Such hate for costco. Any reason to fear monger.

It's a good company, and i agree the negotiation needs to be transparent and fair, but i don't see (today at least) whole foods competing directly with costco. High end vs bulk, high quality vs value.

It will be interesting to see how Amazon leverages whole foods, i can see a just in time / subscription model that does address a need

Kelly: Do you really think Costco didn't run the numbers on what a new Costco location would do to Danville and Livermore locations? Net net certainly won't be too many new costco members, perhaps some right there in Pleasanton...maybe.

Pretty sure Costco is not afraid of Amazon in any way....yet...

Also, keep in mind there is no lease yet or letter of intent to lease between Costco and the developer. I realize a bunch of people here believe Costco will own the building...they will be a tenant.

@Pleasanton Parent - I am not a Costco hater. I am a member and shop in Danville or Livermore at least once per month

@Scott Hale- I do not pretend to know Costco will react to future investments after the Amazon buyout of Whole Foods. It is most likely that infill locations like Pleasanton will be given a lower priority than non-infill. It is also most likely that Costco will give cities priority which will give huge incentives. I do not see this as still the case in Pleasanton.
I am saying that the "Amazon/Whole Foods affect" COULD adjust investment dynamics and priorities for Costco.

Goldman Sachs downgraded their stock yesterday with the belief that Amazon's ecommerce grocery business will affect Costco.
Yahoo Finance, Dana Blankenhorn, wrote an article which states very clearly her belief that baby boomers will leave Costco for the convenience of delivery service. She is 62 years old, and has been a Costco member for 40 years, but no longer needs "42 rolls of toilet paper" - and would enjoy "a meal kit, or prepared meal delivered to her door soon, with wine or a fresh baguette".

Doesn't seem like a game changer for Costco Pleasanton. Seems like there is strong support for it among residents. I'd also be happy to pick up some of any infrastructure improvements​ needed, speaking as a tax payer.

Kelly: the problem with 'cities' is real estate being available. Plus, since Costco isn't a huge employer (per location) I doubt a city/county would give much in the way of tax incentives; unless it was a special development area looking for a major tenant.
I also doubt Whole Foods showed up on Costco's radar since WF tends to have expensive groceries and that is not Costco's target population.
I don't see boomers leaving Costco anytime soon since many of them have families and NEED bulk. An older/empty nester, not so much....
and if a new Costco reduces the lines at Danville location, I'm all for it.

@ BobB - I understand that you are Costco no matter what the cost. If taxpayers do pick up the infrastructure of $21.4 million, this will be about $850 per household. If the infrastructure continues to increase as it has, it could be over $1000 per household.

@ Scott - I agree that Whole Foods was not on Costco's radar until Amazon bought them. Now it's Amazon/ Whole Foods. That's a big difference. People smarter than you and I have concluded this is a game changer for Costco. Yesterday, Costco stock plummeted 7% on the announcement. Over $5 billion was lost by people who owned Costco stock.

As to boomers leaving Costco, 11% of our Pleasanton population is over 60 (empty nesters?). This corresponds almost identically with the world population at 11.8 % which is expected to reach 22% by 2050. We are an aging population.

Kelly: No stock market change would determine if costco opened a store or not. Not one person 'lost' money on the stock unless they happened to be selling the stock that day. Also, I think you might be giving Amazon a bit more credit then they really deserve. Neither Amazon or WF is Costco's target market. Amazon's grocery offering has been suffering from lack of use and WF has been in woes since regular grocery stores began carrying organic offerings. WF just gives Amazon some brick stores that can double as warehouses. Costco isn't about to change due to that.
And, one last thing, you don't actually think just Pleasanton residents will be shopping at a possible new location, aye?

In negotiating with Costco, the City of Pleasanton needs to look at their sales tax projections used for number of years to break even.

As I recall last year, they were using annual projections of sales increases of 3-5% for Costco. If Amazon/ Whole Foods cuts into this, new projections should be used for years to break even.

"I understand that you are Costco no matter what the cost."

Never said that. You are putting words in my mouth.

Scott: your statelement that "no stock change would determine if Costco opened a store or not" is very absolute and broad. While I agree that some changes would not determine a store opening, this is a very specific and substantial drop in stock price based on a surprise move by competition. Most certainly, this type of change could enter into far reaching future planning of opening stores.

As to: "you don't think just Pleasanton residents will be shopping at the possible new location"- I couldn't agree more. The possible Pleasanton location is surrounded by stores- Hayward to the West, Fremont to the South, Livermore to the East, and Danville to the North. As an infill location, it can take customers from all 4 stores. Its net new customers could be small for several years. A consideration.

Friday Costco gas was $2.69.90 per gallon.
The Chevron next to the freeway was $3.49.90 per gallon.
That is a difference $00.80 cents per gallon.

All the taxes being applied to a gallon of gas beginning July One this year will equate to just under $1.00 tax per gallon of gas pumped.

There were several cars in front of me driving past the Chevron to the Costco gas pumps. There were several cars behind me driving past Chevron to the Costco gas pumps.

Costco will collect and contribute by far, more tax dollars by shear volume, then any other gas pumping outlet.

Austin: no one is disputing that Costco has cheap gas, cheap toilet paper, cheap mayonnaise.

Can you tie it to the topic?

"Yahoo Finance, Dana Blankenhorn, wrote an article which states very clearly her belief that baby boomers will leave Costco for the convenience of delivery service. She is 62 years old, and has been a Costco member for 40 years, but no longer needs "42 rolls of toilet paper" - and would enjoy "a meal kit, or prepared meal delivered to her door soon, with wine or a fresh baguette". "

Or they may have kids or friends living nearby that can bring grocery over, you know, like normal people have done for generations.

Ms Blankenhorn must live a very lonely life if her meals can be replaced by meals-on-wheels with a bottle of Chardonnay delivered by drones. My condolences.

FrequentWalkerMiles: good one! For the record for you and Kelly- Dana Blankenhorn is a man.

Gas sales tax is one tax revenue source from Costco, the regular warehouse sales are another major source for tax revenue.

