Measure M and The Math of Economic Development

It is no secret that Clayton has financial challenges ahead.  I have written about it here and here.  Our City Manager has written about it in his newsletter on multiple occasions.  I also wrote about it in the September issue of the Diablo Gazette (page 4).  And the entire City Council voted to place two tax measures on the ballot this November, Measure M which is a 1% sales tax, and Measure N which is the renewal of the Landscape Maintenance District.  Both are critical to the financial stability of the City.

Some have said that Measure M, the 1% sales tax that is on the ballot in Clayton this November is only a band-aid and that the better approach is economic development. That sounds interesting at a surface level, but it belies an ignorance of the actual math involved.  Clayton does not receive the entire sales tax collected by a business. In California, a local jurisdiction generally receives approximately 1% of taxable sales, not the 8, 9, or 10% collected at the register.  The rest goes to other sources, primarily the state regional bodies.  

Measure M would add a 1% local transactions and use tax and is projected to yield $1M in additional revenue to the City of Clayton. This is because the added 1% would be dedicated to Clayton and come back 100% to the City unlike the rest of sales tax collected.

That means that to just match approximately $1 million of annual Measure M revenue through ordinary retail economic development, Clayton would need roughly $100 million in additional taxable sales every single year. Not $100 million in property value. Not $100 million in construction. Not $100 million in “economic activity.” Roughly $100 million in taxable sales, every year.

What does $100 million actually look like?  A few examples to illustrate.

Walmart U.S. generated $483 billion in sales last year across 4,611 stores. That works out to roughly $105 million per store. So, as a simple scale comparison, replacing $1 million of City revenue through new taxable retail sales is roughly equivalent to adding the annual sales volume of an entire Walmart. Home Depot generated $164.7 billion in sales across 2,359 stores, or roughly $70 million per store. One average Home Depot would not even get you to $100 million.

How about restaurants?

Chipotle currently reports average restaurant sales of about $3.1 million per location. At that level, it would take roughly 32 Chipotles worth of annual sales to reach $100 million. That's a lot of burritos.

How about auto sales?

A CarMax-sized operation gives a good sense of the scale. CarMax generates roughly $100 million in annual revenue per location on average. That is approximately the level of annual taxable sales Clayton would need to generate about $1 million in local sales tax. But think about what an operation of that scale actually requires: a very large commercial site, extensive parking and vehicle storage, significant traffic, and regional draw. That is not something that fits into a storefront downtown. It would require a major commercial parcel and a level of development Clayton simply does not have sitting vacant and ready to absorb.  And that assumes that Clayton is a desireable location for this type of business.

How about a hotel?

A hotel is another useful example. Assume an average room rate of $250 per night and a 10% hotel tax. The City would receive $25 per occupied night. To generate $1 million per year, the hotel would need 40,000 paid nights annually, or about 110 rooms occupied every single night of the year. That is not a small inn or boutique hotel. It is a substantial lodging operation with a large building footprint, parking, staffing, and an assumed steady year-round demand.

How about a data center?

Santa Clara reports that recently developed data centers typically generate about $200,000 to $400,000 per year in property tax for its General Fund. At that level, Clayton would need roughly three to five data centers to generate $1 million annually. These are massive industrial facilities, often hundreds of thousands of square feet, requiring large parcels and major utility infrastructure. Where exactly would Clayton put three to five of them?  I'm not aware of big tech wanting to locate data centers in Clayton.

Economic development can absolutely help Clayton. More restaurants, shops, and services would be good for the community and would add revenue incrementally. But simply saying economic development is the answer is not a financial plan. The scale required to match $1 million of recurring revenue is enormous, which raises a basic question: has anyone making that argument actually done the math?

And for those seeking leadership positions in this City, seeking to make decisions about an $8 million budget, understanding the difference between “economic development sounds good” and “here is how much revenue it actually produces” should be a pretty basic expectation.

Measure M is not a substitute for economic development. It addresses a different problem: Clayton has a recurring structural deficit that incremental business growth is not realistically going to close at the scale or speed required. Measure M is projected to generate approximately $1 million annually in locally controlled revenue, enough to materially address that recurring gap and put the City on a more sustainable financial footing for decades.

Upcoming Meeting 10.6.26

At our next meeting, the agenda is light, however we will be receiving a presentation from Save Mt. Diablo as an update to their ongoing work in the area.

If you have thoughts or questions on the above, please let me know.

My Endorsement of Kim Trupiano for Clayton City Council

As I prepare to conclude my service on the Clayton City Council, I am proud to endorse the reelection of Kim Trupiano for City Council.  Kim demonstrates qualities that matter in local government: experience, sound judgment, and a genuine commitment to the people of Clayton.

