Tuesday, July 29, 2014

Why the Sam's Fight Matters to the Entire City

The crux of the fight over the proposed Sam's Club site at CityPlace to date has centered around whether 100,000+ square feet big box retail is appropriate within a transit-oriented development, whether it's compatible with the neighborhood (and whether that neighborhood was properly informed), the entirely car-dependent traffic it will generate, and whether it adheres to the city's comprehensive plan.  Those are all important debates, however in this post I'm going to examine the potential value of Sam's club on this particular piece of land in relation to other Sam's Club sites as well as nearby other forms of development, the mixed-use CityVille development as well as the multi-family Residences at CityPlace.

First, some assumptions and acknowledgements.  I don't have sales tax data.  Nor am I able to project the amount of sales and sales tax revenue from a hypothetical future Sam's.  I'm sure it will be astronomical.  However, 1) the majority of sales tax revenue leaves the city for state coffers and 2) the city's primary source of revenue is not these slivers of sales taxes but rather property tax revenue, which is distributed to the city's general fund as well as to city services such as DISD and public hospitals.  Therefore, from the city's perspective, property taxes are the holy grail and more importantly, we need to be thinking about them on a per acre and lifespan viewpoint.

Second, I don't have job data for a Sam's or a mixed-use building.  So in absence that specific data, see Joe Minnicozzi's chart comparing a walmart to a mixed-use building on a per acre basis.  The take away from this is that if you can fill the same amount of land on the full walmart site with mixed-use type development, you will blow away the walmart with smarter, more compact, more vibrant form of development.  With that said, there is little reason to expect that even the huge potential for sales tax revenue from the Sam's or any big box, wouldn't be matched by a mixed-use development (if not surpassed).  After all, retail sales will happen either way as a product of demand.  We might as well control the form.



Methodology:
I looked up each site in DCAD for land value, total value (improved + land), land area, and annual tax revenue.  Then I let excel spit out each of these data points on a per acre basis.  Lastly, I took these per acre numbers and applied each of these development prototypes to the proposed site for the new Sam's Club.

The comparables I'm using are the CityVille at CityPlace mixed use development, the nearby Residences at CityPlace, the existing site which is largely vacant, the Sam's Club at Loop 12 and its satellite pad sites, and the vacant Sam's Club at Five Points/Park Lane.  I felt it was important to compare an active Sam's to the existing condition as well as some future condition, because after all, how long is the life span of a big box?

MultiFam Comp: Residences at CityPlace:


Mixed-Use Comp:


Proposed Sam's Development (which shows a bit of the Residences in the foreground and CityVille in background):



Table:




The critical notes from the table are:
 - Mixed-Use comp has a total value double of the active Sam's
 - Multi-Fam comp has a similar total value of the active Sam's
 - Thus the ratios for total tax revenue are similarly 2:1 for the former and roughly 1:1 for the latter, respectively

However, on a per acre basis these numbers begin to change quite a bit:
 - Value and Tax revenue per acre for the Mixed Use rise to 4.91x that of the active Sam's Club at Loop 12
 - Value and Tax revenue per acre for the Multi-Fam rises to 3.5x that of the Loop 12 Sam's.

Chart:













Above, we can see the significant jump in total value per acre as well as property tax revenue per acre once the residential component is added, essentially density.  For more on the economic productivity of building a walkable, mixed use city, see Joe Minicozzi's presentation to downtown Austin below: