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City announces tentative plan for financing road improvements near proposed Costco

Original post made on Aug 22, 2017

Pleasanton city staff and Costco officials have agreed to terms on a tentative proposal for how to fund roadway improvements around the Johnson Drive site eyed for the warehouse membership store, a deal that is scheduled to head the City Council for review next week and final consideration at a separate meeting next month.

Read the full story here Web Link posted Tuesday, August 22, 2017, 12:06 PM

Comments (102)

Posted by Bill
a resident of Pleasanton Heights
on Aug 22, 2017 at 1:24 pm

Sweet. Looking forward to not having to drive to Livermore! Many thanks.


Posted by Sam
a resident of Oak Hill
on Aug 22, 2017 at 2:02 pm

But is it a good deal for the taxpayers of Pleasanton? How does this deal compare with most deals between businesses and the city of Pleasanton?


Posted by Michael Austin
a resident of Pleasanton Meadows
on Aug 22, 2017 at 2:19 pm

Michael Austin is a registered user.

It is the best deal!
It is what the majority of voters in Pleasanton voted for.


Posted by Matt Sullivan
a resident of Stoneridge
on Aug 22, 2017 at 3:00 pm

Matt Sullivan is a registered user.

This is a misrepresentation of the details of the agreement, spun by the city to make the taxpayer subsidies more palatable.

Traffic Impact Fees (TIF) are paid by project developers to mitigate offsite impacts to traffic resulting from their project. Onsite infrastructure is ALWAYS paid by the developer with a cash contribution. Using the TIF as proposed is in essence stealing from the taxpayers to fund the project. Since the TIF really belongs to the city, the actual city liability for the project is:

City TIF Contribution for I-680 onramp = $6.4 million (otherwise would go to other needed projects)
City Tax Sharing Contribution (with interest) = $8.2 million
Costco TIF Contribution = $3.7 million (otherwise would go to other needed city projects)
Total contribution by city = $18.3 million
Total Contribution by Costco = $3.1 million
Total Contribution by project developer Nearon = $0 (they get a free ride)

This represents an 85% city share of the $21 million cost, not 1/3 as the article states. This is sleight of hand worthy of Enron (for those of you old enough to know who Enron was).

Using the revenue estimates in the Staff Report, the city would not break even on the deal for 20 years based on Costco revenue alone (Attachment 3 of Staff Report). Payback would be 11 years for total revenue (Attachment 4 of Staff Report).

Even if you subscribe to the idea that the city should subsidize development (which I don’t), the risk/reward structure of this deal is way out of whack. Most of the risk (85% of the infrastructure costs) are on the city, and by far the biggest rewards go to Costco.

Costco gross profit over 25 years from the project = $830,000,000 (based on staff report sales estimates and Costco gross profit percentage of sales as stated in their 2016 Annual Report)
City Revenue from Costco over 25 years = $25,000,000 (from Staff Report)
City total revenue from EDZ over 25 years = $76,000,000 (from Staff Report)

All of this assumes that the city estimate of 3% sales increase annually for 25 years hapens – which is not a reasonable scenario considering erosion of retail sales by on-line retailers (Amazon, anyone) and future recessions.

Hardly an equitable deal considering the city has most of the risk for a reward equal to 2% of the city Operating Budget.

Since this is clearly a bad deal, one must ask why the city is pursuing it. To make the Chamber of Commerce happy (and the resulting campaign contributions)? To beef up your resume with a "coup" over other cities? Whatever it is, it's at your an my expense.

And those of you still foaming at the mouth waiting for Costco and the $1.50 hot dogs – is this taxpayer give-away to a $120 billion greedy corporate behemoth like Costco worth it?


Posted by Lisa S.
a resident of Stoneridge
on Aug 22, 2017 at 4:15 pm

Lisa S. is a registered user.


Matt has it right. I have read the staff's financial proposal. There is considerable SPIN to make it look good.

Costco is not contributing $6.8 million. Their traffic impact fees are $3.7 million. This would be paid by any retailer for impact fees. It is being counted as part of Costco's contribution. In fact, their contribution is $3.1 million. SPIN.

The report says Costco shares 50/50 in the right-of-way costs. In truth, the City pays Costco's 50% through giving Costco more of our sales tax revenue. More SPIN.

Nearon, the developer, pays zero. Costco pays $3.1 million. The City pays the balance of $18 million plus interest.

The City borrows $6.8 million from Costco for up to 25 years.

