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The Pleasanton City Council has given its formal endorsement to a plan for funding key roadwork around where Costco wants to add its third Tri-Valley warehouse store, a highly visible spot near the I-580/I-680 interchange.
The 4-0 vote at the end of a 1-1/2-hour special meeting Monday sets the stage for further public vetting of the Johnson Drive Economic Development Zone (JDEDZ) proposal that would establish rules for how the wholesale retail membership store and other developments could open on the north end of town.
“I think this is good for Pleasanton, and I’ve supported it from the beginning,” Vice Mayor Jerry Pentin said Monday evening at the Pleasanton Civic Center. “We have a responsibility in this city to grow our economic development, and this is a great opportunity for us.”
“And right now, we are going to use Costco’s money to do these improvements and create this economic development zone,” he added.
“I just see this as a straightforward decision, particularly since I think the voters — the residents, a majority of them — have said, ‘We want Costco; what are you waiting for,’” Councilwoman Kathy Narum said.
“I think I can support this … but I struggle with it because it is setting a new precedent,” Councilwoman Karla Brown said before voting in favor.
“I’m going to do what I believe most citizens in this town want, and I will support it,” added Brown, who expressed apprehension about the financing proposal when the council first discussed it last month.
Councilman Arne Olson also offered strong support for the deal during the discussion that took place without Mayor Jerry Thorne, who recused himself after previously owning Costco stock in a retirement fund earlier in the JDEDZ consideration process.
The centerpiece of the financing is a sales tax sharing agreement to cover a portion of the roadwork funding, which sees Costco front the city $6,785,000 in cash for the infrastructure work and the city repaying the money with 40% of the sales tax revenue generated by the Costco until the debt is repaid — a first-of-its-kind funding strategy for Pleasanton, but one used by other cities in California.
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 other portions of the financing deal, to pay for roadwork design and construction, call for $6.4 million to be paid by city traffic impact fee reserves and $6,785,000 in a separate cash payment from Costco as part of its developer fee package.
The pending roadwork includes Stoneridge Drive and Interstate 680 northbound onramp improvements, Johnson Drive widening, improvements at the Johnson-Stoneridge intersection, and new traffic signals at Johnson and Commerce Circle and Johnson and Owens Drive (north).
Since they deem the road improvements necessary to accommodate increased vehicular traffic caused by Costco and other JDEDZ businesses, city officials did not want to proceed with JDEDZ consideration without a funding plan in place.
To cover the nearly $6.8 million ultimately covered in the tax sharing agreement, city officials also considered borrowing internally from city-controlled funds, taking out a bank loan or doing nothing and abandoning the JDEDZ at this time.
The balance due to Costco will be subject to 1.5% annual interest, and the 60-40 sales tax sharing agreement would remain in place until the balance is paid off with a maximum period of 25 years.
The city would anticipate repaying the loan in full in the new Costco’s 17th year, assuming 3% annual revenue growth, which is more conservative than typical growth for new Costco stores, according to city staff. Under those figures, the city could repay the loan in 15 years based on sales tax sharing alone — without adding in JDEDZ transportation fees paid by future developers.
The proposed term sheet — an initial agreement between city staff and Costco officials — was unveiled publicly just under a month ago. The four participating council members weighed in during a public workshop Aug. 29, with all but Brown expressing clear support at that time.
The council also asked city staff to iron out a few remaining details with Costco officials before returning for final direction on the financing plan.
Those changes, now incorporated into the term sheet, included stating the city would not have to pay back its outstanding balance to Costco if the Pleasanton store closes for any reason. The debt would also be forgiven if the city still has a balance remaining after 25 years of payments, indicating the Costco store under-performs compared to current estimates.
Officials also clarified for council members what happens if the roadwork project costs exceed estimates.
Any cost overruns for the freeway onramp component would be funded entirely by the city’s traffic impact fee (TIF) reserve — money that can only be spent on projects identified in the General Plan, such as the freeway onramp. Overruns for the remaining components would be split evenly between the city and Costco.
The city estimates design and construction costs at $19.97 million and $1.5 million for right-of-way acquisitions.
For right-of-way costs, Costco will donate any of its required right-of-way, the city will seek other property owners to donate theirs too, and then any leftover acquisition costs will be split between the city and Costco, with Costco’s portion paid back to the company by increasing the city’s tax-share payback amount — though that portion wouldn’t be charged interest.
City staff also added disclaimer language early on in the agreement that “execution of the term sheet does not supersede the city’s land-use entitlement process or guarantee development rights to Costco or any other entity.” In other words, Costco and other projects still need the JDEDZ proposal to be approved.
