Stage set for decision on city-Costco roadwork financing deal

City Council set for special meeting on proposal Monday night

The Pleasanton City Council is set to give final direction Monday to city staff on an agreement with Costco for how to pay for $21.47 million in roadwork necessary to accommodate the proposed Johnson Drive Economic Development Zone (JDEDZ), which is expected to include the wholesale retail giant's third membership store in the Tri-Valley.

The proposed deal with Costco to fund design and construction of the roadwork calls for just under one-third to be paid by city traffic impact fee reserves, just over one-third by a cash payment from Costco and just over one-third by a separate payment by Costco that will be reimbursed to the company by the city through a 60-40 sales tax sharing agreement with 1.5% annual interest charged for the city's remaining balance to Costco.

Any other developer who builds on the JDEDZ in the future would need to pay their proportional share of these infrastructure costs back to the city, and the city officials plan to use those funds to pay down their debt to Costco.

The council majority gave early support to the proposal during a special meeting Aug. 29, with Councilwoman Karla Brown expressing opposition and Mayor Jerry Thorne recusing himself from the discussion for previously owning Costco stock in a retirement fund.

The agreement has been updated since last month's meeting in accordance with council direction to include provisions that the city's remaining debt balance would be forgiven at the end of the 25-year payback period or if Costco ever goes out of business or the store closes for an act of God, according to Tracy Dunne, city public information officer.

The financing proposal still does not include any upfront payments from Nearon Enterprises, which owns a majority of the JDEDZ land including a vacant site along Johnson Drive that Costco would purchase for its new store.

Brown and Councilwoman Kathy Narum last month urged city staff to talk with Nearon representatives to see if the firm would provide money for infrastructure costs upfront. And some critics point to Nearon's lack of early roadwork funding as a reason to oppose the financing deal.

"Nearon will not be paying upfront transportation improvement costs as the landowner, but whoever develops the land will be paying a JDEDZ transportation fee," Dunne said.

The pending roadwork includes Stoneridge Drive and Interstate 680 northbound onramp improvements, Johnson Drive widening, improvements at the Johnson-Stoneridge intersection, new traffic signals at Johnson and Commerce and Johnson and Owens Drive (north), and right-of-way acquisition.

The financing proposal returns to the council for further public discussion and final direction on Monday evening. If endorsed then, the term sheet would be finalized and incorporated into the final JDEDZ proposal, which would outline how redevelopment could occur in 12 parcels along Johnson Drive and Commerce Circle near the I-580 and I-680 interchange.

The JDEDZ package would then head to the Planning Commission and Economic Vitality Committee for review in the coming months, with the goal of presenting it to the City Council by the end of the year, according to city staff.

Monday's special meeting is scheduled to begin at 6:30 p.m. in the council chambers at the Pleasanton Civic Center, 200 Old Bernal Ave. The council will gather beforehand in closed session, beginning at 5:45 p.m., to discuss ongoing contract talks with the Pleasanton Police Officers Association.

The council also has a regular meeting scheduled for the next night, at 7 p.m. also in the council chambers.

In the meantime, Pleasanton residents will notice some construction activity on Nearon property on Johnson Drive starting Monday, the company announced this week.

DeSilva Gates Construction will be hauling gravel material off 7200 Johnson Drive -- a mix created when the former nine-building Clorox technical center was demolished in 2015 there -- to be used as part of the Highway 84 widening and rehabilitation project, according to Nearon.


36 people like this
Posted by Perry Mason
a resident of Castlewood
on Sep 13, 2017 at 6:08 pm

I sincerely hope the majority of the Council and Mayor continue their support of the infrastructure deal. Practical deal for the city and a win for the residents. Of course the supporters of the transportation company that has leached off of the taxpayers with free parking for decades and the supporters of the monopoly gas station dealer won't like it. Prepare yourselves for "fake news", misleading facts and scare tactics from that bunch.

Looked at objectively and logically, thiis will be a good deal for the citizens of Pleasanton.

Can't wait to shop there.