Costco has been partnered with Google express delivery service for four years now and deliver their Costco products to residential customers from San Jose to San Francisco, I hear they may already be in the east bay in some cities.

Costco is recognized as an industry leader with employees benefits, employee relationships, where as Amazon has quite the opposite history with employee bitterness, poor employee relationships.

M.Austin - you are back talking about gasoline sales tax. Yesterday, your post was so factually incorrect and misleading, that I didn't respond.

Yesterday, you said by July 1, tax will be just under $1.00 per gallon. In fact, total taxes will be about 60 cents on July 1. On November 1, it will go to about 73 cents.

You failed to mention that Pleasanton gets only 1% of the price per gallon. In your Costco example of $2.69 per gallon, this is less than 3 cents.

All of this information was readily available on the internet.

Excise tax - $00.39 cents gallon.
Sales tax - $00.30 cents gallon*.
Cap & Trade tax $00.10 gallon.
Federal Excise tax $00.18 cents gallon.
"All taxes being applied are just under $1.00".

You are again wrong.
California excise tax and sales tax 39.5 cents(gas buddy)
Federal tax 18.4 cents (internet)
Miscellaneous taxes 3.0 cents (gas buddy)
Total 60.5 cents

City portion of 60.5 cents about 3.0 cents

Would you agree on city portion?

If not, ask Costco.

btw... cap and trade is not a tax. Go to EPA website. It specifically says "this is not a tax"

Gas tax? Perhaps a reminder here where the anti costco measure (well, really any retail box over 50k sq feet) was born. Black Tie did not want to lose their free parking and the existing gas station (owners) did not want to have to compete with a very big new gorilla in their area of operation. When those 2 fragile complaints didn't hold much sway the rest was born: stock ownership, infrastructure costs (which will happen regardless). then we had pollution and most recently 2 police officers had opinions on why there should be no Costco.
Very bottom line people are ok with a new Costco; way way over a simple majority. Expand out from Pleasanton and that increases.
Build it, they will come.

A.Miller - I would not expect that you would admit that you are wrong.

S. Hale - the gas tax was brought up by your side. The 3 cents per gallon Pleasanton will receive is correct. Not nearly as much as implied.
I agree. Gas tax is not the topic of this thread.
In response to your comments, this thread questions: are the economics now sufficient for Costco and/or the City to move forward and to "build it" as you suggest?
Your statement that "people are ok with a new Costco; way, way over a simple majority" leads to two more questions, please: was Costco on the ballot and do you believe people are ok with a new Costco at any cost?

Lisa: Um, did you read my comment? Pretty sure it included '(well, really any retail box over 50k sq feet)'. That would answer your question, no? Certainly Costco was not 'named' directly in MM, but that's what the aim was. I mean, really, how many stores are over 50k feet in size? One only had to look as far as who funded MM in the first place....... One biz who didn't want to lose free commercial parking and another who didn't want competition.
And now down to debating gas tax and who gets? Silly. A new Costco with fuel stations will NOT increase gas demand, it will distribute the current need to a broader amount of locations. and THAT is why the current gas stations have the knickers in a wad.......
Me, I already have cheap gas very near. A new Costco would reduce traffic/lines at the Costco we use, hence my support. Oh, trust me, if a new Costco is built, they WILL COME. Guaranteed and not one customer will pay attn to the new roads, signals etc or worry who paid for it. And really, Costco as a TENANT, shouldn't pay for it. The developer/LandLord should.

Scott: You did answer one question: was Costco on the ballot? The answer is no.

Another question you ignored: are Pleasanton residents willing to approve Costco at any cost? (infrastructure at $21.4 million, tax breaks with revenue sharing)

A third question none of us know: are the economics still sufficient for Costco and/or the City to build.

Lisa: I believe I answered your question before you even asked. Made it pretty clear that MM was about no retail box over 50k sq feet. Not exaclty sure how much detail you wish? Costco was not in the text of the measure, certainly. But, then again, how many big box retailers have stores that require over 50k sq feet that have maybe/or maybe not showed interest in Pleasanton?
I also answered your 2nd question (many times in threads). Costco would be a tenant, they will not own the building. So, why WOULD they pay for surrounding improvement costs? Answer: they wouldn't. All up to the developer and eventual owner of the actual building. Should the City assist; well certainly if it is on public property ie traffic signals, road improvements etc. I also presented the opinion nobody who would shop at a maybe new Costco would care who paid for the A) Building B) the road C) the traffic signals and on and on. They would enter the store, do their thing, pay, leave.
Your 3rd question is not for 'us' to decide. The developed area is happening no matter what. Costco only cares if this new store will eventually produce a profit. And yes, it is their duty to their shareholders,to ask for the moon and hope for something in between the moon and reality. but, I should remind all, no lease has been signed. No word of even a letter of intent to lease. The CITY will have no word in the actual lease as that as it is between the landlord and the tenant. Keep in mind something is going there. AND it will be some form of retail or retailers. Pretty sure the City is aware of approx 1/3 of voters who weren't/aren't happy with the proposed, leaked, speculated, non-signed or agreed to details that have been presented (and invented) here. And hopefully the vocal ones here have done enough that the City staff won't come to agreement and sign before presenting what the details are. Although, that still won't make the vocals ones happy, just shift the debate (again).

Scott: I agree that the developer, Nearon, should pay. In this case apparently it isn't happening. City documents show that Nelson Fialho, City Manager, is dealing directly with Costco regional manager for sharing the costs of $21.4 million infrastructure.

My original topic posted 3 days ago, questioned if Costco would still open a Pleasanton store after the Amazon purchase of Whole Foods. It stated that Pleasanton is an infill location between Danville and Livermore, and therefore may not have the same priority to Costco of a new non-infill location, especially if another city is willing to give more incentives.

Today, being the next trading day after the Amazon/ Whole Foods announcement, another major institution, Deutsche Bank, became the second to downgrade the stock, and another $1 billion of Costco market capitalization was lost.

