In an era when deficit-ridden state government is slashing allocations left and right and tax increases require a two-thirds majority vote, retail development looms like a giant gold dollar sign on the horizon for California's towns and cities.

Not only can increased sales tax revenue help close budget gaps, but a new infusion of retail is often the most expedient way to revitalize past-their-prime commercial districts - whether strip malls or downtown towers.

Now, such activity is no longer solely the province of old center cities. Aging fringe towns are engaged in their own form of "suburban renewal," trying to revive long-neglected downtowns from the ravages of shopping malls and Wal-Mart. Three of the East Bay's largest municipalities are banking on retail to either rescue their commercial cores or, in one case, create a downtown that never existed in the first place.

Capitol Avenue Partners LLC, a division of Sunhill Development, and Blake Hunt Ventures Inc. were selected at the Fremont City Council's Feb. 3 meeting to develop the city's Capitol Avenue/Downtown project.

City officials envision a pedestrian-oriented development of one or two blocks in length at Fremont Boulevard and Mowry Avenue featuring specialty retail stores, restaurants, entertainment venues and offices that could open by 2007. It would serve as the first-ever "downtown" for the sprawling city of 210,000 formed 48 years ago from a collection of five small towns.

In the heart of Concord, an underutilized three-story downtown structure has been transformed into a mixed-use retail and office project with 100,000 square feet of space.

Hayward has snagged a 12-screen Century Theatres movie complex and 18,000-square-foot Cost Plus World Market store to anchor its new Cinema Place project, which may be open by late 2005.

The Hayward development will be on a 2-acre parcel at B Street and Foothill Boulevard that became available when Albertson's Inc. abandoned it for a new 60,000-square-foot store three blocks to the west. It will boast 113,000 square feet on two levels.

In addition to the theaters, which will have from 1,800 to 2,000 seats, and Cost Plus, there will be space for about a dozen retail stores, according to City Manager Jesus Armas.

"Both the new Albertsons store on the west end of the downtown area and Cinema Place on the east end will serve as catalysts to reinvigorate our downtown area," he said. "The theaters and Cost Plus should be a huge shot in the arm. (Downtown) should change dramatically."

That's a much-needed development, Armas added, because there are now too many empty storefronts in the aging district. "It's not as contemporary as we'd like," he said.

But it is on the right track to rejuvenation, Armas added, citing the city's new civic center and hundreds of new homes built downtown during the past decade. City officials also have invested $3 million to make extensive streetscape design changes to B Street, which has, in turn, spurred private property owners along the thoroughfare to make their own facade improvements.

It represents a significant turnaround for downtown Hayward, which began to head downhill in the early 1960s, when Southland Mall opened along Interstate 880, 1 1/2 miles to the west. Anchored by Macy's, Sears, JCPenney and Mervyn's, the center now generates the lion's share of sales tax revenue in the city of 144,000.

"The city didn't respond in a way that would help (downtown) to remain competitive," Armas said. "There was some neglect, but that has changed."

Just a bit smaller with 121,000 residents, Concord, the largest city in Contra Costa County, went down a similar path beginning in 1967, when the then-newly opened Sunvalley Shopping Center started luring business away from the city's central business district a couple of miles away. Sunvalley, with a similar roster of anchor stores as Southland with an even more upscale lineup of specialty retailers, has cornered Concord's retail for more than three decades.

The opening last week of Salvio Pacheco Square across the street from Todos Santos Plaza and a short walk from the 14-screen Brenden Theatres complex is refocusing attention on downtown. A "20-year-old building that looked 40" has been dramatically transformed with a new color scheme, signs, lighting fixtures, furniture, landscaping and new design touches by owner JCM Partners LLC, according to Craig Semmelmeyer, principal of Main Street Retail Services Inc., a Lafayette-based firm that's involved in leasing the project.

"This is a mission-style building that had excellent bones, so it was the perfect candidate for a redesign," Semmelmeyer said.

Tenants arriving this spring or summer include House of Bagels, Coldstone Creamery and Panama Bay Coffee Co. Five other restaurant and retail businesses are expected to follow on the ground floor, along with offices on the second and third levels.

Florence Weiss, Concord's downtown coordinator, said the spruced-up structure will be connected to busy Todos Santos Plaza by an improved pedestrian crosswalk built by the city.

"It's very exciting (JCM Partners) has made this kind of investment in downtown," she said. "We already have a strong daytime population because of nearby businesses and Mt. Diablo Medical Center. The new restaurants will draw nighttime crowds going to the theaters. They will attract people attending the farmers' market and all of the other events held across the street in the plaza."

Long overshadowed by Sunvalley and retail-heavy Walnut Creek, downtown Concord is coming into its own, Weiss said.

"It's a hidden jewel," she said. "Developments like this will ensure that it's not so hidden in the future."

But cities shouldn't necessarily get their hopes up for sales tax riches, says Steve Shmanske, Cal State Hayward economics professor. Commercial renewal hasn't been terribly effective in U.S. cities, he said.

"For the most part, they've been unsuccessful," Shmanske said.

"Studies of cities that built publicly funded sports stadiums have shown they actually grew more slowly than similarly sized cities that didn't. Retail-oriented renewal projects typically mean sales tax revenue shifts from one location to another, not an increase in sales tax."