Last month, I discussed mixed-use development in downtown and how we are trying to create a sense of place for Morgan Hill. I stated the entire downtown is a mixed-use development. However, downtown’s success will depend on the potential support from the local market within five to 10 minutes of travel time.
Downtown has approval for about 500 new homes, including the 100 units available under Measure F, and about 40,000 square feet of new retail/commercial space. According to the Urban Land Institute (ULI), residents living in a mixed-use development will spend about $15,000 per unit annually on retail/entertainment expenses. About 20 percent of that $15,000 is “captured” or spent in the mixed-use development, but it will vary. For illustrative purposes, let’s assume our residents love downtown and double the typical capture rate to 40 percent.
So 500 homes, times $15,000, times 40 percent, equals $3 million in new annual retail/entertainment sales in downtown.
Let’s do the same analysis for office workers. ULI found an office employee who worked in a mixed-use development spent an average of $6 per day in retail/entertainment expenditures with a capture rate of 50 percent. Let’s assume with the opening of the courthouse in Morgan Hill, to be completed in the spring of 2008, we’ll add the equivalent of 300 office workers of full-time employees plus jurors and other related courthouse businesses in downtown.
So 300 office workers times $6 a day, times 260 work days, times 50 percent, equals $234,000 in new annual sales.
The two amounts combined equal about $3.2 million in new annual sales which would increase sales tax revenue in downtown by about 30 percent. ULI assumes retail uses in mixed-use developments usually need to generate $300 per square foot per year in sales to be successful. The new housing units and office workers can support about 10,000 square feet of new retail/entertainment space ($3.2 million divided by $300 per square foot). . This means that while the new homes and office workers help to create the “sense of place,” the community as whole as well as the region must support downtown to make it a success.
SALES TAX
During the four quarters of the 2006 calendar year the city experienced about a 3 percent increase when compared to the four quarters of 2005. The general retail and construction sectors dropped slightly. A promising note is that the general retail category for the fourth quarter of 2006, from October through December, declined by less than 2 percent when compared to the fourth quarter of 2005. Given the trend to purchase gift cards, buying items on-line, or shopping out of town, I think Morgan Hill did pretty well over the holidays. When Target opens in July followed by Circuit City, Petco, Staples, and others by the end of the year, we should see a huge spike in retail sales. If you’re wondering what the design theme is for the new Cochrane Road Center at the northeast corner of Cochrane Road and U.S. 101, it’s Art Deco. Chili’s and Red Robin will look like classic diners of the 1950s.
The sales tax sector that experienced the most growth is the business to business category with a 21.8 percent gain for the year. Business to business sales means companies selling retail products to other companies. Statewide, the business-to-business sector only increased by 4.7 percent. So it appears some Morgan Hill companies are doing much better. Unfortunately this sector can fluctuate greatly because a few companies generate most of the revenue. The sector generated about $830,000 in sales tax revenue, still well below the all-time-high of $1.1 million in 2001, but slowly moving in the right direction.
WORK2FUTURE
Did you know that we have a great resource for people looking for jobs in town? Located in Jasmine Square, just south of the Post Office on Monterey Road, Work2future provides no-cost job counseling, placement and training services for youth and adults. Annually it serves more than 100,000 individuals through its one-stop facilities located in Morgan Hill, Gilroy and San Jose. It also provides on-line job-search assistance, workshops in computer literacy, resume writing, interviewing techniques, job networking and financial education. It will hold job fairs and specialized recruitments for employers at its one-stop locations. Executive Director Jeff Ruster states it works directly with employers, large and small, and offers and provides free recruitment services, pre-screening of resumes and other human-resource support.
Garrett Toy is director of business assistance and housing services for the City of Morgan Hill. BAHS is responsible for the city’s economic development, redevelopment and affordable housing activities. E-mail him at garrett.toy @morganhill. ca.gov.
