by Vince Vasquez
Thursday, February 18, 2010
My column series on fixing San Diego’s traditional workforce will now close with a look at our retail sector, one of the largest countywide employers and producers of tax revenue. Creative new strategies are required this year to fine-tune this powerful economic engine, which data reveals has been sputtering under years of financial decline.
From shopping malls, to big box stores and small boutiques, retailers are an important business partner in our community, often shaping the character and values of where we live. They also wield a significant economic impact; the California Board of Equalization counts $31.7 billion in 2008 taxable transactions from San Diego County retail stores, including $13.9 billion from the City of San Diego. However, state data also reveals that retailer taxable transactions have also been on the decline since 2006, which has had a devastating effect on industry employment.
According to state labor figures, employment in San Diego County’s retail sector reached a nine-year low last year, falling from a high of 158,100 jobs in December 2005 to 133,000 jobs in October 2009. Retail work is typically filled by unskilled adults with less than a college degree education, which studies have shown are much more vulnerable to unemployment and recessions than workers with more education. Unfortunately for these workers and their employers, 2009 holiday sales gave little financial reprieve; a SurveyUSA poll taken in November 2009 found that 55% of county residents planned to spend less last year on gifts than in 2008. Less retail activity means fewer jobs for residents and fewer tax dollars for San Diego City Hall; Fiscal Year 2010 is expected to close with $185.4 in sales tax revenues, which is more than a $40 million drop from 2008’s tally.
Working with San Diego’s retail industry to help alleviate their economic challenges in a lasting way may require flexibility and new approaches to onerous land use and development laws, which demands greater attention and consideration from the City Council at large. I argue however that what is needed today is immediate action from City Hall that can inspire the public and provide an influx of new business activity to the struggling sector, which is largely comprised of small business owners. One city has already launched an ambitious retailer rebate program this year that may have usefulness in our own region.
This January, Anaheim Mayor Curt Pringle announced his plans to advance a new temporary sales tax rebate on purchases of $20,000 or more to stimulate new spending and boost retail sales in the Orange County city. Approved by the City Council, the partial .5% sales tax rebate is now being collected on transactions occurring between February 10th and June 30th. Businesses that report sales taxes can easily pre-register for the program on the city’s website, and electronically submit rebate requests during a six month period. Pringle states that the benefits of the rebate, known as the “Anaheim Purchase Incentive,” are shared not only with consumers who make large purchases (cars, home appliances and new furniture) but also with businesses which are more likely to spend significant capital to expand their enterprise or develop new cost-saving efficiencies, creating and retaining good jobs in the process.
It is worth noting that larger retailers typically have more full time higher paying positions available than smaller shops; the U.S. Bureau of Labor Statistics identifies automotive dealerships and building supplies dealers as offering the highest hourly mean wages for retail sales work. San Diego County has many larger retailers that could be interested in partnering with a city government on a temporary sales tax rebate program this year; 2008 data from the City of Chula Vista identifies auto dealerships, supermarkets, big box stores and chain clothing stores are the top producers of sales tax revenue. A cursory analysis also finds that at least 1/3 of all countywide taxable retail transactions occur at establishments that sell and specialize in “big-ticket” merchandise.
Passing a sales tax rebate program in America’s Finest City would be an uphill fight, as the City Council and the Mayor’s Office both demonstrated their obstinacy towards sensible business tax reform in 2009, even in the face of legal action that is likely to prevail on the side of taxpayers. Enacting targeted tax relief today requires a strong commitment to economic recovery and job creation that supersedes the bean-counting concerns of the status quo. Mayor Pringle declared that the municipal government was “willing to forego a little of our tax revenue today, to encourage people and businesses to shop here in Anaheim, spurring Anaheim retailers and creating jobs here in our city.” Business owners understand that you have to spend money to make a profit; let’s hope that in 2010, San Diego City Hall will learn the same valuable lesson.