Now I'm wondering if the City of Pleasanton should still consider a $21.4 million investment in infrastructure which could take 15-20 years to break even. Should Costco's sales be affected, as many financial analysts fear, it could take even longer for the City to break even at a slower growth rate for Costco. The City's planned borrowing for the infrastructure has become more risky.

If Costco builds, we could see an empty warehouse in 10-15 years. This article says membership per household is declining. Costco is a good company, but the risk now is greater to Pleasanton to spend $21.4 million than it was a year ago.

Web Link

@Kelly K,

I understand that you are against all growth and development in Pleasanton, no matter what the terms, but many of us would like to see a Costco at this location in Pleasanton.

Hey BobB- you accuse me falsely for being against all growth. I posted a topic on June 9 "Way my No Vote on MM, a Yes for Costco? If you look on page 2 of Town Square, you can find it. In the topic, I explained that one of the reasons for my no vote was that MM was too restrictive and limited retail to 50,000 square feet or less. It was a no vote on restrictions. Does this sound like I'm against all growth?

I am trying to express my opinion with the facts. Did my previous post 3 hours ago misrepresent the current facts?

Um, Kelly: Your facts don't seem to hold a lot of water. did you check the last 3 years of gross revenue for costco? Please take notice of the trend...a hint it is not downward. Please also research net income last 3 years. the trend. which way?
A new costco, as I posted many times, will not 'create' many new, never been, customers. It will take from the installed base and maybe an existing member 'might' shop more if a new Costco was closer or more convenient. No way a costco at this location would be 'closed' in 10 years. And, no, the Amazon purchase will have net net no effect beyond lowering grocery costs at a premium grocer outlet. And CERTAINLY if costco does have plans here, they won't change because of any of the above or the vocal minority up in arms when nothing has been agreed to and certainly nothing has been signed.
Build it, they will come. Guaranteed.

"Did my previous post 3 hours ago misrepresent the current facts?"

Yes.

You said: "@ BobB - I understand that you are Costco no matter what the cost."

Scott- surely you would not use the last three years to predict the future. What are your feelings about the article which quoted Costco membership is down in households in the last quarter. This is a little more current than 3 years ago.
Is you contention, that against financial analysts' belief and contrary to a $7 billion market capitalization loss in 3 trading days, Costco will not be affected by Amazon's acquisition of Whole Foods? Certainly, many believe Costco will be affected.

BobB - can you furnish me any blog that you have made which says you are unwilling to support Costco at a certain cost to the taxpayers? If so, I will stand corrected.

@Kelly K.,

You already stand corrected.

Getting back to numbers...is a $21.4 investment with over a 20 year break even wise for the City of Pleasanton? Especially, considering Costco's household membership is down for the first time that I can find in recent years, and Amazon/ Whole Foods is a new competitive announcement.

On February 24, Fortune Magazine says ..."Costco trails the competition in developing a digital platform, perhaps the most vulnerable of all" (grocers).

"Amazon is broadly expected both to revamp Whole Foods' retail stores, and leverage them to enhance Amazon's own food-delivery operations. That would intensify an already-challenging environment for traditional brick-and-mortar grocers, who are fending off attacks from meal -delivery services and low-cost entrants like Trader Joe's and Aldi"

Again, I ask: do we want to spend $21.4 million (City staff's estimate) to assist Costco? What if it becomes $25 million?

Will we have an empty warehouse in 15-20 years?

Last post should read "On June 24, Fortune Magazine says..."

Yes, build the Costco. What a great location for it.

Costco Has a digital platform.
I have been using it for nearly ten years.
Costco also partners with Google shopping Express delivering Costco products to residential and commercial customers since early 2012, five plus years.

@BobB

I have quoted the City staff at $21.4 million, which I believe could be $25 million or more before completion.

You seem to be fine spending this amount of taxpayer money, saying "build it". Is there an amount which you would consider too much?

The City may also consider tax breaks. When would you say "no".

Lisa are you aware the infrastructure costs will be incurred regardless of what the final tenant or tenants will be? You seem to feel the costs are only going to happen if Costco actually signs a lease with the developer or landlord?

Also, please research when a costco warehouse/location has closed (not just relocated).

You might also want to track their financial statements for the last 5 years. Gotta check their trend.

Scott- infrastructure is normally paid by the developer; not the City.
In this case, because Costco is proposed as an end user, the City is considering picking up the costs. The City is dealing directly with Costco. Only because this multi- billion dollar company demands incentives to locate in a city, are we considering this expenditure,

In the current discussion with the city of Pleasanton, developer and Costco corporation. It is the city of Pleasanton that is demanding. Not Costco.

Anonymous anti Costco people are simply continuing with their rhetoric of gloom and doom if Costco is granted permit to build in Pleasanton. The majority of registered voters in Pleasanton have stated to the city council of Pleasanton, "BUILD IT", we will shop.

The anti Costco people are continuing with their rhetoric that they did not understand the ballot language, they voted yes because they want to continue to discuss their anti Costco rhetoric before the city council. The anti Costco people insist that the cost is astronomical when their is no firm cost agreement.

The anti Costco rhetoric goes on and on.

Costco demands the City pay for infrastructure. To say there are no demands by Costco in the current discussions is misleading. Costco has already made its demands through their regional manager, Mike Dobrota.

True, the City is now trying to get Costco to pay a small portion. Costco is balking.

Costco demands? really? Pretty sure they request and negotiate. In fact, as a public corporation it is their DUTY to do so. And, yes, they may ask for the moon and accept something below that in the end. Again, it is their duty to do so.
Let's be clear here as well. Costco will not own the building, they will lease it from the developer and or its assigns. There is no lease signed. There is no agreement with City or County (yet). The infrastructure costs will be incurred no matter what or which tenant lands there.

Hmm...more attempts at misleading...

Call it negotiations, call it requests, call it requirements....Costco's standard operating procedure is to require incentives to locate within a city. Look it up. It is all over the internet, city after city -- millions of dollars from each for infrastructure, revenue sharing, reductions in property taxes.

Developers pay for infrastructure. Yes, infrastructure will be paid for. Not by taxpayers for the profit of a muti-billion dollar company that needs no handout. Costco/Nearon should pay for infrastructure.