20 people like this
Posted by Scott Hale
a resident of San Ramon
on Sep 13, 2017 at 7:25 pm

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build it, the parking lot will be full. Even if the full time naysayers boycott. I mean, they should boycott after all, otherwise they might be accused of being hypocrites if they shopped at a new Costco.....

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Posted by Grapevines
a resident of Vintage Hills
on Sep 14, 2017 at 12:36 am

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PW, could you please clarify if the debt is forgiven if Costco chooses to close this one store, or is it only if the entire corporate entity winds up? If it's the latter, that sounds new and different.


2 people like this
Posted by Pleasanton Parent
a resident of Pleasanton Meadows
on Sep 14, 2017 at 5:39 am

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I want an equitable deal that brings Costco to pleasanton.
The roadwork has to happen regardless, and to expect infrastructure development dollars to go elsewhere if paid is unreasonable.

I do want to see where those dollars are coming from and how they stack up against other development projects as I think it's ok to give some on Costco coming to Pleasanton but should not be fully burdened by taxpayers

1 person likes this
Posted by Jeremy Walsh
associate editor
on Sep 14, 2017 at 8:19 am

Jeremy Walsh is a registered user.

Thanks for your question, Grapevines. Our understanding is forgiveness would happen in both cases. The new staff report with the updated language has not been released, but this is the comment we received from the city's public information officer on that point: "If Costco goes out of business for some reason, or in the event of a force majeure, the City will not be required to make subsequent repayments."

1 person likes this
Posted by Roscoe
a resident of Pleasanton Heights
on Sep 14, 2017 at 9:29 am

A traffic light leaving Clubsport is a necessity. There is a blind curve when leaving the western lot and turning south onto Johnson.

1 person likes this
Posted by DKHSK
a resident of Bridle Creek
on Sep 14, 2017 at 10:26 am

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As much as I think it would be a pain, I agree with you. Leaving the parking lot at Clubsport is a challenge at certain times of the day. I think the very least they could put a stop sign.

5 people like this
Posted by Long Timer
a resident of Golden Eagle
on Sep 14, 2017 at 3:02 pm

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This is a bad deal for Pleasanton homeowners. We should not be paying for 1/3+ 1/3 = 2/3 of the infrastructure. The city staff presented 4 options...the fifth option of re-negotiation the deal and finding another developer never came up. I have no idea why Nearon was allowed to purchase this land, if they could not pay their fair share of the follow-on development. It was simply dismissed by city staff that Nearon informed city staff that they could not come up with the money to pay for infrastructure and city staff accepted this as fact. I think Costco should have loaned what should be Nearon 1/3rd share of the cost and that Nearon would repay Costco when they made their money off of the hotels that they would build.
I am unimpressed with our city staff. If you have already have a reserve to widen the Stoneridge access you still make it part of the negotiation process, but you don't give it away....which is what our city did.
I would like to hear from our city council members that they are not taking Nearon developer money either directly or through an affiliate. Dublin council candidate members all announced this during their last elections that they do not accept any developer money. Web Link start it from 25 minutes 57 secs into the video. Each Dublin candidate said they are running a clean campaign and are not accepting developer money.

Costco representative Jennifer Murillo, Director of Real Estate Development, clearly said that they came to the City to build a Costco on Stoneridge, for these reasons:
1. Bay Area is the top market area in the nation, ie the per capital spending is higher here than the rest of the country
2. Livermore and Danville are top 10 Costco in the country.
3. Livermore and Danville are impacted stores.... the parking lot are full and their customers will go else where if they can not find parking.
[ I had a conversation with a Costco Manager several years ago. He told me that Livermore and Danville at that time was top 3 stores in the Bay Area]
[ Pleasanton from the demographics point of view is the number 1 in Median income. From Wikipedia

"Pleasanton was ranked the wealthiest middle-sized city in the United States by the Census Bureau" ]

In real estate it is all about LOCATION, LOCATION, LOCATION. The Stoneridge location is at the 580 & 680 crossroads. This is very important. It is a more
ideal location than Danville which is not visible from the freeway and is heavily impacted for parking. Livermore is visible from the freeway, but also is heavily impacted for parking. Parking and long Costco lines will only get worst with the additional build out in Pleasanton, Dublin and Livermore. My guess that Costco-Stoneridge is the ideal location. They would get the drop in traffic from commuters to pick up the daily groceries, while waiting for traffic to die down either heading up to Walnut Creek or heading back out to the central valley during the weeks commute. Groceries is the fastest growth area for Walmart (25%).