The updated financing proposal met with mixed response from the nine speakers who commented to the council Monday evening in the council chamber.
Scott Raty, on behalf of the Pleasanton Chamber of Commerce, urged the council to approve the deal, saying it would “enable the timely construction of transportation improvements to Stoneridge Drive and I-680 ramps while generating substantial new tax revenue to the city of Pleasanton and will indefinitely help fund many public services that we equate to quality of life here.”
Resident Frederick Johnson worried about increasing traffic around an oft-jampacked freeway interchange, especially during commute hours.
“The traffic now in that period of time is a disaster,” he said. “If 580 and 680 are at capacity now, I just don’t understand the logic.”
Josh Shumsky, representing a hotel development firm working to purchase land in the JDEDZ, said they are eager to see the proposal move forward and plan to submit project applications to the city right after full JDEDZ approval.
Resident Alejandra Lopez was one of several to urge the council to deny the proposal for giving Costco too much financial support from taxpayers and instead “let Costco pay their fair share.”
The council also heard that local advocacy group Pleasanton Citizens for Responsible Growth retained consultant firm Civic Economics to conduct a third-party analysis of the financing deal.
Conclusions reached by the firm’s Tulsa, Okla.-based partner Dan Houston include that the city’s consultants used overly optimistic projections for Costco sales and underestimated the impact Costco would have on sales tax revenue from existing Pleasanton businesses.
“We think you’re seeing this through rose-colored glasses that people have given you to look at, and we would ask that you look at it through data instead,” Houston said, urging the council to hold off on final consideration and take more time to analyze the proposal and statistics.
Council members weren’t swayed by comments from Houston or other detractors Monday evening, with all four opting to support the financing deal.
The council’s vote technically only authorized staff to proceed with finalizing the term sheet to include as part of the final JDEDZ proposal for future consideration, so ultimate approval of the deal would come with adoption of the JDEDZ.
The move Monday also advanced the JDEDZ forward for new public consideration, a process set to get underway with an Economic Vitality Committee discussion of the JDEDZ this Thursday.
The Planning Commission is expected to hold at least one meeting on the proposal next month before making a recommendation to the council, which is expected to hold one or more meetings on the JDEDZ before taking a final position by the end of the year.
The four council members also agreed that they would be open to allowing two hotels, with a maximum of 231 rooms overall, to begin operating in the JDEDZ before all roadwork is completed.
“If we can develop the roads up to the hotels, then I would support bringing those hotels forward,” Brown said. “I want the $1.8 million to help pay down the road and infrastructure costs as soon as possible.”
The 40-acre JDEDZ area consists of 12 parcels at 7106 to 7315 Johnson Drive and 7035 and 7080 Commerce Circle with a mix of land-uses. A key segment is a 20-acre-plus vacant plot that once housed the now-demolished Clorox research center and is now owned by Nearon Enterprises. Other areas still in use include sites for AT&T and FedEx.
Costco has been in talks with Nearon to purchase a parcel along Johnson Drive though that hasn’t been finalized, according to city staff.
The remaining vacant land is anticipated to house hotel rooms and yet-unidentified retail uses, while existing land-uses in the EDZ area would be permitted to continue as is, protected by grandfathering provisions and not subject to the transportation fee.
Great news! Now, let’s get this’s project moving.
I am so glad that the City leaders had the common sense to move this forward. Happy that they saw through the fodder and the phony “study” that was funded by Matt Sullivan and his friends. I wonder why he has such an obsession with this project?
Thank you City Leaders!!
This article is nothing but propaganda to justify unwarranted and fiscally damaging subsidies to Costco. It goes to great lengths to parrot the city’s misleading and flawed explanation of the financing mechanisms, but gives short shrift to the “detractors” at the meeting last night. Especially concerning is that no details were provided about the Civic Economics analysis which raised serious and legitimate concerns about the city’s methodology and their real ability to make this project pencil out for the public. When the press fails in its responsibility to keep the public informed and serves only as a mouthpiece to power our democracy is lost.
Speaking of sham democracy, the City council excelled last night at kissing the feet of their masters and the true decision makers in Pleasanton: city staff, the Chamber of Commerce, business owners, and developers. As they said, collectively they decided on “Day 1” they were going to support this project. This before they even knew what it was, what the finances would be, or its impacts to the larger community. Fortunately for them, city staff was able to hire consultants who provided the narrative they needed to put a false veneer of legitimacy on their actions. When real concerns were raised, for example by the Civic Economics report, they were unthinkingly discarded as inconsequential. Reportedly, when the City Manager was asked about the report, his response was to roll his eyes and shrug his shoulders.