Misleading? Yes, I believe that occurs in this thread. Perhaps you need to understand via research just how a publicly owned corporation works? Are you aware the board of directors would fire the top managers if they didn't do their job? Are you aware the board of directors is responsible to the shareholders? Costco CAN ask for the moon. They can require/demand/beg. It is called fiduciary duty. Look it up. It is a negotiation. And, I think many here reading believe Costco is A) Building the warehouse and B) will own it. Not true. They will be a simple tenant with a lease with the developer or whomever it assigns to manage the location. Those are facts, not misleading.
Many also believe the infrastructure won't happen if Costco doesn't sign a lease. Also not true. Should the developer pay for upgrades not directly on their property? Perhaps. Should a tenant? Not normally.
Costco can ask for stuff until they are blue in face. They will either get it; a portion of it and if they don't, they certainly could decide to open a new location in another site (oh, poor Dublin here comes a Costco). As you correctly pointed out they are a 100+ billion dollar corporation. They won't shed tears if a Pleasanton location doesn't pencil out. Mostly because they know net-net there won't be a large increase in their gross revenue since a lot of a new store will cannibalize customers from the other 2 locations already IN the area. Seems to me you should concentrate on the DEVELOPER.

You say "seems like I should concentrate on the developer". Very interesting comment.

I have said many times that developers pay for infrastructure. Why the City has chosen to deal with Costco directly is hard to understand, but this is what documents show that were provided to the public.

The City Manager, Nelson Fialho, was dealing directly with Mike Dobrota, regional manager of Costco, regarding infrastructure, borrowing, interest rate, revenue sharing.

Why should we, the taxpayers, pay $21.4 - $25 million? This should be the developer, who then collects portions from the tenants like Costco.

Lisa I still don't think you fully get it yet. The infrastructure costs will happen regardless of who the final tenant or tenants are. the city will pay because, really, it IS a city responsibility. If they can get the developer to 'help' pay for improvements, good for them.
Once again a reminder. There is no signed lease. No letter of intent to lease and no agreement signed with the City or the County. the city has zero say in whether or not Costco is a tenant beyond regular permits for a retail establishment.
Seems your fight is with the city and the developer, not Costco. Shouldn't you have been involved prior to the office buildings being knocked down? You do know that is what was there, yes?

Yes, and we should get 100% of the sales tax revenue not 60%. This was a very bad deal being negotiated with Costco last year.

Scott,

You are wrong with your statement "The infrastructure costs will happen regardless of who the final tenant or tenants are. the city will pay because, really, it IS a city responsibility. "

The developers are responsible for infrastructure improvements. This is the same for residential and commercial. The infrastructure costs are determined by the uses planed for the area. If the new uses are the same as the old uses then there will be minimal infrastructure improvement costs (paid for by the developer)

Since much of this thread has evolved into discussions of the costs of infrastructure and how this will be payed, I would like to venture a guess on the City's negotiations. Based on the terms of past negotiations and the present costs, here's what I see as the final proposal the staff will make to the Council:

The staff and city manager would like to cover the $21.4 estimated costs of infrastructure by 1/3 of the cost ($7.1 million) from our city reserves, 1/3 of the cost from borrowing from Costco, and 1/3 of the cost from Costco/ Nearon.

It's not going to come out to be 1/3, 1/3, 1/3. I think it will be: $6 million from our reserves, $9 million borrowing plus interest, and $5 million from Costco (net after credits for all studies, reports, etc. Last year the City offered a $1.2 million credit to Costco).

I believe the borrowing (from Costco) will be paid back over 30 years @ 4% interest with revenue sharing of the sales tax at 60/40 ratio. (The City would like to do 20 years, but that's impossible on $9 million with a 60/40 split on sales tax).

We will be asked to deplete our $6 million in reserves and to pay $15.5 million in total borrowing ($9 million principle; $6.5 million interest) and to repay the borrowing by getting only 60% of our sales tax for 30 years.

If the infrastructure goes to $25 million in 2-3 years, the additional money will have to come from our general fund, or additional borrowing. This contingency should be covered in the recommendation to the Council.

Anyone else like to venture a guess?

Kelly,

I find it interesting that the Costco proponents are silent when it comes to discussing financing of infrastructure.

$9 million borrowing seems like a deal killer. As you said, this will take 30 year financing, and cost over $6 million in interest.

I really see no solution unless Costco/Nearon kicks in $9- $10 million and the City borrows $6 million.

BTW... your total of $6 million from reserves, $9 million from borrowing, $5 million from Costco was $1.4 million short of the City total of $21.4 million.

This seems impossible to reach, especially allowing for contingencies.

@Lisa S,

Regarding your question above, when would you say "no"?

Bob,
I am happy to respond. I have repeatedly said developers should pay for infrastructure- this means all infrastructure $21.4- $25 million.

I keep seeing Costco will be a "Tenant" and Nearon should pay the development costs. Is this really a good thing? Seems that having Costco directly on the hook for the payoff would make more sense. I'd never even heard of Nearon before this came up. Seems like a multi-billion dollar company like Costco would be a much safer risk. Since they are going to get most of the benefit of the city funding (our tax dollars), they should be directly tied to the payback. I too have seen articles raising red flags about the weaknesses and risks of Costco's business model over the long term. Based on this, it doesn’t seem responsible for the city to accept anything over a 10 year payback on our infrastructure investment.

Dale,
The City will be borrowing (most likely from Costc) to do the infrastructure. I know that it doesn't make sense that we the taxpayers are borrowing, and paying back with our sales tax money to build the infrastructure.
I agree that any break even of more than 10 years is risky. Most likely it will take us 20 years or more to break even. The borrowing may take 30 years to repay.

The City should soon reveal the entire proposal of terms. It will be very interesting to learn how much we will need to borrow.

Kelly K's and Lisa's cost estimates are dead on. If you have any doubts, go read the documents the city was forced to release on their negotiations with "Costco" and "Nearon". They offer a clear picture. I've yet to see any "real" evidence produced to contradict the information in these emails and documents.

