Title
Update Regarding City Sales Tax Capture and Gap Analysis
Staffreport
SUMMARY AND RECOMMENDATION
Staff recommends the Finance Committee (Committee) receive the report. This report is for information only.
BACKGROUND
The Committee requested staff to provide an update regarding the City’s Sales Tax Capture and Gap Analysis. The Committee also requested comparison information with other cities. The City’s sales tax consultant Avenu has provided reports and charts showing the City’s sales tax capture rates for the 3rd quarter 2019, 2020, and 2021. Sales Tax Capture and Gap Analysis for the following cities are also included in the charts:
• City of Union City
• City of Emeryville
• City of Hayward
• City of Livermore
• City of Pleasanton
• City of Dublin
• City of Berkeley
DISCUSSION
The reports and charts attached to the staff report provide an overview of how well San Leandro is capturing potential sales tax based on its residents' effective buying income (disposable income) compared to San Francisco Bay Area regional purchasing habits. Below are highlights of the Sales Tax Capture and Gap Analysis for the City.
• The City has a very strong sales tax base which has grown over the last two years of the pandemic from 216% of expected sales tax revenues to 252% of expected sales tax revenues. This means that the City generates over two and half times the expected sales tax.
• The City has a diversified sales tax base with each of the five main sales tax categories exceeding expectations. In 2021, Retail category was 257%, Food was 154%, Transportation was 240%, Construction was 415%, and Business to Business was 253%.
• It is important to note that the Leakage reports are a potential indicator rather than a comprehensive market analysis. Frequently, businesses might want to locate in areas of relative strength such as Construction for San Leandro.
• Conversely, areas of current leakage such as Recreation Products and Food Processing Equipment either might currently be provided outside of the City, but within the nearby trade area and/or may be relatively small sales tax producing categories and may not be big ‘winners’ from a sales tax perspective even if the City were to improve to 100%.
• Sales tax represents about 40% of the General Fund revenue budget. The projected growth is expected to be positive as the economy recovers from the pandemic.
ATTACHMENTS
• Attachment A - Sales Tax Capture and Gap Analysis - San Leandro and Other Cities 2019Q3
• Attachment B - Sales Tax Capture and Gap Analysis - San Leandro and Other Cities 2020Q3
• Attachment C - Sales Tax Capture and Gap Analysis - San Leandro and Other Cities 2021Q3
PREPARED BY
Susan Hsieh, Finance Director