Bad deal.

The report also says that the project is not feasible for Nearon or Costco without the City's contribution. I would like to see that study. It should be made public. A $70 billion corporation needs our taxpayer help!

.


Posted by Flightops
a resident of Downtown
on Aug 22, 2017 at 4:47 pm

Flightops is a registered user.

Didn't take long for the first half of the " gloom and doom" team to return with the announcement of the possible death of P-town if Costco is built, still nothing official yet, I'm waiting to hear the proposals at the next council meeting on this and ask questions. A little confused though, is Costco a 120 billion greedy corporate behemoth or just a 70 billion corporation needing our help?


Posted by Lisa S.
a resident of Stoneridge
on Aug 22, 2017 at 5:06 pm

Lisa S. is a registered user.


The report is on the City website. No need to wait. Whether it's a company of $70 billion or $120 billion-- it's a bad deal.

No gloom and doom. The staff report can be read.


Posted by Matt Sullivan
a resident of Stoneridge
on Aug 22, 2017 at 6:25 pm

Matt Sullivan is a registered user.

It's not gloom and doom. It's called making an informed decision.

Costco's annual revenue in 2016 was $120 billion according to their Annual Financial Statement. If they insist on having the taxpayers pick up their development costs they are indeed greedy.


Posted by 27-year Resident
a resident of Grey Eagle Estates
on Aug 22, 2017 at 8:35 pm

27-year Resident is a registered user.

It appears that, if the Costco is built in Pleasanton, it will be the "Premier Costco " in the United States. I invite you to google Costco's annual reports for the last several years:

FACT: The average Costco opening sales are between $83MM and $108MM.
FACT: The average Costco reaches its peak at about 5 years- theraafter its sales stay flat.
FACT: Costco has 715 warehouse stores as of 2016. The total sales of ALL stores in existence since 2013 has decreased in sales.

Saying that Pleasanton is going to increase in sales by 3% annually for the next 25 years to increase Pleasanton's sales tax base to pay back our "loan" for infrastructure costs to Costco is unrealistic.

It hasn't happened in the last 5 years for Costco-- and now we have Amazon and what in the next few years?

I'm not necessarily against Costco-- I'm against this ridiculous bailout of a multi- billion dollar company by using voodoo economics to try to justify a loan ( yes - it is a loan) (no- maybe it's a gift) (no- maybe it's a crazy idea that no sane person would do with his own money - only with someone else's money) but I see no reason for our city do GIVE any money for this project.

Our city leaders now are experts at finance? How come they didn't figure out what I did by studying Costco's financial reports?

IF COSTCO THINKS THIS IS A GOOD DEAL, LET THEM PAY.


Posted by Michael Austin
a resident of Pleasanton Meadows
on Aug 22, 2017 at 8:51 pm

Michael Austin is a registered user.

Anonymous: 27-year Resident:

Costco's profit is from membership fees!

Costco does not strive to profit from sales!

Costco remains profitable due to its membership fees!


Posted by 27-year Resident
a resident of Grey Eagle Estates
on Aug 22, 2017 at 9:23 pm

27-year Resident is a registered user.

Michael Austin: my Goodnesd! 16 likes in15 minutes! You are very popular!

My question is - what do membership fees have to do with my point? If some other business comes in and "pays its own way" we as a city still have the money to use as intended - parks, potholes, etc.

We don't have to wait 25 years to get it back from a multi-billion dollar corporation that we also gave a sales tax incentive to - and other businesses in town paid less sales tax because of losing business to Costco.

Competition is good for all - but the little guy on the corner had to pay all his fees to the city to open his doors to the public. And it was rougher for him to do that than Costco. Why are you so fast to defend them? You didn't even respond to my logical arguments.

I'm trying to make an informed decision- tell me what's wrong with my facts - maybe you can enlighten me. But don't start throwing dribble around. Stick to the facts.


Posted by Pleasanton Parent
a resident of Pleasanton Meadows
on Aug 22, 2017 at 9:57 pm

Pleasanton Parent is a registered user.

- If TIFs are payed by the developers, and Nearon is the developer, why is this a Costco vs city problem? Seems its a city vs Nearon problem?

- If a TIF is payed by the developer to the city to pay for off site traffic impact, wouldn't it seem appropriate for that funding to be applied to 680 offramp where the impact is? If I was a developer being required to pay a traffic impact fee that was used to improve something completely unrelated to my project (i.e. lets add a stoplight downtown vs infrastructure related to the area of my project) it would seem like a bribe paid to the city to get the project approved. No?

