City sales tax revenue dropped more than $662,000 in the 2nd quarter (April-June) compared to 2008. Combined with last year’s $371,000 fall during the same quarter from 2007, the three month period has seen a reduction of more than $1 million over the past two years.
The decline was the 10th in the last 11 quarters. The 17% decrease follows a $685,000 drop in the 1st quarter of 2009, creating a $1,347,000 shortfall for the first six calendar months.
About 40% of MV sales tax is produced by four retail areas: Shops at Mission Viejo (-19%), New Car Dealers (-11%), Freeway Center (-8%), and Kaleidoscope (-1/2%).
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A $1,374,000 sales tax shortfall in the first six months of 2009 confirms several trends that could get a lot worse for Mission Viejo. In reviewing the following, consider that the City of Mission Viejo has accelerated discretionary, non-essential spending:
1. Mission Viejo mall and import auto dealers showed the biggest decline, in tune with national trends of a consumer shift from high-end brand purchases to value purchasing. I recall that the #1 complaint in a Coto de Caza survey a couple years ago was that the nearest Wal-Mart was too far away. Yikes! Upscale Coto residents are prime targets for the mall and auto dealers. Meanwhile brand purchasing continues shifting to outlet centers.
2. The current holiday shopping season is not encouraging so far, so look for more than the usual number of post-holiday vacancies.
3. Mission Viejo’s Redevelopment Agency subsidizes the mall and auto dealers, with the mall using the windfall to leverage against local mom and pop retail competitors, making small business even more vulnerable in a down economy.
4. Closing of big-box retail stores, even entire chains, may continue in 2010, as more companies will be unable to pay off debt from acquisitions and store openings during a decade of overbuilding. Commercial loan defaults are on the rise. The Freeway Center has highly noticeable big-box vacancies.