We are at a critical juncture with regard to the future of the Johnson Drive Economic Development Zone (EDZ) on Pleasanton's northwest side.
This 40-acre parcel, once home to a Clorox research center, was in essence, the topic of ballot Measure MM in November. Brought to voters by a successful signature-gathering campaign, Measure MM sought to amend Pleasanton's General Plan to permanently restrict retail development in this area to buildings no larger than 50,000 square feet -- and thus preventing a Costco, after the company signed a letter of intent to build a store at the site.
The measure also sought to stop the City Council-appointed Johnson Drive EDZ task force from continuing its work on determining the best uses of vacant land on Johnson Drive, an industrial-zoned street highly visible and commercially appealing as an Interstate 680 frontage road, with a FedEx regional center at one end and Home Depot on the other.
Measure MM was resoundingly defeated by 62.63% of voters, which could be construed as voter approval of building a Costco there. We also supported the building of a Costco in our Oct. 7, 2016, editorial, "Vote No on Measure MM" and continue to believe the planned development is best for the city and its residents.
For months now, city staff, representatives of Costco and developer Nearon Enterprises have been negotiating a proposed agreement about how much each will pay for necessary infrastructure improvements such as traffic enhancements.
Once an agreement is reached, city staff has to outline financing options to pay for the city's share and present those to the City Council for consideration during a public meeting -- which City Manager Nelson Fialho said will happen no earlier than July. Only after that point would the city be in position to begin public review of the full EDZ plan outlining environmental analysis at the site and detailing rules for how development would occur there.
Options being considered here are those commonly used by cities around the country to finance such public infrastructure efforts associated with development.
The city could borrow internally from the approximately $195 million in total cash and investments available in city-controlled funds, or the city could take a conventional bank loan.
Another option is a sales tax sharing agreement, in which Costco fronts the city's portion of the cost for infrastructure improvements and a percentage of sales tax generated by Costco annually is used to pay back the company.
To explain this last option, let's look at a hypothetical situation in which the total infrastructure improvements cost $1 million. The city agrees to pay half -- $500,000 -- with a 60%-40% sales tax split annually up to 20 years.
Hypothetically, let's say the sales tax revenue due to the city is $100,000 in the first year. With the sales tax sharing scenario, the city would keep $60,000 while Costco would receive $40,000 as payment for fronting the city's share of the improvements. The more sales tax revenue produced, the quicker the debt is paid.
Keep in mind, these infrastructure improvements have to be made regardless of what type of development is built at the site.
Several development options have been suggested for the parcel, including a large fitness center and a strip mall, while others would prefer just leaving the area as it stands and not building anything. We believe leaving the area as is -- vacant, except for piles of debris here and there from the razing of the Clorox building -- is not an option because the opportunity cost is too great.
Costco and other large businesses, like proposed hotels and recreational venues, belong there to add to Pleasanton's sales tax base and employment opportunities. These businesses will not compete directly with our downtown businesses, nor will they create extra traffic congestion during peak commute times because they typically aren't as busy then.
The first domino -- an agreement on infrastructure costs -- needs to fall to get this on track. Because there is still no agreement, we could be months from moving this forward, according to Fialho.
"Assuming we get something in June we can agree on, we'll have the finance discussion with the City Council within 30 to 45 days," he said. "Assuming some type of agreement by the City Council in a public meeting, then the process for considering the EDZ would kick-off, first by the Planning Commission and then the City Council."
A council-endorsed financing option would be wrapped into the final EDZ plan, and consideration of that final plan would take three to four months, he added. So, if we are being optimistic that an agreement is reached this month, it would be October and possibly November before the process for EDZ consideration starts.
No financing agreement means no Costco, which means no Johnson Drive EDZ plan. While some might cheer this, we harken back to the public outcry that stopped the Home Depot from being developed on Stanley and Bernal. Now there is high-density housing there.
We would like to see an equitable distribution of cost between the city, Costco and Nearon to fund necessary infrastructure improvements and an agreement in place soon so the city can move forward with public vetting of the EDZ plan and Costco project.