Imperial Beach, National City and the pursuit of sales tax money

Standing in an alley between a construction site fence and a one-story home, Imperial Beach Mayor Serge Dedina can see what might be the city’s commercial future.

He’s looking at what will become the Breakwater Town Center. When it opens, the three-block-long shopping center on Ninth Street and Palm Avenue will include Grocery Outlet, Chipotle, Starbucks and more. The city could certainly use the sales tax money the new businesses are expected to generate.

“As simple as it sounds, having a good grocery store and a nice coffee shop in the middle of an area, an economically diverse area, is a super big deal,” Dedina said.

During the first quarter of 2015 — the most recent year for which detailed data is available — Imperial Beach brought in the least sales tax revenue of any city in the county. The South Bay community is small, about 27,400 residents, with a median household income of about $46,700.

The $699 per resident the city received in sales tax is less than one-fifth the county average. In fact it’s $1,548 less than the next lowest city, Oceanside.

Dedina has been mayor of Imperial Beach since 2014. He said the city faces a dual challenge: Many of its residents shop at the commissary on Naval Outlying Landing Field Imperial Beach, a grocery store open to military personnel and veterans. Also, no major freeways run through the city.

“We’re a cul-de-sac, so getting people from the outside to come to here is tough,” he said.

The mayor is hoping to attract more dollars, in part by making it easier for new businesses to grow.

“We need to really open up the business environment so people can start up small businesses and entrepreneurs can get to work,” Dedina said.

That means new development like the Breakwater shopping center. The project hit a snag in 2009 when California eliminated redevelopment agencies. Getting the deal done took 10 years and the work of the city, state Senator Toni Atkins — who was then an assemblywoman — and the developer, Sudberry Properties, Dedina said.

“It wasn’t easy but it’s worth it and it’s important to make these things work in cities like Imperial Beach,” he said.

A tale of two cities

A few miles up the bayshore sits another low-income city facing a starkly different commercial situation. National City is larger than Imperial Beach, with 61,000 residents. The city’s median household income of about $41,400 is the lowest in the county.

However, National City collects the second most sales tax revenue in the county, $5,913 per resident. Only Del Mar is higher, collecting $7,470 per resident.

Adjusting for residents’ income makes National City’s revenue more significant. For every $100 of median household income, the city collects $14. Del Mar collects almost $7 — higher than the county average of $6. Imperial Beach collects just $1.50.

See the sales tax revenue per resident in San Diego County cities:

Multiple factors play into National City’s robust sales tax revenues, starting with its tax rate  — which at 9 percent is the highest in the county, compared to 8 percent for most of the other local cities.

Another big advantage: location, location, location. The city is close to Chula Vista and downtown San Diego, as well as the San Diego Naval Base. It’s crisscrossed by three major freeways.

“That was always seen as a negative and that’s one of the things that I pushed,” said Ron Morrison, mayor of National City. “Let’s start using our freeways and our transportation systems as a positive.”

Passing motorists can easily stop to shop or eat. National City also has two huge commercial centers: The Mile of Cars and Plaza Bonita.

The Mile of Cars, an association of car dealerships near Interstate 5, produces a significant share of the city’s sales tax revenue. Car-related sales brought in $2,426 of sales tax revenue per resident during the first quarter of 2015, the most in the county for that business category.

Plaza Bonita, a shopping center near the intersection of interstates 805 and 54, also represents a significant source of revenue. Clothing sales brought in $609 per resident in sales tax, virtually tied with Carlsbad for the most in the county in that category.

“They always hate it when I say it but my slogan for Plaza Bonita is you can find anything you want to at Plaza Bonita except a parking space,” Morrison said.

The mall has 188 stores and did $313.5 million in sales during 2015, according to documents from Westfield Corp., which owns the mall.

The city has even benefited from smaller businesses. The first Dunkin’ Donuts in San Diego County opened in National City

Unlike Imperial Beach, National City has had no trouble attracting shoppers from throughout the county. Morrison said surveys National City conducted found that 75 percent of its sales taxes come from people who live somewhere else.

“Our population is 60,000, as far as census population, but our daytime population hovers between 120,000 to 150,000,” Morrison said. “People come here to shop, to do business, work, all those different types of things so we try to capitalize on that.”

That large sales tax base has allowed the city to provide all its own services, rather than contract with San Diego County. It’s also allowed the city to expand services, like weekly residential street sweepings and making athletic fields free for youth sport leagues, Morrison said.

The sales tax revenue is there, Morrison said, because the city has been able to attract business and development. And it’s been able to do that by communicating with citizens the connection between new development and city services.

“Even right next door, and I don’t want to get down on them, but like Chula Vista, they have a hard time locating businesses,” he said. “Everyone goes up in arms when there’s going to be a business going into their neighborhood.”

Chula Vista’s 2016 budget acknowledged this challenge. Alongside a chart comparing sales tax revenue per resident, the official budget document said the city “continues to be challenged in the generation of taxable sales per capita when compared to other county cities.”

The city said it hopes new car dealerships, housing developments, office space and other developments in Chula Vista will attract and retain consumers.

Yes in my backyard

Back in Imperial Beach, Toni Nagy is looking forward to the opportunity to do more shopping locally. Her house is on the other side of the alley where Mayor Dedina was overlooking the construction. Breakwater Town Center will be practically in her backyard.

The retired civil litigation paralegal moved with her Army veteran husband and their Australian Jack Russell terrier to Imperial Beach 2½ years ago. They do their grocery shopping at the commissary and the 99 Cents Only Store, Nagy said. She’s now looking forward to the Grocery Outlet.

“I’m thrilled to death, we do not have to get in a car and drive anywhere,” Nagy said. “I’m very excited about the grocery store being put in.”

Dedina is hoping that residents will also see the new development as a community center.

“Shopping centers have also become lifestyle centers,” he said. “When I look at this, it’s not just a place for folks to shop, but it’s also for folks to congregate.”

The Starbucks will be one of the few places to provide low income residents in that part of the city free wi-fi. And they won’t have to take the bus to Chula Vista to go grocery shopping.

For her part, Nagy is particularly excited about a new ice cream place she heard will be part of the shopping center.

“Right in my backyard, nothing makes it better,” she said. “Just got to walk out my front door.”