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.
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?
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?
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.
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.
