Downtown development: Stockton’s sleeping cash cow

10 years ago, when a parade of cement mixers, bulldozers and construction workers were streaming into the open space just west of Interstate 5 off of Eight Mile Road, most people thought the impending development would result in a financial windfall for Stockton. Spanos’ mammoth shopping center and sprawling subdivisions would bring much needed tax dollars to the general fund. But while Target, Kohls, and soon, Walmart, all call Trinity Parkway home, it’s the historic buildings and empty waterfront lots downtown that have the potential to refill the city’s coffers, not the mega developments occurring at our city’s edges .

The sprawling Spanos West development on the Northwest edge of Stockton (Courtesy of Anomalous_A)

That’s right. Despite all the claims by developers, big-box store spokespeople and some city officials, building these massive shopping centers and subdivisions is not an ideal way to generate revenue for the city. Steering growth downtown into dense development is a much more efficient way to generate revenue for Stockton than continuing to allow low-density development on the city’s edges. I argue that when you take into account the infrastructure costs of building low-density malls and subdivisions on farmland, they actually cost the city more money than they make. Instead, the city should focus its growth policy on infill development, specifically downtown, where dense development brings in more tax dollars per acre while taking advantage of existing infrastructure.

When new, sprawling subdivisions and shopping centers are proposed, proponents tout the economic benefits. While new development on the outskirts of the city does bring in tax dollars, it does so at an inefficient rate. Joe Minicozzi, A developer in Asheville, North Carolina, looked at this issue in 15 cities in the US, as described in this Atlantic Cities article, and found that low-density growth is less effective at bringing in tax revenue than dense development within city limits. For example, Minicozzi’s firm rehabbed a historic building in downtown Asheville and found that the tax revenue collected by the city from his project actually netted more per acre than the city’s Super Walmart:

“Asheville has a Super Walmart about two-and-a-half miles east of downtown. Its tax value is a whopping $20 million. But it sits on 34 acres of land. This means that the Super Walmart yields about $6,500 an acre in property taxes, while that remodeled [building] downtown is worth $634,000 in tax revenue per acre.”

Even when sales taxes are factored in, the downtown rehab is still worth about six times as much as the Super Walmart, according to the article. Even more impressive is that this building is not particularly lavish. At six stories, the old JC Penny building in Asheville houses ground floor retail, second floor office space and 19 condos. Yet somehow, this modest reuse of a historic building nets more per acre than the mighty Super Walmart. This example is not unique to this one building, either. Since developers began investing in downtown Asheville, the city’s central business district saw an increase in taxable value of $104 million in 1991 to $665 million in 2010. Clearly, the city of Stockton cannot afford to let downtown sit idle when it has the potential to bring in cash at such an efficient clip.

Downtown waterfront, riddled with empty or underutilized land just begging to be developed

Another reason why focusing growth densely in established parts of the city is that these areas do not require substantial infrastructure upgrades. For example, new subdivisions planned on what used to be farmland must be augmented with new streets, sewers, power lines, street lamps, etc. Cities are generally left picking up the tab, making this kind of new development more costly. In Sarasota, Florida, for example, Minicozzi finds that the city takes a loss over time on new subdivisions versus dense downtown development which brings in revenue:

“A downtown 357-unit multi-family complex on a 3.4-acre site [in Sarasota] … pays off its infrastructure in three years. A suburban subdivision on a 30-acre site will take 42 years to pay off. After two decades, that downtown multi-family complex will have made the city $33 million in net revenue. The suburban subdivision will still be $5 million in the hole.”

Moreover, allowing Stockton to expand its footprint can also strain city services. When we build on farmland and extend the city’s boundaries, we also create more turf to cover for our city’s already taxed fire and police departments. New schools must also be constructed and parks must be maintained, all at the expense of the rest of the city.

So what can Stockton learn from these examples? That the days of letting developers run rampant at the city’s edges at the expense of the core should come to an end. Now that we know how big-box centers and sprawling subdivisions actually cost the city money, there is no way we can continue to justify expanding the city’s boundaries. Continuing to allow sprawl to dominate development activity will only perpetuate the city’s current fiscal dilemma. As seen above, investment in dense, established neighborhoods is the most efficient way to grow.

What can be done? Investment in downtown or any older neighborhood cannot happen unless a strong growth strategy is in place which fosters new projects within the city’s borders by restricting the rapid pace of construction on the outskirts. Until boundaries and limits are set, developers will continue to build further and further away from the city on cheap farmland, leaving downtown, and its tremendous earning potential, to languish.