IMHO the concern that they may go out of business or the internet may impact their business is not going to happen. Costco wants this deal... and I'm sure they will be willing to pay much more for it than the current deal.

Pleasanton deserves better.

I would like to see a RESET and START ALL OVER AGAIN on the negotiation and for Nearon to pay their fair-share or for Costco to put more into this deal and loan NEARON the money that they should have contributed.

23 people like this
Posted by BobB
a resident of Another Pleasanton neighborhood
on Sep 14, 2017 at 7:09 pm

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This is a good deal. Let's get it done. We voted yes.

18 people like this
Posted by Jake Waters
a resident of Birdland
on Sep 14, 2017 at 8:58 pm

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For all you naysayers: stop it. Stop the fear mongering. Pleasanton will not fall into the sea when Costco is built. Besides, all of you that continue ad nauseam will be shopping there, and will be filling up your car with gas and you know this. Start the tractors and hand out the shovels.

2 people like this
Posted by Howard Jarvis
a resident of Oak Hill
on Sep 14, 2017 at 9:00 pm actually voted "NO"
And thats why this whole thing reeks like a pile of manure.
What an example of "voodoo" economics

16 people like this
Posted by BobB
a resident of Another Pleasanton neighborhood
on Sep 14, 2017 at 10:04 pm

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No meaning -- Yes for Costco. We understood that. Time to move on.

4 people like this
Posted by Rider
a resident of Another Pleasanton neighborhood
on Sep 15, 2017 at 1:55 pm

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@Long Timer

It is my understanding that Nearon is going to sell the property to Costco. After that transaction, Costco would be considered the developer, not Nearon. That is why Nearon is not going to pay anything now.

The city noted in their report that if Nearon or whoever develops the remaining vacant property in the Johnson Dr EDZ, they will have to pay their fair share of the $21.7M cost. The city would use that money to pay back the loan that Costco is giving the city. So it's possible the loan will be paid off in much less than 25 years.

I think my biggest fear I have of this whole deal is that the city traffic engineers are going to pull another Owens Drive stunt and decide to narrow a 3 lane street down to 1 lane so the area will be more "pedestrian and bike friendly". Now you got a bunch of pissed off drivers in 3 lanes all going 40 MPH trying to squeeze into 1 lane that is 25 MPH for 1 block. This creates a huge backup on Owens during rush hour. I think we should put the city traffic engineering office in the BART station on Owens Drive and see what the traffic engineers think of their plan when they have to fight the traffic they created to get home.

5 people like this
Posted by Rider
a resident of Another Pleasanton neighborhood
on Sep 15, 2017 at 2:10 pm

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Top 10 Pleasanton City Traffic Engineering slogans:

10. "Got Traffic? If not, we'll engineer some for you."
9. "Traffic is our middle name."
8. "Just Do it. Don't think about it. Just Do it."
7. "We don't care how far you're going, just walk. Our streets are pedestrian friendly"
1. "Engineering traffic jams for a living"

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Posted by Sam
a resident of Another Pleasanton neighborhood
on Sep 15, 2017 at 8:15 pm

Whenever I need that 5-gallon jar of mayo, I just head to San Ramon.

16 people like this
Posted by Michael Austin
a resident of Pleasanton Meadows
on Sep 15, 2017 at 8:27 pm

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With the new Costco store, when opened in Pleasanton, your trip will be much shorter.

4 people like this
Posted by Flightops
a resident of Downtown
on Sep 15, 2017 at 11:16 pm

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@Rider. #6. " let's give it a year and if the traffic doesn't get any better we will give you back a second lane, TRUST US""

11 people like this
Posted by Patriot
a resident of Birdland
on Sep 18, 2017 at 9:43 am

Great that Costco is coming. Will be a great tax generator for Pleasanton. Reminded of E pleasanton when I drive by on way to Livermore that the corner property was for a Home Depot store, but city loved the complaints about the traffic from a store and couldnt wait to build hundreds of apartments there with more cars and no mass transit nearby.