- Why would a Costco TIF contribution go to something other than this if the project wasn't funded/approved? i.e. - if there is no costco, there is no costco TIF contribution, therefor there is no money for other projects. No?

Seems like our anger should be to Nearon, not Costco.


Posted by Lisa S.
a resident of Stoneridge
on Aug 22, 2017 at 10:24 pm

Lisa S. is a registered user.


Pleasanton Parent,
You and I agree. The developer should pay for the traffic impact fees- but, in this case Costco is purchasing the land.

Matt Sullivan's point is that these impact fees are the City's money, not a contribution by Costco. The Costco contribution is $3.1 million; not $6.8 million.

The City staff report has an asterisk by the Costco contribution of $6.8 million stating that $3.7 million is from Costco impact fees. Just as sales tax is City money, so are impact fees.

To say Costco is contributing $6.8 million is deceitful at best.


Posted by Scott Hale
a resident of San Ramon
on Aug 23, 2017 at 7:13 am

Scott Hale is a registered user.

the impact fees collected will be used exactly as intended. I'm not clear on why the few naysayers don't want those funds spent....ever?

Bring on a new costco. Less of a trip for me and I didn't even get to vote.

What the naysayers won't say or admit is the EDZ will have tenants whether you guys like it or not. Scare away Costco and perhaps the City will have to pay 100% for a zone they created.

I wish 'nuf said'.


Posted by Claudette McDermott
a resident of Del Prado
on Aug 23, 2017 at 9:54 am

Claudette McDermott is a registered user.

If this is correct:

City TIF Contribution for I-680 onramp = $6.4 million (otherwise would go to other needed projects)
City Tax Sharing Contribution (with interest) = $8.2 million
Costco TIF Contribution = $3.7 million (otherwise would go to other needed city projects)
Total contribution by city = $18.3 million
Total Contribution by Costco = $3.1 million
Total Contribution by project developer Nearon = $0 (they get a free ride)

Pleasanton Tax payers are getting the shaft by Project Developer Nearon and Costco...!! I'd rather take the drive to Dublin/Livermore, Thank you ~

Can't someone broker a better deal... ??


Posted by BurbMom
a resident of Vintage Hills
on Aug 23, 2017 at 10:16 am

BurbMom is a registered user.

Just SO glad it's not on our end of town! Will never go- hate big box stores and especially in our city. Give me specialty stores any day- I'll remain a Gene's and Whole Foods customer thank you. Thankfully this end of town still has some character and is not as homogenized as the other end. You Costco fans can have it! The traffic mess too!


Posted by Kelly K.
a resident of Ruby Hill
on Aug 23, 2017 at 12:19 pm

Kelly K. is a registered user.


Fools! Fools! The City must think we are fools. This City report is a shell game. They are moving money from one pot to another. Nothing has changed since the negotiations in May, 2016 -- except the costs of infrastructure have gone from $16 million to $21.5 million.

City documents provided by the California Information Act showed that on May 11, 2016, an email from Nelson Fialho, City Manager, to Mike Dobrota, Costco Regional manager:
Costco/Nearon's net contribution $3.1 million ($4,780,000 less $1,700,000 credit or refund for all studies. (Plus, Costco had to pay for traffic impact fees). (TIF).

This staff report released yesterday (August 22), shows Costco's contribution is $3.1 million. ($6,785,000 less credit for TIF of $3,700,000).

The City is contributing the rest ($18.3 million), and we must borrow $6,785,000 with interest for 17- 25 years. Most likely 25 years.

Fools! Fools! The City are the fools. We can figure this out. The impact fees that were to be paid in 2016, are now trying to be spun as part of Costco's contribution. Nothing has changed, except now our share has gone from $13 million to $18 million, because of the increased cost of infrastructure from $16 million to $21.5 million. What do you want to bet it's really now $25 million?? The study says that the $21.5 million does not include Tri-Valley Transportation Fees which are necessary to mitigate the impact to I-680. Yet, it does not quantify or estimate these additional fees which are not part of the $21.5 million infrastructure.

Yesterday's released report also says that right of way costs of approximately $1.5 million will be split 50/50 with Costco - but... then the report says Costco's 50% will be paid by the City by adding it to our loan of $6,785,000. Huh?... We pay all. The 50/50 is not truthful. This is shameful.

