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.

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Categories: Development News, Smart Growth

Author:David A. Garcia

David A. Garcia founded SCL in March of 2012. He holds degrees from UCLA as well as Johns Hopkins University and currently works as the Director of Community Development at The Cort Group in Downtown Stockton, and previously worked as a researcher/analyst for a congressional agency in Washington DC. The views expressed here are solely of the author.

11 Comments on “Downtown development: Stockton’s sleeping cash cow”

  1. April 11, 2012 at 1:52 pm #

    I agree, more merchants could be attracted to the downtown location if we could get them up and running. I see empty spots that could be leased in good faith for under-market value to encourage businesses to startup downtown. Or the city could partner with franchises or local businesses and possibly split the revenue generated. The ‘build it and they will come’ attitude hasn’t gotten them the ROI we were expecting. At this point business owners need an incentive to open up in an area that is still pretty rough around the edges & your main revenue nights are only going to come when events are held.

    Cool website, great insight.

    • Stocktonian
      April 12, 2012 at 2:08 pm #

      Thanks for the comment, 209. You make a good point and I think the answer lies in bringing people to live in and around downtown through mixed-use developments. Typically, people want to know that when they open a business, there will be demand outside of just the lunch crowd, and is it stands right now, downtown clears out at night, except for when there are events. By building new residential housing along with commercial space, you can create a perpetual cycle of need as new downtown residents need services and new businesses need customers. And I think you are right about the city needing to incentivizing this kind of growth, but for mixed-use to really be a viable option, the city needs to get serious about limiting growth on the outskirts in order to drive demand inwards in areas such as downtown. Obviously, a lot more goes into achieving this than can be discussed in just one comment. I hope this site can start a constructive dialogue with city residents about the choices Stockton faces moving forward.

  2. rosalio estrada
    May 2, 2012 at 3:39 am #

    Since the city of Stockton’s redevelopment plan was the precursor to the destruction and under utilization of its
    downtown core, it seems to me it is imperative that the city do everything it can to encourage revitalization. Greenfield development is part of a city housing elements but it needs a core to compete as a city. Wall Street vs Main street is a short battle. Wall Street cannot win this confrontation. We have the food, water and people to overcome the banking squeeze to create more debt by over building. see, Stockton and California as examples of this latest bubble. Building without a sustainable plan will create more public debt. Laying off more public employees will not improve the quality of life of our residents. Human history has shown that maintaining civilization has been the format for improving life. Monkeys stay in an area long enough to eat and then move on to other areas, their standards have not improved. I don’t see the monkey method as being sustainable. We need better public policies to remain sustainable. Let’s clean up our delta water supply and rebuild our city. Our legacy will be a format for coming generations to have a better life.

  3. May 6, 2014 at 9:17 am #

    David,
    Truer words were never spoken.
    Finish what we have started in our Historic District downtown and along the Waterfront.

    People relocating to Stockton as a general rule, are not interested in our Targets and Walmarts. Instead, they want to see our Historic buildings, sports/entertainment centers etc.

Trackbacks/Pingbacks

  1. Joe Minicozzi does Modesto « Stockton City Limits - April 26, 2012

    […] brings in tax dollars at a more efficient rate than less-dense development on the edges of cities (you can find the post here). Turns out, Minicozzi was just in Modesto to discuss his work and offer an example based on some […]

  2. As population shifts back into cities, will Stockton follow suit? « Stockton City Limits - April 30, 2012

    […] as much as they wanted as buyers viewed houses as commodities, not homes. As I have pointed out, focusing growth solely on single family housing and strip malls on the outskirts of the city makes l…. Car-dependent subdivisions also prove less valuable than housing in established, walkable […]

  3. The Wal-Martization of Stockton: Are three Wal-Marts good for the city? « Stockton City Limits - June 5, 2012

    […] such as Wal-Mart, are proven to be a less efficient means of collecting tax revenue, as discussed here in a previous blog post. Per acre, it makes more sense to invest in more dense retail and commercial property in older, […]

  4. How to save the general fund: bring development downtown « Stockton City Limits - July 3, 2012

    […] advantage outweighing the purported benefits of monstrous shopping centers and subdivisions. I have written before about cities on the East Coast that have reaped the windfalls of prioritizing downtown development, […]

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  6. Smart growth or Socialism? Debunking the myths of Agenda 21 | Stockton City Limits - March 12, 2013

    […] profiled Joe Minicozzi’s work demonstrating how modest downtown revitalization efforts yield greater economic benefits than the traditional suburban shopping center or subdivision. Minicozzi has performed this analysis locally as well in Modesto, Turlock and Merced, with similar […]

  7. How better zoning can curb crime | Stockton City Limits - April 23, 2013

    […] Not only does a mixed-use approach lessen the burden on the police department, but can yield greater economic benefits for the city as well, as I have previously discussed. Not coincidentally, the best place for these types of developments […]

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