BobB,
You asked for my position on "when would I say no (to Costco)". My answer was: unless the developer pays for all infrastructure, it's an easy no for me.

Now, I ask you the same. When would you say no? Kelly K has outlined the most likely scenario which will require the City (taxpayers) to borrow $9-10 million over 30 years, and to pay over $6 million in interest. Also, to use our $6 million reserve fund which we have accumulated over many years of savings.

Would you say yes to this?

Have negotiations broken down with Costco? I believe they have. The $21.4 million infrastructure became insurmountable.
Even using our $6 million reserve, it left a $15 million balance which will most likely will require $10 million in City (taxpayer) borrowing.

With the previously negotiated 60/40 sales tax split with Costco and Costco's estimate of $900,000/annual sales tax revenue, it could take a lot longer than I originally thought to repay the $10 million plus interest. It could take 50 years.

It just doesn't work. Can anyone show me how it does?

Kelly,

Your 50 year payback is correct for borrowing $10 million with a 60/40 split on sales tax revenue with Costco. In fact, it's over 50 years.

No one has countered. Proponents of Costco are silent. The Costco bloggers are silent.

Negotiations? Transparency? Nothing.

Despite increased store sales reported in June, investors are bailing on Costco stock. Since June 15, the company has lost $13 billion in market capitalization. Today was another very bad day.

Some believe that its business model of bulk selling may not work for milleneals, as boomers age. Costco also faces stiff competition from ecommerce with Amazon/ Whole Foods. As I said in my topic, Pleasanton as an infill location, between Livermore and Danville, must be reexamined as an investment. Most likely, Costco will want to contribute less to infrastructure. The City Manager and Council must consider these factors in long term borrowing.

In Costco's annual report, it mentions this as a risk factor:

"Our growth is dependent, in part, on our ability to acquire property and build or lease new warehouses and regional depots. We compete with other retailers and businesses for suitable locations. Local land use and other regulations restricting the construction and operation of our warehouses and depots, as well as local community actions opposed to the location of our warehouses or depots at specific sites and the adoption of local laws restricting our operations and environmental regulations, may impact our ability to find suitable locations, and increase the cost of sites and of constructing, leasing and operating our warehouses and depots. We also may have difficulty negotiating leases or real estate purchase agreements on acceptable terms. In addition, certain jurisdictions have enacted or proposed laws and regulations that would prevent or restrict the operation or expansion plans of certain large retailers and warehouse clubs, including us, within their jurisdictions. Failure to manage these and other similar factors effectively may affect our ability to timely build or lease new warehouses and depots, which could have a material adverse effect on our future growth and profitability.
We seek to expand our business in existing markets in order to attain a greater overall market share. A new warehouse may draw members away from our existing warehouses and adversely affect comparable warehouse sales performance and member traffic at those existing warehouses.
We intend to continue to open warehouses in new markets. The risks associated with entering a new market include difficulties in attracting members due to a lack of familiarity with us, attracting members of other wholesale club operators, our lack of familiarity with local member preferences, and seasonal differences in the market. In addition, entry into new markets may bring us into competition with new competitors or with existing competitors with a large, established market presence. We cannot ensure that our new warehouses and new online business websites will be profitably deployed and, as a result, our future profitability could be delayed or otherwise materially adversely affected."

Kelly,
I read and reread you post and the risk factors Costco included in its annual report. Seems like many cities are enacting laws to restrict or prevent Costco from building, yet our city officials are not only welcoming them with open arms, but plan to subsidize them with infrastructure which will cost between $21.4 million and $25 million.

Costco talks about environmental regulations- but, again there is no concern from Pleasanton staff or council.

Yes, the long term viability of their business model is at risk. Wall Street is telling us this.

Should we borrow to provide infrastructure? I say: No Way!

Lisa,
Where are you getting the information that our city is paying for this?

I've heard and read speculation around how the city would pay if it was the only option but have yet to read or hear any city official or publication indicate any intent to do so.

Pleasanton Parent,

I stated "subsidize them with infrastructure which will cost $21.4 million to $25 million". How much we will be subsidized by the City is unknown. There is no transparency.

We were told that we would know financial details by mid- June. That has come and gone. Kelly K makes a good case that the financing will be:
$6.4 million from our reserves
$5.0 million from Costco/Nearon
$10 million city borrowing

This would be $16.4 million subsidy by the City. The problem is borrowing $10 million doesn't work. It takes over 50 years to repay at a 60/40 spiit of sales tax.

What is your guess as to the financing of the infrastructure? Do you have an idea as to when we will learn? Do you believe the deal could have fallen apart?

Lisa,
So the answer is, this is all speculation. Thank you.
I'll wait for facts before I form an opinion

Pleasanton Parent,

It is not all speculation as you suggest.


First, the City did set aside the. $6.4 million just last month to subsidize the infrastructure.

Previous documents provided by the City show negotiations were centered around a combination of borrowing from Costco and a contribution requested from Costco. The borrowing was to be repaid with a 60/40 split from sales tax revenue. Costco was to receive a credit of $1.3 million for environmental reports, etc. The net contribution by Costco was about 25% of the total infrastructure.

Pleasanton Parent,

You will wait for the facts before you form an opinion. Normally, I would agree. The problem is: we will be given very little time. The final details will come (finally, after 3 years) and most likely the council, (a majority being pro Costco), will vote within the next meeting or two. If not then, quickly thereafter. The details will be known to some of them well in advance of the public.

It is important to discuss the most likely scenarios now. Would you agree to borrowing to subsidize the infrastructure? What if it's $8-10 million? If so, it would be a long term bet on a company whose future is being questioned by investors. Competition from ecommerce will be a factor. Buying preferences of millennials will be a factor.

Today you may want your 52 rolls of toilet paper, your 8 lb jar of mayonnaise, your case of oranges. Later you may have a smaller house, a smaller vehicle for transporting these items. You may not want to pay an annual $60 membership fee.

We need discussions now. I voted no on MM, but not yes to Costco, especially with terms which are likely to be unfavorable based on past documented negotiations.