Yesterday's report also said that a study by Century Urban (who?) determined that both Nearon and Costco would need a City contribution to fund the transportation improvements. This is one of the more absurd statements in the City's report. Costco and Nearon need the City of Pleasanton to fund $18.3 million. They can't fund it, or borrow the money. Fools! Fools!


Posted by chas
a resident of Parkside
on Aug 23, 2017 at 4:55 pm

chas is a registered user.

Do any of you actually think that anything you say will make a bit of difference. Show up at every meeting there is and voice your concerns. In the end if they want a Costco here they will do whatever they need to to get it.
It matters not one bit what any of us say.


Posted by Michael Austin
a resident of Pleasanton Meadows
on Aug 23, 2017 at 5:13 pm

Michael Austin is a registered user.

The majority of voters in Pleasanton have already spoken.
The majority of voters in Pleasanton voted their support for Costco to build in Pleasanton. The majority of voters in Pleasanton voted the current city council into office. That same city council appointed the current planning commission members.
A new Costco in Pleasanton is a promising return to the majority of voters in Pleasanton.


Posted by Kelly K.
a resident of Ruby Hill
on Aug 23, 2017 at 5:36 pm

Kelly K. is a registered user.


Michael,
You have no idea why the majority of voters voted No on MM. I, for one, voted no because it was too restrictive. I did not vote for Costco. You cannot speak for all "No" voters.

Granted, many voters did want Costco and still do, but they expected a better deal than what was being negotiated last year. This deal is no better; in fact, because the cost has escalated $5 million, it is worse.

Let's talk about the numbers, and the current proposal.

Chas,
Sadly, you may be correct.


Posted by Michael Austin
a resident of Pleasanton Meadows
on Aug 23, 2017 at 5:48 pm

Michael Austin is a registered user.

I do not speak for no voters and I do not speak for yes voters.
I stated the majority of voters in Pleasanton want a Costco to be built!


Posted by Scott Hale
a resident of San Ramon
on Aug 23, 2017 at 6:01 pm

Scott Hale is a registered user.

Kelly: What deal do you propose beyond the developer or Costco should pay for items not directly related to parcel and in Costco's case the sq feet they will lease.
And if your 'deal' is the developer or Costco pay for everything, please account for what will happen if both decide to abandon the development and how the city will 'replace' them.


Posted by Hank Helper
a resident of Stoneridge
on Aug 23, 2017 at 6:19 pm

Hank Helper is a registered user.

A lot of time and energy have gone into this blog, to anaylize the numbers of this almost 50 page report. I would like to thank those who have taken the time to analyze the numbers--bcecause that is where we are at. Those who voted "no" on MM, and wanted Costco, I believe, had faith in the City that a fair deal would be made. And here we are anylizing this deal...

I would like to ask "27-year Resident" a question: if you are correct, that Costco has a slow build in growth, peaks at 5 years, and then remains flat, where in the world did this 3% of yearly growth come from?

Secondly, if your facts are correct, and this Costco also has a similar grwth pattern, how long will it take Pleasanton to pay off this crazy loan? Heck, if we have plat sales for 20 years and only 5 years of growth, it seems to change things, dramatically. Anyone else see a concern with this promise of 3% annual growth for 25 years? If I am mistaken, please correct me.


Posted by Kelly K.
a resident of Ruby Hill
on Aug 23, 2017 at 6:32 pm

Kelly K. is a registered user.


Scott,
It's impossible to know who might be interested as long as we head down the same wrong path. Surely, you would not suggest this is the only deal possible.

If we say no to this deal, maybe Costco/Nearon will come up with more than $3.1 million of the $21.5 million+ that is needed.

This is a bad deal. Just because no others have been pursued, does not mean that we should accept a bad deal.

Have you calculated how many years this will take to break even? Even if we get $1 million per year in sales tax, it's a long time to get $18 million back. What if sales decline after a few years, as happens at other Costco's?

Do you know how much extra the I-680 impact fees will add to the $21.5 million? Who pays for cost overruns? There's a lot not covered in this report/proposal.


Posted by Scott Hale
a resident of San Ramon
on Aug 23, 2017 at 7:45 pm

Scott Hale is a registered user.

Kelly: no matter what that development zone needs A) a developer and B) tenants. We can agree on that, ya?

Again, I ask what deal is ok with you beyond the city paying zero dollars?