I have had the opportunity to serve alongside Kim and see firsthand how she approaches the job. She is one of the hardest-working Councilmembers I have ever seen.  Kim does her homework, asks questions, follows issues through, and does not give up when a problem is difficult. She is tenacious in addressing resident concerns and consistently keeps the people of Clayton at the forefront of her decision-making.

We have worked together on some of the City's most difficult issues, including the Housing Element, the Geological Hazard Abatement District, the library refresh, and the City's response to the Civil Grand Jury report.  What stands out most is her persistence. Kim does not simply identify a problem and move on. She stays with it, pushes for answers, and works to get it resolved. That work ethic, combined with her experience and commitment to residents, has earned my trust and my vote.

Clayton needs Councilmembers who have the necessary experience to guide policy making decisions, will do the work, ask hard questions, and listen to residents.  I have seen Kim do that firsthand and that is why I am proud to endorse Kim Trupiano for Clayton City Council.

My 9.15.26 Meeting Summary

Last night, the Council discussed one signficant item - restructuring of a loan to Diamond Terrace.

The Council approved an amendment to the City’s loan with Diamond Terrace to support the continued financial stability of an 86-unit senior housing development, including 81 income-restricted units, while improving the City’s ability to recover the full outstanding loan balance. The amendment replaces a large near term balloon payment with annual payments through 2040.  In addition, the loan amendment eliminates a provision in the original agreement that would have forgiven $500,000 of principal and the end of the loan term.

Quantitatively, the City will receive the full principal ($2.2266 million) currently owed, rather than forgiving $500,000 under the original agreement. The new schedule provides $150,000 annually through 2039 and a final $126,600 payment in 2040. Qualitatively, the restructuring reduces the risk that a large repayment requirement could create financial distress for the property, while helping preserve affordable senior housing in Clayton. The original loan was itself part of the City’s affordable housing program, and City records confirm that Diamond Terrace has historically been financed through non-interest-bearing redevelopment housing loans.

Upcoming Meeting 9.15.26

At our next meeting, we will be discussing one signficant item:

- We will consider a proposed amendment to the City’s loan with Diamond Terrace, an affordable senior housing development. The amendment would restructure the remaining $2.23 million balance by eliminating the 2030 balloon payment and extending repayment through 2040, while preserving the City’s security interest and requiring full repayment of principal.

If you have any thoughts on the above, please let me know.

My 9.1.26 Meeting Summary

On Tuesday, the Council approved several Municipal Code updates. These include eliminating the business license tax on single-family rentals and ADUs, clarifying false alarm fees, updating the recreational vehicle definition, modernizing park sound rules, and revising intersection sightline standards to better address pedestrian visibility and vegetation.

We also created a separate Special Event Permit process for events that affect streets or traffic. Lower-impact temporary uses will remain under the existing Temporary Use Permit process. The changes are mainly intended to make the code clearer and better reflect how the City operates today.

- We discussed traffic safety on Mitchell Canyon Rd. near Mt. Diablo Elementary.  Current municipal code restricts commercial motor vehicles exceeding GVW of five tons to operate only between the hours of 7am and 10pm each day.  This has been an issue that I was interested in for several years, however it has taken time to do the research necessary to determine what options were available to the City.  There are many things that can be done, but most of those require agreement or cooperation from outside entities whose interests may not be aligned with the City, or may be cost prohibitive, or both.

Given the high volume of commercial vehicle traffic on this road during school drop off areas, I suggested the Council discuss various ways we could enahnce pedestrian and vehicle safety.  Some ideas that were mentioned included the addition of sidewalks (this is already in flight for a small section), street widening, speed limit reduction, additional crosswalks, or actually restricting commerical vehicles.The City has discretion on what operating hours are allowed, and through ordinance, can modify the existing operating hours.  The Council formed an ad hoc committee to discuss the matter, and Councilmember Tillman and Vice Mayor Enea volunteered to serve on the ad hoc committee.

While a large influx of vehicles during a short window will always increase safety risk, there are definitely things the City could do to incrementally mitigate that risk.  One of those is restricting the time of operation of large commercial vehicles so as not to overlap with morning drop off in front of the elementary school.  I hope future Councils pursue this as it would be a quality of life improvement for our residents.

Upcoming Meeting 9.1.26

At our next meeting, we will be discussing several signficant items:

- We will do the 1st reading of the 7 ordinances that we discussed at our last meeting.  Due to administrative issues, those ordinances were not able to have their first reading.  We discussed each last time and continued each to this meeting.  Ordinances need two readings before they can take effect.  The first are typically done with public hearings, and the second reading is often done through the consent calendar at the following meeting.

- We will discuss options to address large commercial truck traffic near Mt. Diablo Elementary School.

If you have any thoughts or questions on the above, please let me know.