Many of you may have seen this article by CNBC yesterday. It makes a good case for our city not to spend millions on infrastructure for Costco, especially not to borrow to do so. The article mentions Costco specifically as a retailer to be hit with losing a share of the retail market to Amazon.

This chart shows how quickly Amazon is 'eating the retail world'

Amazon's share of retail sales across the U.S. in key categories is about to accelerate, MKM Partners' Rob Sanderson writes.

Read more: Web Link

Sent from the CNBC app. Available for iPhone and iPad

Now that the same 2 people have undeniable proof that it's the end of the world for Costco maybe they have a better idea for something to be built there that will never leave town, that won't generate any traffic, will pay good wages to their employees and won't take any parking away from Blacktie Limo or sell gas below the inflated prices of our local Shell gas stations!! Being a town of sneaky back door deals nothing will surprise me with whatever gets built on that prime piece of property. Really enjoying the ping pong match, good luck changing our majority vote!

@Flightops,

Totally agree. Amazing the amount of FUD coming from those two posters. I'm sure they have no connection at all to the local gas stations that stand to lose business to cheaper Costco gas, or to Blacktie Limo that stands to lose the free parking.

Two anonymous posters putting up misleading information while claiming expertise.

Before Measure MM reaches the city council for their approval, the two anonymous posters will have the city cost at $50 million and the pay back time at 100 years!

Attacks rather than any facts. Accusations of being associated with gas stations and limos. I guess that I could say you are associated with Costco and Nearon, but I will not go there.

I will answer the only the only question, posed as a statement: "perhaps they have a better idea of what can go there." I will reconfirm that I am in agreement with Matt Sullivan that R&D and manufacturing would produce better economic diversity, better paying jobs and less traffic than a Costco.

Now, will one of the three of you answer my question: how will the $21.4-25 million in infrastructure be paid? I have asked many times. There has never been an answer.

simple. the developer should pay, but question is would they still if the City gives in to a minority of vocal people (here in this forum, not city wide) and says the City will pay for no infrastructure on City property. What happens if the developer walks away??
The time to complain about what would go there was the moment y'all learned the office building was coming down. Somebody suggested R&D could go there? What? Replace office building with another office building? Not happening. Having a park there. Not happening. That boat sailed and sank. It will be retail of some sort.
And the entire opinion that Amazon will hurt costco is horse dropping. Amazon bought a high priced grocery chain. Not costco's target. Amazon's grocery offering has SUFFERED, hence the purchase.
No, this all started as Black Tie having a cow their free parking would be reduced and a few gas stations would need to begin to compete or go bye-bye. the rest came about when the 2 above failed to get any traction.
And, please, keep in mind Costco already knows a new store won't really add to their bottom line as most of the sales will be from already members who go to one of the other locations.
MM lost. Move on.

Scott,

You are the only pro-Costco blogger who will say the developer should pay for infrastructure. This would mean no use of our reserve, no taxpayer borrowing, no sharing of sales tax revenue. I completely agree.

This developer, Nearon, hopes by bring in Costco, they get free infrastructure for their entire development: Costco, hotels, etc. Obviously, this is not the real world. The developer, backed by the chamber of commerce, was able to get city officials support for a very bad, one sided deal, which was brought to light by Measure MM. I did not vote for MM, but believe a greater awareness was the result.

If the developer is not willing to pay for infrastructure, I will use the term you used: they can go bye-bye. Other developers will step up. This is prime land with freeway visibility. There will be no shortage of interested developers.

We cannot, and should not, pay for infrastructure -- especially through long term borrowing.

glad we agree on something....and yeah, I'm one of the brave souls who post on the Costco/developer issue, even tho I don't live in Pleasanton. Dropped a crap load of sales tax there and do pass thru/by daily...but wasn't a voter. AND I've been in the thick of this since day 1 when the only complaints were from Black Tie and gas station owners, who funded MM. When those didn't work out it spiraled out of control. Really, the Mayor has a mutual funds that had Costco stock. Really? And he didn't disclose in a timely manner. yeah, that is why the Mayor is for the development zone that might include costco. Not.
So, latest is who will pay for the required infrastructure costs to upgrade the area. Well, a lot of it IS on City property or right-of-ways. Does the City really want Costco and should they (the city) pay. Me, I don't think having a Costco really brings much employment and/or tax dollars to the table. yeah, they have 100+ employees per site; big deal. Will it bring a load of sales tax to Pleasanton; heck yes at the expense of Livermore and Danville, tho.
If the developer ceases all work and walks away, pls do tell us which developer would want that property and what would y'all allow them to build? Note office building or space is not an option since that is exactly WHAT was there. Me, I'm selfish a new Costco would reduce warm bodies at the Danville Costco; a win for me.

You and I both know prime, undeveloped land with freeway visibility will not sit there forever. This developer and the city would lead you to believe that Nearon are the only ones. If they walk, there will never be anyone else. No true.

A new developer will come. They will pay for infrastructure. This is the way that it's always been done. Possibly, you will get your Costco. Pleasanton taxpayers will not be in debt.

Definitely not willing to pay for infrastructure costs or any other costs that the developer should be paying but also we must walk a tightrope here because if plan A leaves town I'm afraid plan B would be condos/apartments or stack and pack housing given the cities tendencies to give-in to developers of mega density complexes! Maybe Blacktie Limo would be willing to relocate to that property and put a shell gas station there also, problem solved, everybody happy?

Fiightops,

You are now the second pro-Costco blogger to agree that the developer should pay for infrastructure. The problems are no longer the limo guy, the gas station guy, Measure MM --It's the infrastructure which has gone from $15 million to $16 million to $21.4 million in just over one year. (All are city staff estimates). At this rate, who knows what it will be in 2 years.

If Nearon will not pay, then we can focus on plan B.
If Nearon pays, you get Costco.
Simple.

what is it with our city's elected officials that they can't competently negotiate? seems to be a trend lately...

Lou,

To answer your question, incompetent deals are made by the City as a result of Chamber of Commerce having undue influence over our City Manager and Council.

Special interests (developers) influence the Chamber, which in turn helps elect the Council.