The only person in all of city government who in the two years of this process has raised any concern about the project finances, Councilmember Karla Brown, was finally pressured last night into supporting it by city staff and a few soccer moms who want “their Costco”. Now, I want to go to Paris for a month and forget about work, but I would probably lose my job and won’t be able to pay my rent. But hey, I’ll just steal some money from my kid’s bank account and go anyway! When my kids complain, I’ll say it’s okay because I used the same slight-of-hand as the city did by stealing $10 million in TIF funds and handing them to Costco in a paper bag. When it comes to spending the public’s money, someone needs to be the adult in the room.
As the saying goes, it’s not over until the Fat Lady sings. And she ain’t sung yet!
(OK. Now you trolls working for Costco can bring on the vicious personal attacks. It’s always easier to attack someone than raise legitimate issues. I guess it’s the price of speaking Truth to Power.)
I am not a troll.
I do not work for Costco.
I do not engage in vicious personal attacks.
My family shops Costco at every opportunity.
Looking forward to Costco in Pleasanton.
Matt: Where is your viable plan for the area? Also, where is the developer you have that will ‘take over’ since your idea won’t float with the current land owner.
The people (who got to vote) have spoken. the people of the region have spoken.
Bring a new Costco and most of us will travel shorter distances to get to one.
Surprised you didn’t mention TWO new hotels. Think of the traffic. yikes.
All this and we only go to Costco maybe once every 2 months or so….. I have no problem taking sales tax dollars from Danville and ‘giving’ it to Pleasanton, who then pays Costco back. You should be happy the City isn’t paying for all non-parcel related expenses!!
A new Costco will have a full parking lot and many happy customers. Guaranteed.
Mr. Sullivan – there is no doubt that you accomplished some positive things while you were on Council. However, everything you are accusing others of doing, you are now doing yourself. You note, viscous personal attacks, etcetera. However, in your post above you accuse the city leaders and Staff of outright stealing of public funds, deception and unethical dealings. Really? What specific evidence do you have? These are serious allegations, not something that you should so easily be accusing people of, especially with the absence of evidence.
You also show your true colors by demeaning women by referring Karla Brown’s supporters as “Soccer Moms”. Those again, are shameful and sexist comments and really have no place in this issue or in this day-and-age. Shows your true intentions and state of mind.
Just accept the loss and quit embarrassing yourself and detracting from your accomplishments. So immature and unprofessional.
BTW-I, like Mr. Austin are NONE of the things that you (inaccurately and immaturely) accuse folks who don’t agree with you.
It’s legitimate in a democracy to criticize elected and non-elected government officials. That’s what I am doing. If more people looked closely at these activities and did the same, perhaps we wouldn’t be in the position we are in today with government at all levels.
Im looking forward to becoming just like any other town in the bay.
Yea for warehouses
@RUK– I’ll be out there with you installing those no parking signs! Bill Wheeler has sucked money from us taxpayers long enough — pay for your employee parking and let the voters and taxpayers in this town get what they voted for.
Mr Sullivan –
I am not a troll. I support the City Council. I support the City Council deciding how to deal with that vacant property based on the current zoning laws and how the people of Pleasanton have voted.
I do not support Back Tie and you dictating to the rest of us what we should do or think.
You lost – get over it. That is how democracy works – sometimes you win and sometimes you lose.
You are just an angry, unhappy man who thinks the people who don’t agree with you and support what you what done are a bunch of idiots.
Boo hoo Matt Sullivan. Nice trolls comment. Enjoy the new Costco.
@RUK — add me to that volunteer work party list I will gladly put those signs up, the freebies are coming to an end!! Might want to stage a moment of silence during the work party for poor price gouging Shell Oil their days in this town are coming to an end lets see how they handle having some real competition.
@Sullivan
I too, am not a troll, I voted for the project, and I am very happy. Please stop with the accusations, name calling, and fear mongoring, because it is very unattractive. You are sounding very familiar to another person that lost. Hmmmm, and the name will come to me.
Matt: you heard of the phrase ‘you can be part of the solution, or the problem’?
You are good at throwing rocks, less at proving a different answer or solution.
the majority of Pleasanton (voters) have spoken. They elected or re-elected the city council and they spoke on MM. What more is needed?