I also ask (again) why the hue and cry for using a fund that was created and paid for by developer for this exact reason? What other items should this fund be used for, I haven't seen any examples beyond NOT paying anything from that fund.

I certainly hope you attend all the public meetings and provide your solution that is acceptable to the parties that count. Note: this forum users are not parties to the deal. Harsh, but true.

If/when there is a Costco the parking lot will be full of buyers, that is guaranteed. Vast majority of those voting in Pleasanton and near 100% of those who don't live w/in City boundaries want a Costco there. Numbers speak for themselves.

Unless the minority can find a legal avenue to pursue, this will happen one way or another.....


Posted by Al Arthur.
a resident of Charter Oaks
on Aug 23, 2017 at 7:51 pm

Al Arthur. is a registered user.

Every time I read something put out by the city on this Costco deal, I feel like I need to take a shower! It seems they want this deal so badly that they will twist facts, make up numbers and ignore risks. The latest is that they hired a consultant to tell us that Costco and Nearon can't afford the cost of necessary infrastucture. Anybody believe that? They tell us that the $6.4 million in TIF funds the city will spend was earmarked for onramp improvements at Stoneridge and 680 in 2009 when it actually was for "overpass improvements." They are ignoring Costco's own historic performance when they use inflated store sales estimates and use a 3% sustained growth factor over a 25 year period. It's more of the same: twist facts, make up numbers and ignore risk.


Posted by soccermom3
a resident of Parkside
on Aug 23, 2017 at 8:24 pm

soccermom3 is a registered user.

I may just be a soccer mom with 3 kids but over the years I’ve learned to question our leadership in Pleasanton. When they want something badly it usually means we should be cautious and look into the details.

Clearly this is not a good deal for those of us who live in Pleasanton!





Posted by tigergin
a resident of Downtown
on Aug 23, 2017 at 8:39 pm

tigergin is a registered user.

Lets see,
As a 45 yr resident I have seen many changes to our city that have improved our area and made Pleasanton a fine place to live.

Costco and the City have a plan to improve a part of Pleasanton that is directly next to sewage drying ponds and Costco is willing to put up cash to do so.
Which other plans are better than the Costco plan?

Have not heard any others!

MM passed and we can now move forward with improving a difficult area of town with a $$ generating plan.Hotels next to the sludge pit? C'mon.
The City needs to do something to fix Johnson Dr anyway and Clorox has left us
with ugly cement hills that need to be removed.
Time to move on from this issue and focus on some real problems, such as a second Bernal bridge for example.

.
.


Posted by Lisa S.
a resident of Stoneridge
on Aug 23, 2017 at 9:04 pm

Lisa S. is a registered user.


Gosh... it's such a bad area, do you think we should pay Costco to come. Oh, that's what we are doing to the tune of $18.4 million.

We should be grateful. No one else would want to be there. Even though it's almost free. Costco must be crazy to locate in such a bad area. Forget the freeway visibility, this is a bad area.

Be grateful that we are only paying $18.4 million, that will generate 12,000- 15,000 cars per day and produce unacceptable levels of pollution. That break even is in 20+ years. That we will need to borrow $6.785 million plus interest.

Let's get on to more important things.


Posted by Scott Hale
a resident of San Ramon
on Aug 24, 2017 at 6:46 am

Scott Hale is a registered user.

Lisa: Same question to you. What is an acceptable deal to you. Just note the City paying (you keep saying YOU will pay, not) nothing is not on the table. The city created that zone and they want business(es) there. Please detail which developer would pay and how they will make a profit on their investment.

Also note leaving that area 'empty' is also not an option.

Please also detail how the current term sheet (look in up) would cost you a penny in taxes.

the cars per day was debunked months ago as over inflated. The pollution, same deal. Nobody will be getting MORE gas, they will just get it someplace else. Cars traveling region wise will drive fewer miles. And actual cars shopping, not that much more than when it was a large office building.

Nuf said until the next public meeting where I hope you and Kelly will be there to vent.


Posted by Lisa S.
a resident of Stoneridge
on Aug 24, 2017 at 8:38 am

Lisa S. is a registered user.


Scott,

You and I have debated this often. Finally, you agreed that infrastructure is the responsibility of the developer, or land owner. In all other developments this is then passed on to the end user. Nearon has pursued no one but Costco whose negotiators want it basically free. Other users would pay there fair share. How can we know who they might be until we say no to this very bad deal??

