Data mining: the solution for capturing tax leakage?

2020 Vision: Financial Future

Rebecca Neipp

News Review Staff Writer

Data  mining: the solution for  capturing  tax leakage?A recently approved contract with Buxton, a group that captures and analyzes consumer data to help match communities with compatible retail and restaurant concepts, could help the city resolve a decades-old challenge of how to retain disposable-income dollars that are routinely spent outside of the community.

“As consumers – knowingly or not – we are constantly giving away information about ourselves: who we are, what we spend, where we are going,” Lisa Hill, a senior VP for Buxton, told the Ridgecrest City Council at its Dec. 18 meeting.

“I know it sounds very ‘Big Brother’ — and it is — but the reality is, before Bass Pro goes and makes a $30-million real estate decision, they have to know whether they have enough customers within 90 minutes to warrant that store. That’s the type of information that we have.”

The council voted to enter into a yearlong contract with Buxton, the $50,000 cost of which will be shared with IWV Economic Development Corp., Ridgecrest Chamber of Commerce and Ridgecrest Area Convention and Visitors Bureau.

The data provided by Buxton can be used not only to help established businesses enhance their share of the market but also to attract retailers that are underrepresented in the community.

The idea is that providing more robust products and services will increase local spending — capturing more dollars to circulate in our relatively closed economy and increasing the tax revenue streams that ultimately pay for the infrastructure and quality of life for our remote community.

These are challenges that the city has grappled with since the 1990s. For context, the community had Walmart, Kmart, Mervyns, Miller’s Outpost, Clothestime and numerous other boutiques during that era.

As defense downsizing moved jobs (and residents) out of the community and e-commerce and other factors changed the marketplace, those options slowly winnowed down over time, leaving only Walmart and a handful of Mom-and-Pop shops selling clothing in the IWV.

The base alone pours half a billion dollars in salaries into our community, but market studies (including one the city chartered from COSMONT) showed that most purchases by local residents for clothing — and a significant share of furniture, automobiles, appliances and other big-ticket items — were made outside of Ridgecrest. Local merchants began to wither on the vine, further depleting shopping options and exacerbating a negative flywheel effect.

Councils for years have struggled to find a way to reverse the trend — which by definition becomes more challenging with each passing year.

Although most local residents are conscious of the absence of local purchasing options, city officials note that many may not understand (or perhaps not care) that their continued out-of-town purchases contribute to the persistent obstacle of a weak tax base.

For the past few years, the city has sent a contingent of representatives to the International Council of Shopping Centers. But many of the most frequently requested brands — Trader Joe’s, In ’N’ Out, Target — will not even look at a community with a population our size.

Advocates started building a case that might compel vendors to give our community a second look.

Scott O’Neil, executive director of the IWVEDC, noted the high income level of local residents and added that Ridgecrest is a shopping mecca for many nearby communities as well as the many thousands of travelers who pass through each year.

“Our community works a lot on anecdotal information,” he said “Being able to get quantifiable data to help make decisions is imperative.”

Hill told the council that Buxton represents 4,000 clients — from small footprint to big box and everything in between. In addition to the city using the data to try to recruit and strengthen new businesses, her company also looks at their client communities to make recommendations about strategic site selection.

In the last few years Buxton has worked with 350 communities in California to land more than 35 million square feet of retail expansion and boost municipal sales taxes by $6 billion.

The insight gained through credit card usage, GPS data and cellphone records build a picture of consumers in a community that is cross-referenced with a database of retailers to find the best fit.

Hill noted that this data provides information not only about resident populations but about visitors as well.

“If there are enough customers to justify a Whole Foods, for example, you can make the case to the retailer,” using the established customer base, existing competition, consumer traffic, etc., said Hill.

“Just saying, ‘My mayor would love to have a Trader Joe’s’ is not going to compel Trader Joe’s to come here. We really have to identify Trader Joe’s’ criteria – what do they need to see to make a market decision about you.”

The Buxton data also feeds into “geofencing” for existing retailers, she noted, who can leverage that information to detect when consumers are within their geographic proximity and send alerts through various social media platforms to entice customers into their storefronts.

Buxton also tracks data relating to health care, industry and education. “It’s not just about what your purchases are from a consumer standpoint,” said Hill.

“We look at overall lifestyle,” which can inform from a city planning perspective.

Many communities use the tools for attracting visitors, retaining residents and creating jobs.

O’Neil said that better understanding the current retail leakage can help the city grow and increase existing businesses.

“The same can be done for industry,” he said. As just one data point, he noted that China Lake spends $30 million a year on credit card purchases.

“I would love to see how we can capture more of that locally.”

See related stories for more detail.

Pictured: Lisa Hill of Buxton addresses the Ridgecrest City Council last month. — Photo by Laura Austin

Story First Published: 2020-01-03