Often, the City does not make good business decisions. The documents from the previous Costco negotiations are a good example.

On a separate note, Costco had another very bad day on the stock market today. It is now down $15 billion in market capitalization since June 15. This is far more than the Amazon/ Whole Foods buyout. Investors are fearing a long term reduction in retail/wholesale market share for Costco.

Lisa: ah, er, um: the entire market was down today. Costco just followed with it and not for the reasons you have posted. Look at the last 5 years of Costco. Gross Revenue trending upwards. Net income same. Costco is not in 'trouble' and certainly not to the extent of effecting store openings (or closings). They know here, in this area, a new Costco won't add much to their bottom line since most shoppers will be coming from one of the 2 locations.
As far as the Council; well, just had elections and didn't the incumbents all win? the Mayor by a wide margin?

Scott,

I answered Lou's question regarding the trending incompetency of the City's negotiations. You, yourself, have said the developer should pay for infrastructure. City documents from last year show Costco/Nearon was only to pay a minor share, a net of $3.8 million. This was negotiated between the City Manager, Nelson Fiahlo, and Mike Dobrota, regional manager of Costco. This is very hard to explain unless there are outside influences.

As to your statement "the entire stock market was down today "- you know that is false. The S&P 500 was up; the Nasdaq was up; only the Dow Jones Average was down slightly, .03%. Costco was down 2.02%. That is 67 times worse percentage wise than the Dow. Costco lost another billion dollars today in market capitalization.

Lisa: Actually I said the developer should pay, but if the numbers don't work for them they could walk away as well. Because no doubt they didn't factor in paying for City right of way infrature. And if they do walk away, then what? Who would buy it? Maybe y'all should have been up in arms before the office building was knocked down, aye?

And yes, the market was down. Perhaps not every single index as you noted. HOWEVER, your drilling on costco's stock price has nothing to do with anything beyond investors. Have you reviewed Costco's financial reports for the last 5 years. Notice the trend?

If I were Costco I'd dangle a store location in Dublin and that would be that. Nuff said until there is A) a signed lease and B) a signed and approved deal.

Scott,
I don't know about Lisa, but I was in retail a few years ago. When competition moves in, or people change their buying patterns or preference, the last 5 years of sales, makes no difference. The past does not predict the future in retail.

The City has promised us financial details this month. If they are to live up to their promise, there is only one more Council meeting. Next Tuesaday, the 18th. Watch for this date. Maybe we shall know more then. Or, maybe there will be another delay.

In either case, we should not be held hostage to pay for infrastructure, just because of fear that there will be no other developers.

As to Costco dangling a store location to Dublin- Dublin would not negotiate paying this amount for infrastructure. Not the full amount; not the 75% previously negotiated by Pleasanton. If Costco thought Dublin would be this foolish, they would be trying to locate there.

Costco has found the incompetent negotiators. They need look no further than Pleasanton with its Chamber of Commerce influence.

It looks like the Costco issue was pulled from the July 18th Agenda. Word is that Nearon's [removed because it could not be verified.]. All they have left is Costco. Which puts the viability of the overall development in question and makes the city's agreement to pay two-thirds of the $21 Million for infrastructure even more risky.

Dale,
Interesting statements - why would the risk level of spending $21M change? But more importantly - I'd love to see the agreement the city made committing to spending that $21M......because I've yet to see any evidence of any agreement....ever.

@Dale
Interesting that you learned that you learned that Costco will not be on the agenda for the July 18 meeting. More delays. A[removed because it could not be verified.].This does change the economics of the City's investment for infrastructure.

@Parent
At the June Council meeting, the staff and the City Manager did state that the infrastructure is now estimated at $21.4 million. If the City pays 2/3's-- this will be $14 million. If the City develops the infrastructure just for Costco, the economics for break even to recpture the $14 million will take longer than if other uses were in the JDEDZ. The City has essentially become a developer using taxpayer funds and borrowing to build infrastructure for land that has only one current use. There is a big gamble on future uses. I think this sets a precedent which has never been done in Pleasanton. Break even could be many years.

I see that a portion of Dale's email was removed because it could not be verified. Then again removed in my email for repeating the quote from Dale. Fair enough.

Certainly, the point made could be refuted by someone, if it were incorrect. I have no idea where Dale got his information, but no one refuted it.

Bottom line...there is no transparency.

I think we need to know if the two hotels have backed out. This was reported Dale M. It has not been verified. We need transparency.

Paying for 2/3's of the developer's responsibility for infrastructure ($14 million) is poor negotiations. If it is now true that there are no other uses at this time-- it is a ridiculous use of taxpayer funds to benefit the developer.

If this happens, and is approved by the Council, special interests have prevailed.

@Lisa S and @ KellyK -
We get it, you are against Costco...
Your obsession with this thread is getting to the point where it is working against you. You have made your (unverifiable) statements and we get it, we get it, we get it.

Somehow the impression is that this is your personal thread. If you have such strong feelings, then why haven't we seen you at previous City Council meetings voicing your opposition?? At each meeting there is an open forum that allows anyone to address the Council on any non-agenda item. Where have you been??

Nothing is going to get settled through this forum. Perhaps you have lost sight of that fact.

Also to state that in retail the past does not predict the future, that is just a silly, silly statement. How do you think retailers plan expansion and contraction through a crystal ball?

Enough already

@RU,

Most of this thread has been based around:
--changing competition for Costco and the resulting financial implications for the City
--who pays infrastructure
--potential other uses of the land
--forecasting future sales when competition changes, and how past sales are not a predictor of the future
--transparency of negotiations

Now, that a new topic has emerged about the hotels (not introduced by me, but by Dale M), you seem quite irritated. When people no longer want to discuss these issues, they will stop blogging.

I voted against MM. If this were a thread strictly against Costco, I would be focusing on traffic, pollution, crime, etc. It has mainly been a financial discussion.

@Kelly K.,

"Crime" associated with Costco? That's beyond funny.

Bob,

Is this a topic that you really want to debate, especially after the two recent robberies in Danville? One where a gunshot was fired and a customer was taken to the hospital for shock.

