With the grand opening of Target July 29, I thought it would be helpful to recap the economic benefit of Cochrane Commons to the city. Well, the city will receive sales tax revenue from the center. Phase I will consist of about 255,000 square feet. To account for the fact that not all of the space is leased up and not all the space is retail per se, let’s assume the center will generate on the average about $300 per square foot in annual sales (i.e., some businesses will generate more per square foot than others). That equates to about $76.5 million in annual sales which translates to $765,000 in sales tax revenue to the city. If we assume 60 percent of those sales are “new sales” as opposed to recaptured sales (e.g., Target is not generating all new sales since it had an existing store), the city would receive about $380,000 in new sales tax revenue to the general fund. This could be used for any purpose such as funding police officers, parks maintenance, or recreational activities. This illustrates why the Cochrane Commons is so important to the community from an economic development perspective.
On a side note, the manager of Cochrane Plaza indicates that she does have a national tenant committed to take over the old Target Space. However, she is unable to disclose the tenant or timing at this time. While rumors abound, it’s probably best to wait and see who pulls the permit for tenant improvements.
SALES TAX REVENUE
Well, the sales tax results are in for the first quarter 2007 (January through March). When compared to the same four-quarter period in 2006, the city experienced about a 5 percent overall increase in sales tax revenues within the economic categories of transportation (vehicle and gas sales), general retail (apparel and department stores), business to business (companies selling to one another) and food products (restaurants). Statewide average was about a 2 percent increase.
The greatest increase was in the business to business category which experienced more than a 20 percent increase. Statewide the average increase was 3 percent. This would seem to imply that the local economy is picking up, at least for some businesses. In contrast, the construction category (building materials/supplies) decreased by about 5 percent in sales. This decrease in construction was also experienced statewide.
The largest economic segment of Morgan Hill’s sales tax revenue continues to be vehicle sales. Service stations and restaurants make up the next two largest segments of sales tax for the city. Typically restaurants, department stores, and vehicle sales represent the top three largest economic segments, in terms of sales tax revenue, for a city.
FUN FACTS
Did you know that Morgan Hill has more Burger King stores than all of Japan. We have two. Japan has one with another store to open in Tokyo this year. Burger King has a long way to go to challenge McDonald’s, which has 3,800 stores in Japan.
Similarly, did you know that Morgan Hill has more Starbucks coffee stores than all of Russia. Starbucks will be opening its first coffee shop in Moscow this year. Morgan Hill will have seven Starbucks by the end of year (six existing and one new drive-thru in Cochrane Commons).
QUOTE OF THE MONTH
“A clever person turns great troubles into little ones and little ones into none at all.”
- Chinese Proverb
In a nutshell that’s what we try to accomplish as part of the city’s business ombudsman program. We try to solve development problems that may arise in the approval process. Although when we are successful, I’m not sure that makes us clever.
Garrett Toy is director of Business Assistance and Housing Services (BAHS) for the City of Morgan Hill. BAHS is responsible for the city’s economic development, redevelopment and affordable housing activities. Should you have any questions, comments or suggestions for this column, feel free to email Garrett at
garrett.toy @morganhill, ca gov.
