales: Fell 0.3% in March to $446.9 billion. That missed a median forecast of a
0.1% gain from 81 economists surveyed by Bloomberg.
Retail trade sales: March clothing and accessories sales fell 0.9%, general merchandise sales rose 0.5%, and electronics
and appliance sales rose 0.1%. E-commerce sales fell 0.1%.
Paying debt: Consumers are also choosing to save or pay off debt rather than spend, and when they do, they are
increasingly favoring experiences over stuff.
Spending trends: These new spending trends are forcing retailers to reconsider their marketing strategies and physical
stores, offering more value to the consumer with no-cost online resources and free in-store events.
Decreases: Led by the biggest drop in demand for autos in a year, and cutbacks at clothing stores, Internet merchants
and restaurants.
Automobile dealers’ sales: Dropped 2.1% in March, the biggest decrease since February 2015. Purchases of cars and
light trucks grew at a 16.5 million annualized rate in March, the slowest in more than a year, according to Ward’s
Automotive Group.
Gasoline: Regular gasoline at the pump climbed last month to an average $1.94 a gallon, or up 21 cents from the
February average of $1.73, according to AAA, the biggest U.S. auto group. Fuel costs, however, remain a tailwind for
consumers as the February level was the lowest since 2009.
Purchases: Excluding autos, purchases rose 0.2% last month after being little changed in February. The increase was
paced by a 0.9% jump in receipts at service stations that probably reflected the recent pickup in gasoline prices.
The Changing Retail Model
http://cre.org/CRE_2015-16_Top_Ten.cfm
The retail sector faces continued challenges. Merchandise offerings are subject to the preferences of demographic groups
in transition. The sector is skewered by decreasing consumer purchasing power, often hampered by aging infrastructure,
subject to steep declines in spending if an adverse event (think terrorist attack or cyber security breach) occurs. And
yesterday’s best location may be todays or tomorrow’s worst as urbanization draws more households into cities. On the
bright side, despite steady increases in online shopping, there is still a role for physical presence, where shoppers can
browse and try products. Retailers that incorporate e-commerce elements, including fast delivery options, are well
positioned, at least in the short term. There is continued pressure on existing properties to keep occupancy strong and
adapt logistics. Store sizes, particularly within live/work/play, walkable, and transit-oriented developments are shrinking,
but the attractive amenities of such “urban” shopping districts are being incorporated into suburban shopping areas.
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New Retail Phenomenon – “Snacking” – Nibble at Purchase
http://www.pymnts.com/news/mobile-commerce/2016/snacking-shoppers-use-apps-to-nibble-at-purchases/
App-based “snacking,” or small, impulsive purchases made on mobile devices through the day, is largely coming to replace
the increasingly antiquated practice of making a lower number of larger purchases on less portable devices. Not all retailers
are finding themselves behind the eight ball, though. Amazon’s mobile app, which presents a user interface similar to its
desktop version.
Gift Cards - Retailers and Responsible for Fraud
https://ca.finance.yahoo.com/news/gift-cards-feel-pinch-rules-234200369.html (March, 2016)
Americans are expected to load $651 billion on prepaid cards this year, up 57% from six years ago. Nearly half of that is
expected to involve the “open-loop” cards that can be used anywhere and that are affected by the new limits. Retailers are
making it tougher to buy gift cards, a consequence of new credit-card rules that put them on the hook for fraud. Others
have cut back to smaller denominations, put limits on repeat purchases or stopped selling certain cards altogether.
Shopping Trends – When and How Men and Women Shop
http://www.wsj.com/articles/men-are-shopping-like-women-1455657516 (02/17/16)
Increasingly, men shop for clothes on their phones and frequently check retailer websites for new products or brands. As an
example traffic at Mr Porter, Net-a-Porter’s luxury online men’s store, picks up noticeably on Tuesdays and Fridays. Those
are the days when new products and brand launches arrive on the site. The retailer reports that 25% of its traffic comes
from men shopping on their mobile devices, up from 12% in 2014.
Nordstrom’s E-Commerce Strategy: Failure or Success?
http://nreionline.com/retail/nordstrom-s-e-commerce-strategy-failure-or-success
In 2014 Nordstrom said it would continue to invest in e-commerce, to deliver merchandise to its customers in
whichever way they preferred.
In the first quarter of 2014, the net sales had increased year-over-year by 33.0%, on top of a 25.0% increase
experienced the year before. The company reported that in the fourth quarter of 2015 same-store sales for its off-price
division, Nordstrom Rack, dipped 3.2%.
SECTION 11 – RESTAURANT TRENDS
Cocktail and Beer Market Share: Despite the craft beer craze, beer lost a portion of its share of U.S. alcohol revenue in
2015 to liquor for the sixth consecutive year and the 12th time in the past 15 years. U.S. Beer’s market share fell to 48% last
year from 56% in 2000. Liquor has risen to 35% from 29% and wine to 17% from 16%. Spirits tastings are now allowed in
stores in 38 states compared with 22 in 2001.
No Restaurants for App: There is a revolution in high-speed food delivery. Some chefs are trading in restaurants for an
ordering app.
Fast Causal: Traffic to fast-casual restaurants grew even faster, with 6% more customer visits in the year ending February
2016 compared to a year ago.
Zero Waste: Two restaurant concepts are opening in Los Angeles that will take a zero waste approach. The average kitchen
probably wastes about 30% – the new restaurants by Chef Marcel Vigneron are in the 5% range.
Attachment D