Why Thousand Oaks Had to Cave To Rick Caruso
- William Fulton
- Dec 12, 2021
- 5 min read
Cities tend to be land-rich but cash-poor. So it’s not surprising that – especially in California, where they don’t get much in the way of property taxes – cities are always on the hunt for creative ways to extract more cash from their valuable real estate. And over the past generation it’s been especially tempting for cities to use their real estate not only to generate income but also sales tax revenues, which have been the fool’s gold of municipal budgets ever since Proposition 13 passed more than 40 years ago.
But the truth of the matter is that cities, for perfectly understandable reasons, are often lousy real estate investors. They’re highly political entities that are often incapable of making hard-nosed business decisions. They usually don’t have the real estate expertise required to make good decisions (and are often reluctant or too naive to hire that expertise). And they tend to get caught in a vise between trying to exploit long-term real estate assets on the one hand and trying to maximize sales-tax revenues on the other.
Which brings us to the tale of Thousand Oaks and Rick Caruso.
Thousand Oaks is a famously affluent and well-planned suburban community in Ventura County, just over the line from L.A. County west of the San Fernando Valley. Though the city’s planners have frequently sought to build more of a “downtown” along Thousand Oaks Boulevard, residents and some political leaders have resisted this transition strongly. They often use terms like “rustic” and “semi-rural” to describe the city, which has 127,000 residents and a median home price of around $1 million.
Thousand Oaks, which did not impose a property tax in the pre-Prop. 13 era, is also highly dependent on sales tax revenues, the single biggest source of money for the city’s general fund. About 36% of the general fund revenue comes from sales tax, a far higher percentage than most California cities. (By comparison, neighboring Simi Valley, a city of about the same size with a similarly sized general fund, gets about 20% of its general fund from sales tax.)
Rick Caruso is, of course, the legendary retail real estate developer who built The Grove in Los Angeles and Americana at Brand in Glendale among other shopping centers. (Caruso is also the beleaguered board chair of the beleaguered University of Southern California, but that’s another story.)
Last month, Thousand Oaks City Council voted 3-2 to sell the dirt underlying Caruso’s The Lakes shopping center, which is located more or less next door to the Thousand Oaks Civic Arts Plaza, and allow Caruso to build a six-story apartment building on the site. The decision divided both the council and the city itself and, depending on how you look at it, represents a major step forward in urbanism in Thousand Oaks or the beginning of the end of the city’s rustic atmosphere.
But the fact of the matter is that Thousand Oaks didn’t have much choice: The city’s past attempts to exploit its own real estate assets to generate sales tax revenue – combined with the original Caruso deal and rapidly changing retail sales patterns – had put the city in a hole that, basically, forced its hand on the apartment building.
