Barbara Wiggins has seen it all during her 24 years in business in downtown Napa. The current recession is the third and perhaps most painful downturn for the owner of the Mustard Seed women’s clothing store.

Two years ago, when big money was investing in new hotels and commercial projects, downtown was “on the cusp of something wonderful,” Wiggins said. The future never looked brighter.

“Then the recession hit,” she said.

Within a year, two downtown mainstays folded — Mervyns and Copia — and the grandest development ever proposed for the central city, a Ritz Carlton resort, went into a deep freeze.

As older businesses struggled, ambitious commercial projects that had launched before the recession came to market, adding to the surplus of retail space.

Going into the 2009 holiday shopping season, business owners and city officials say the foundation has been laid for downtown’s prosperous future with such new developments as Oxbow Public Market, the Riverfront commercial/condo project and the Napa Square dining/office complex. The challenge is surviving until the economic turnaround.

According to city sales tax figures, downtown sales peaked in the fourth quarter of 2007, bottoming out 15 months later in the first quarter of this year. Sales rebounded in the spring, but were still down 15 percent from the peak, Robin Klingbeil, a redevelopment analyst, said. More recent data is not available.

These statistics, which include several car dealerships, don’t fully capture what’s going on in the downtown core, Craig Smith, CEO of the Napa Downtown Association, said. Based on business license revenues, Smith believes downtown sales are down only 5 percent through the first nine months of 2009. That’s not bad considering that Mervyns was closed virtually all of that time, he said.

Some sectors, such as restaurants, are enjoying relatively strong sales, while others, such as home furnishing stores and jewelers, struggle to find consumers, he said.

“Go downtown on just about any night and look at the restaurants. It’s hard to imagine the economy isn’t doing well,” Smith said.

A Kohl’s department store opened at the former Mervyns site this fall, animating downtown’s largest commercial space after nearly a year’s shutdown. But downtown still lacks a “critical mass” of stores to match its vibrant restaurant scene, Smith said.

With a recession this deep and long, he worries that downtown could yet achieve a more alarming critical mass — “a critical mass of vacancies.”

Dining up, retail lags

The vacant storefronts in Napa Town Center and along First Street paint a picture of a downtown that is struggling, Smith said.

Kent Gardella, owner of Napa Valley Jewelers in Napa Town Center, said downtown’s restaurants and wine-tasting venues are doing OK, but “retail is another matter.”

It’s not just a Napa problem, Gardella said. Virtually every mall and downtown in America is dotted with store vacancies brought on by the recession.

Downtown Napa hasn’t lost as many merchants as most towns, Cassandra Walker, the city’s economic development manager, said. That’s because going into the recession, “we weren’t over-retailed like a lot of communities,” she said.

Even in these hard times, “downtown is becoming more and more a food and wine destination,” Michael Holcomb, an agent with Strong & Hayden commercial real estate, said. “So many restaurants want to be part of that new energy.”

Three restaurant closings made the news recently — Piccolino’s, Kelley’s No Bad Days Cafe and Christopher’s — but nine new restaurants are on the way. Five are destined for the Riverfront and Napa Square, the others are going into vacant restaurant spaces.

The Riverfront signed up two celebrity chefs, “Iron Chef” Masaharu Morimoto and the Food Network’s Tyler Florence, as well as the highly regarded Lark Creek Restaurant Group, with opening of all three by early next summer.

“There aren’t many cities with downtowns with as many lease signings and openings as Napa has seen over the past year,” said Craig Semmelmeyer, whose Main Street Properties is the commercial leasing agent for the Riverfront.

Attracting restaurants doesn’t seem to be a problem, nor has downtown seen its last new wine tasting venue, Cathy Holmes, a commercial agent with Coldwell Banker Brokers of the Valley, said. Downtown’s challenge is “figuring out how to bring in true retailers,” she said.

In early summer, the Napa City Council voted to pay Economic Development Systems of Redondo Beach $100,000 to come up with a marketing and leasing strategy for downtown. Their report is expected next month.

Simultaneously, the city is paying $762,000 to develop a Downtown Specific Plan that will serve as a blueprint for commercial and residential growth for the next 15 years.

The planning process, which includes a citizens steering committee and public workshops, will run through 2010. The plan will lay out the best downtown street system, map areas where taller buildings and hundreds of residential units should go and designate an entertainment district for late-night music.

In the view of Gary Van Dam, a commercial agent with Strong & Hayden, making downtown streets two-way would go a long way to filling up downtown’s vacancies.

With traffic only one-way on First, “retailers think they’re missing out on 50 percent of the traffic,” Van Dam said. As conditions are now, First “takes you out of town before you know you’re in town,” he said.

Traffic circulation needs improvement, said George Altamura Jr., whose family is downtown’s major commercial property owner. “If you’re a tourist, forget it. You need a GPS to find the Clay garage.”

An extra eggnog?

From his new location near First and Main, Dan Dawson of Back Room Wines said his business is doing “very well,” boosted by foot traffic generated by guests at the new Avia hotel and shoppers at Oxbow Public Market.

“People beget people,” Dawson said. “If people see other people walking around, they are more likely to do the same.”

While most downtown retailers shut down at dusk, Back Room Wines stays open until 7 p.m. or later.

His “highest-quality foot traffic,” meaning the shoppers who buy the most wine, appears after 4 p.m., he said.

Cheryl Richburg, who has operated Napa Valley Traditions since 1992, said downtown retail had been suffering for several years. The first half of this year was particularly bad, she said.

Yet, in September and October her sales were better than the year before. The opening of Kohl’s undoubtedly helps, Richburg said.

“I’m sure 2010 will be better than 2009. There’s no question in my mind downtown will be more vibrant. Will it be lots and lots better? I don’t know that,” she said.

Greg Cole, owner of Cole’s Chop House and Celadon restaurants, said his sales slipped compared to a few years ago, with customers ordering less expensive wines. Going into the holidays, he’s seeing signs of improvement. Last year no one was booking holiday parties. This year they are, he said.

“Last Christmas was horrible,” Gardella of Napa Valley Jewelers said. Sales one month last summer were the lowest in seven years. But there is reason for optimism, he said. His sales in October were the highest he has ever had.

Gardella, who added lower-priced silver jewelry to appeal to more customers, expects sales to be down 10 percent for the year. “When I talk with my peers, everybody would settle for 10 percent,” he said. “If I end the year only 10 percent behind, I’ll have an extra eggnog.”

Steve Carlin, the developer of Oxbow Public Market, said he and his merchants are exploring new strategies to generate sales in a down economy. Having First Street closed to traffic for more than a year for flood project construction didn’t help, he said.

The Oxbow now has live entertainment three evenings a week and a new stage to showcase it.

Merchants are coming up with creative promotions to generate foot traffic, Carlin said.

Revenue is down 5 percent for the year, but customer transactions are up 20 percent, Carlin said. Oxbow Public Market is poised to prosper with the reviving economy, he said.

“The good retailers seem to be holding their own,” the city’s Walker said. Although Kohl’s is a good boost for downtown, “I think it will take at least a couple-three years to get back to where we were,” she said.

In the meantime, downtown may well see some more business failures, Walker said. “There are a couple more restaurants on the edge,” she said.

Altamura is more bullish. “I don’t see it getting any worse than it has this past year,” he said. “It always works itself out. We’re going through a crazy time right now is all.”

“I think we’re coming to the end of this horrible recession,” Wiggins said. “Downtown will be wonderful someday. I hope I’m not in a wheelchair when it happens.”