Vast majority want a 3rd Costco location and perhaps a few care about the details of the ‘deal’ that gets a Costco there.
I think you might be better served moving on to fighting the TWO new possible hotels, yeah?
Wow! This is supposed to be about subsidies to Costco and corruption in government but somehow has become about me. No wonder we are so dysfunctional as a society and in our governance. Who is part of the problem?
Matt: just what part of your petty, name calling rant was about democracy? You remind me of another politician who lost and cannot shut their mouth. 4-0 tells me Pleasanton is united on this project. You lost because you treated residents like they were stupid while being less than transparent and not trustworthy. This is not a winning formula. Just ask HRC.
All this is just like the Stoneridge extension controversy. What happened to all of the gridlock on the Stoneridge extension. Whenever I drive it east of Santa Rita it is empty. Same BS peddlers.
Matt said: “OK. Now you trolls working for Costco can bring on the vicious personal attacks.”
Then after responses to this statement Matt says: “Wow! This is supposed to be about subsidies to Costco and corruption in government but somehow has become about me.”
So Matt preemptively attacks commenters as “trolls”, then is surprised when commenters take offense to his remarks and defend themselves.
You deserve every condemnation you’ve gotten thus far.
Like Clinton voters, your side lost. Get over it.
Dan
oh no I ‘liked’ a Dan post. the world has stop spinning….. OK, but to topic..
Matt: where is your solution? rock tossed, no alternative that is viable to the current landowner (developer) eventual landowner (costco) and the City.
AND it seems you totally missed the whole ‘possible 2 new hotels’ bomb.
Just what is your vision for that zone and where were you when the building that took up a big portion was knocked down to make room for…..something different? Crickets….
btw, is a person you don’t agree with a ‘troll’? Is that like when Trump doesn’t like news it is ‘fake news’? Hmmmmm.
<end sarcasm>
Matt-
What do you expect? You came out swinging with your inflammatory (and defamatory) attacks towards our City Council, Mayor, City Manager and Staff, not to mention the MAJORITY of the citizens who support the project. It is difficult to understand why, when you oppose something you call it the democratic process to justify your vileness and ill behavior. When others have an opposing view and give you a little taste of your own medicine, you cower and play the victim. Additionally, your outright insulting attitude towards women (see my earlier post from yesterday) is completely inexcusable.
You seem to have an end-justifies-the-means attitude. As a result, you have lost all credibility and, unfortunately have likely destroyed any positive legacy you may have had with regard your past service to the city. You have also, likely poisoned any future input you may have on future issues. It has also become more and more clear who you likely have alliances (monetary or otherwise) with.
Lastly, if you noticed, I acknowledged your past contributions in my post yesterday and gave you, what I thought was pretty good advice, to stop embarrassing yourself and take a step back. You took that as a queue to accelerate your immature attacks.
Its over, the fat lady (your words not mine) is warming up her vocal chords and will be singing in the very near future, despite your veiled threats to the contrary. Take care and best wishes for a wonderful day.
Mr Sullivan –
It seems you really hate the residents (voters) of Pleasanton, the City of Pleasanton Government, the Businesses of Pleasanton (the Chamber of Commence) and anybody else that does not agree with you.
I suggest 2 things:
1) Go back and read all of your angry letters where over the years you have belittled, criticized and made false accusations against the people of Pleasanton. Then think why people like me are speaking up. You seemed to have a severe psychological block that prevents you from seeing yourslef how others see you.
2) Since you hate everything about Pleasanton, please consider moving someplace else that you do not hate so we don’t have to read or listen to all of you anger and continue to be the targets of your verbal abuse.
Yes, thank you city leaders, it has been a long road! I am so very happy this morning – great news.
The people have spoken and their voice has been heard loud and clear. Despite all of the chaff and fodder that was put forth, and Measure MM, where a “yes” was a “no” and a “no” was a “yes”. Then when it was defeated and crashed and burned, we were told by its supporters that we really didn’t know what we were voting for and were apparently too simple to figure it out for ourselves. Then comes this nonsense study put forth by a group of ‘concerned citizens’ whose only mission was to seek transparency even though they, themselves lacked transparency by hiding their identities.
I would like to be the first to volunteer to install “No Parking Anytime” signs along Johnson Drive. Would anyone like to join me?
Disappointed at the discourse on both sides here – Matt as previous council member, would expect a higher level approach to criticism. Conversely the community owes you a higher level of respect and gratitude for your previous service and continued involvement in our community. We need people that care on all sides.
I don’t agree with your position, but I respect your commitment to our community.