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Posted by Diana
a resident of Birdland
on Sep 18, 2017 at 12:37 pm

I watched the previous meeting but am confused on why Pleasanton agreed to pay the cost sharing when other communities (Livermore) have not. Can anyone explain?

1 person likes this
Posted by Long Timer
a resident of Golden Eagle
on Sep 18, 2017 at 1:50 pm

Long Timer is a registered user.

the problem does not lie with City Traffic Engineers. They take their instructions from the City Staff who take it in turn from City Council. You have to ask City Council why they instructed and approved a change like this. The only thing that makes any sense to me is that the developer needed additional parking space to make their quota since they were building high density housing.

IMHO, the only way to fix this is to replace the existing council members.

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Posted by Long Timer
a resident of Golden Eagle
on Sep 18, 2017 at 2:13 pm

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Costco came to us not the other way around. They wanted this deal. The city and council wanted this deal so badly that they gave them in my mind a sweetheart deal. They needed to replace the lost earning that would normally come from Stoneridge Malls that was lost to the San Francisco Outlets. So, instead of negotiating from a position of strength, we gave them our 1/3rd and worked out a deal where we end up paying for another 1/3rd via a loan.
This is like going to buy a car without doing your homework. You find out what the wholesale price and any manufacturer incentives and go in work from that price.....If you don't do your homework... you are working from the inflated Manufacturer suggested Retail price and any other mark ups.

I feel that City staff should have done much better.

IMHO, they need to re-do this deal.

If they can't then I am concluding that we have the wrong staff in place.

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Posted by Fact Checker
a resident of Downtown
on Sep 18, 2017 at 2:55 pm

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Trying to figure out how this is a bad deal if you look at the facts...

-There is no public subsidy. But for Costco, there would be no sales tax money at all.
-Costco assumes all of the risk of the loan. There is no minimum annual payment by the City. If sales projections are off and repayment extends beyond 25 years, the City has no further obligation.
-The City still has to make traffic improvements in that area with or without Costco. See General Plan and TIF. Costco is only 44% of the JDEDZ traffic at buildout.

1 person likes this
Posted by Long Timer
a resident of Golden Eagle
on Sep 18, 2017 at 3:45 pm

Long Timer is a registered user.


I understand that with Costco we have sales tax revenue. without someone there ... we have none.

But I don't think the City has done an exhaustive search. It is in a prime location. For example, IKEA was interested in developing in Pleasanton long time ago.... and this location is much better than the 680 location that they were looking at.

It is a bad deal because we could have gotten a lot more for the location. WE DID AN AWFUL JOB AT NEGOTIATION.

IMHO, Livemore and Danville were the top 3 most profitable location in the Bay Area.... per a discussion with a store manager 5-7 years ago. The Pleasanton location is more ideal than either location.....This could potential become Costco
number one site in the north america.

To get this site... IMHO, Costco would have been happy to pay a lot more than 1/3rd.

You made my point. When you said "The City still has to make traffic improvements in that area with or without Costco"

That means that we have money in the bank to cover our part of the improvements.
That's great.

But my guess is that Costco would have covered the other 2/3rds because they need this store. Both Livermore and Danville stores are impacted. Their parking lots are completely full. Customers are circling around looking for parking. The lines are the longest they have ever been in store. We are not even talking about Christmas or the holidays... I am talking about the weekends. I am now noticing that even during the week... I am parking farther and farther away.
The area is still growing like crazy. If Costco could break ground before the end
of the year....they would do it.

BAD DEAL, because we could have gotten a LOT more.

1 person likes this
Posted by Long Timer
a resident of Golden Eagle
on Sep 18, 2017 at 4:04 pm

Long Timer is a registered user.

If Nearon is selling Costco property to Costco....
I assume that they are still developing the property for the Hotels.
If they are they should be still paying their fair share of the development of the intersection whatever portion that maybe. They could have gotten a loan from Costco as well and pay them back when the Hotels are finished.

Sorry, but further commenting on this topic has been closed.

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Nominations due by Sept. 17

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