Web Link

Up to you, whether you want to pursue this topic - but, I can find more examples. I think it's best to drop this one.

@Kelly K.
Here are my responses to your latest comments:
1. You say "The past does not predict the future in retail", yet you also say that competition changes plans. i agree but how is the potential competitive impact measured if past, or same-store sales data is not used? Any one who "was in retail a few years ago" should know this.

2.Re: Hotels, Dale M apparently brought that point up, but it was deleted because it could not be verified. Nevertheless you reference it as if it were fact.

3. Thank you for validating my original comments. Approximately 80% of the thread is by you and another poster. Again, where have you been when the City Council meetings are held? Where have you written to the Editor or authored an Op-Ed piece?

Maybe you and Matt, Black Tie and Cox 'Family" stores can float another initiative for those too simple to really understand what they were voting for to begin with. I will remind you that all of the pro-MM signs had the word Costco circled with a slash through it. So, don't say now that Measure MM was not a vote for or against Costco.

By the way, where is your outrage to the $250,000 it cost the City of Pleasanton to place Measure MM on the ballot? Was that a good use of 'our' tax dollars. Maybe some of us feel it could have been better used elsewhere.

Lastly, although it seems that you may be a fan of jumping to conclusions, you don't know me, so I would appreciate if you would withhold your comments about my being "irritated". I understand you feel as if you must name call, but, did you take the time to see if I have expressed a pro-Costco or anti-Costco position. I haven't expressed my stance either way. Again, enough is enough.

@ Kelly K
I forgot to mention re: crime. I was thinking that banks bring "crime" too when they are held up. Maybe we should close and chase them all out of town. In fact, I propose we close any business that has ever been burglarized or robbed and chase them out of town too. Heck lets close the mall while we are at it.

BTW this is my last post so we don't continue chasing our tails - I'm getting dizzy.

@ RU,

Goodness..saying you are irritated at me... Is name calling? Yes, my blogs have clearly irrated you.

I agree that past sales are used to compare new data...but just because a retailer had 5 good years, it is no predictor of the future, especially when competition changes.

Time will tell about the hotels. Do you know the answer? My bet is that Dale M knew what he was talking about. He was right about the discussions on Costco being cancelled for July.

Costco was not on the ballot. I voted no on MM, but it was not a yes vote for Costco, especially under unfavorable terms.

Measure MM did not cost $250,000. The County of Registrar of Voers stated less than $50,000 since the Mayor and Council races were already scheduled for Pleasanton on the ballot.

You say enough is enough..but you keep going!

"Is this a topic that you really want to debate, especially after the two recent robberies in Danville? "

No, it is a topic I want to laugh about. As if there were something special about Costco that attracted crime! Hilarious!

@Kelly K,

It's a lot like the people complaining that the new Workday building was going to lead to increased crime in Pleasanton. All those software engineers. Who knows what they're up to all day. Why all the long hours! Criminals! It's scary!

this is like the never ending story. Once with a lot of opinions.

Has any lease been signed by anybody yet?

Has there even been a letter of intent signed?

Is there an option for nothing to be there?

Will the developer cease development if there are no tenants signed?

And, oh, what will the city do then.......

Scott,

I agree. Never ending.... We need transparency. Rumors prevail. You posed several questions about the lease. I hear Costco will not lease; but, instead build.

As to the developer, I say let them walk, rather than us paying for most of the infrastructure by long term borrowing. We should not let fear control our decisions.

Costco will own the building? Says who? That is not Costco's business plan to own buildings; they lease.

The two rumor mongers on this thread are Lisa S. and Kelly K.!

Both - Busily dispensing unverified rhetoric, unverified financial statement, unverified commitment of others, unverified everything!

Austin,

Again, attacks without facts.

On June 17 in this thread, you said by July 1 gasoline tax would be just under $1 per gallon. How did that unverified fact come out on July 1? According to Gas Buddy, it's 60.5 cents.

Lisa,
You're killing me with your constant statements of possibility then later stated as fact.

You respond to me with infastructure costs of an estimated 21M, and then state IF the city pays 2/3 that is $14M. You then turnaround and state the city will be paying.

So again....where is the publication of what the city has actually commited

Pleasanton Parent,

Don't mean to be killing you...it's rather simple:

In June, the City Staff and the City Manager quoted infrastructure costs at $21.4 million. There will be cost overruns, as in all large projects, so what the final number will be is unknown, but most likely over $21.4 million.

The City Manager is trying to get the developer, Nearon, or Costco to pay approximately 1/3, as evidenced in previous documents. So, the best case scenario is that we pay 2/3's which is $14 million. This is best case.

Even though our portion will be likely more than $14 million, we need to discuss if this is reasonable for us to pay. I say no. This is the developers responsibility.

We don't have $14 million. We have about $6 million in reserves. We will have to borrow the rest.

Do you support the use of our reserves, and the borrowing?

BobB - No discussion of crime should be considered hilarious, especially, considering the two recent incidents at Costco in Danville. Yes, Costco does carry expensive merchandise, and yes, it does create more crime than an office building like Workday's. I'm sure Workday would take strong exception to being compared to Costco when it relates to crime statistics.

@Al Arthur,

Another poster on another thread brought up the issue of crime with regard to the new Workday building.

I thought the idea that a new Workday building would result in more crime in Pleasanton was ridiculous. It is the same with Costco.

BobB,
[Removed because it was inaccurately written as a quote] It took me just a few minutes to find these recent crimes at Costco- just in the Northern California area:

July 5 - San Jose - man shot in Costco parking lot
June 22 - Foster City - mid-day robbery by 4 men wielding hammers
May 23 - Fresno - purse theft - 3 suspects
May 22 - Danville - armed robbery, shots fired
May 9 - Danville - robbery, 4 men wielding hammers
April 17 - Pittsburg - 2 men shot at police officer in Costco parking lot
April 5 - Lodi - armed robbery lead to high speed chase - 2 people died

This thread has gone off topic, become a battleground for a few posters and has outlived its usefulness. So it is being closed.