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Costco History: Multi-Million Dollar Tax Incentives the Norm

costco-inside 1When moving into a new site, big box stores normally expect to received tax incentives from the localities where development will take place. Costco is no exception to this, often expecting large concessions in order to built their club retail stores where the annual average sales per site is $170 million.

In an article headlined “Building our Future: Costco Scopes Out Corpus Christi,” reporter Chris Ramirez of the Corpus Christi (TX) Caller Times discussed the proposed local deal there, and then went on to highlight a number of other Costco developments and what was being required in the way of concessions.

While he couldn’t get details on the local concession negotiations (which ultimately broke down, resulting in no Costco), he did discover a lot of other deals around the country:

“It’s not uncommon for most big-box retailers to ask for and, in many cases, receive tax breaks.

“For example, officials in Tulsa, Okla. set up an incentive program that allows up to $2 million in sales-tax rebates for big-box retailers. Doing so cleared the way for Costco to open its first store in Oklahoma. It’s slated to open next summer.

“And in New Orleans, the City Council approved a nearly $6 million financial incentives package for both infrastructure improvements and tax breaks to bring the first Costco to Louisiana two years ago. Costco asked $9 million in incentives, but local officials set a limit of $5.7 million,” Ramirez wrote.

Ramirez went on to describe Costco deals in several other locations (all the following from the Corpus Christi Caller Times, May 18, 2014):

OTHER COSTCO VENTURES

Suburban Allentown, Pennsylvania

Officials for Lower Macungie Township, Pa. weighed plans to forgo up to about $237,000 in property tax dollars generated by the project over 20 years, according to The (Allentown) Morning Call. The money would be used to pay off bonds for the project. Over that period, the township would realize about $237,000 in property taxes, in addition to an estimated $908,000 in local services tax revenue, $324,000 in earned income taxes and $134,000 in real estate transfer taxes. Developers have secured about $10 million in state grants and a low-interest $3.7 million loan from the state. They are seeking an additional $3.2 million low-interest loan.

Tulsa, Oklahoma

Costco is poised to become one of the first to benefit from the city’s recently started retail incentive program. It allows up to $2 million in sales-tax rebates for big-box retailers deemed capable of drawing a significant number of shoppers from outside the city, according to the Tulsa World. The store will be the first Costco in Oklahoma and will employ about 200 people. It is expected to open next summer.

Rochester, N.Y.

A $30 million, 150,000-square-foot Costco store factors heavily into a larger $250 million development called CityGate, according to the Rochester Democrat and Chronicle. The project also includes a 150-room hotel, 300 apartments and other retail space. The company applied for property and sales tax incentives worth $3.6 million over 14 years. The city offered Costco a 14-year property tax abatement. Under the agreement, Costco would pay 10 percent of property taxes the first year, then pay greater amounts each year afterward.

New Orleans

The City Council approved a financial incentives package totaling nearly $6 million for both infrastructure improvements and tax breaks to bring the first Costco to Louisiana two years ago, according to Nola.com. The $45 million, 148,000-square-foot store sits across the street from Xavier University. Costco originally asked $9 million in incentives. The administration and the New Orleans Business Alliance set a limit of $5.7 million. The money came from diverting 1 percentage point of the city’s total 2.5 percent general sales tax on sales at the store.

And there is one more example from the New Orleans Times Picayune on April 14, 2014:

“In May 2013, the Baton Rouge metro council voted to approve an agreement with Costco that would reimburse the warehouse store company for $7 million in sales tax payments, plus interest, up to $7.8 million. The plan called for Costco to use that money to pay for road infrastructure improvements around the site where it built its Baton Rouge location at Dawnadele Avenue and Airline Highway, and to demolish a blighted Coca-Cola facility currently on the site.”

For the full Corpus Christi Caller Times article, see here.

 

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