As th the sales tax, if we accept accept this deal we lose $8 million in sales tax.

As to the vehicles per day, The City's own numbers said 12,000-15,000 cars per day for the JDEDZ. Of which Costco would be 8,000. These are City numbers.

As to the pollution, Bay Area Air Quality said that pollution levels would be "unacceptable and unavoidable".

Please debate facts and numbers of the study- all you are doing is asking questions which have been answered, or, are impossible to know, until the developer seeks other users.




Posted by Grapevines
a resident of Vintage Hills
on Aug 24, 2017 at 10:52 am

Grapevines is a registered user.

Huh? I don't get it. I suppose the city could buy the land and make it into a park, but that would be a terrible use of money.

I don't know if a Costco is the only thing that needs to go there, and I don't know whether the sweeteners are needed even for Costco to pull the trigger. But if no other developer has stepped up with an alternative, then there might not be a lot of choices. The city does seem to be trying to work hard to make a deal, but at least they are also trying to limit the exposure to whatever bonus revenue the Costco brings in, so that it's not revenue negative. The only money argument against this deal would be if any other deal would bring in more money.

So if the argument is that the city is being desperate and should play hard to get, I understand that but don't think we have enough data to evaluate whether that is a viable strategy in this case. If the argument is instead that it is unfair to take a deal with revenue sharing (the "subsidy"), then that's based not on what's a good business deal but what feels good. I suspect the correct response to that would be that the residents voted already and there's good reason to believe that those bad feelings about revenue sharing are not widely held by the residents.


Posted by Kelly K.
a resident of Ruby Hill
on Aug 24, 2017 at 11:27 am

Kelly K. is a registered user.


Grapevines,

In my opinion you have fairly analyzed both sides. We will not know our other options unless we say no to the subsides, and either another use is found which pays its own way, or the developer sells to another developer. Eventually, the land will be developed into something besides a park. It is valuable land with high visibility and close proximity to freeway access.

As to your last statement regarding the vote, the vote did not tell us about the citizens feelings on this deal with Costco. I voted no on MM, but not yes for Costco with heavy subsidies, loss of sales tax, borrowing, and a break even of 20+ years. If this current proposal were put on the ballot, don't you agree that the outcome could be different?

I believe the voters expected a better deal to be made.


Posted by the gardener
a resident of Downtown
on Aug 24, 2017 at 12:13 pm

the gardener is a registered user.

everything is so expensive in Pleasanton that at least we can save a penny or two buying groceries at Cosco. its a good thing for families with a low income


Posted by Grapevines
a resident of Vintage Hills
on Aug 24, 2017 at 12:30 pm

Grapevines is a registered user.

@Kelly,

I don't actually know what another vote would turn out to be. But I do remember that these same arguments were made by both sides during the campaign, and I have to assume that voters either knew the arguments and decided, or didn't care enough to know, which in itself is a fine decision. I suspect if you asked the question now as "Do you support building a Costco in Pleasanton where the city will give Costco back 40% of the sales taxes their customers pay for up to 25 years as an enticement?", many people would say "why not?"

I suppose, if people feel strongly about it, they can petition to put this question on the ballot. But I'll be shocked if it gets enough signatures. People tend to not like being asked two questions about the same topic, even if those questions are materially different.


Posted by Hank Helper
a resident of Stoneridge
on Aug 24, 2017 at 1:31 pm

Hank Helper is a registered user.

I am still chocked by 27-year resident claim that, according to Costco data, sales of new stores have a slow build in growth and peak after 5 years, hen remain flat.

In contrast, we have been promised 3% growth, annually, for 25 years. It seems to me this is a pretty big mathematical error. Shouldn't we base our projections off of the data available? Where will this 3% of conitiual growth come from?

I remember the election. Those who were for Costco, laughed at us, "of course a better deal will be made". Seriously, ya'll were so convincing that all the fuss over numbers was ridiculous, because a better deal was would be negotiated". Hhmmm, here we are.


Posted by 27 - Year Resident
a resident of Grey Eagle Estates
on Aug 24, 2017 at 3:19 pm

27 - Year Resident is a registered user.

Hank Helper:

You say you are shocked by my claims. Anyone can go to Costco's annual reports and financial statements and see where I got the numbers. I did not "spin" the numbers as I see some folks have that are trying to sway the arguments in their favor.

This matter is too important to us here in Pleasanton, I, for one, am deeply concerned about this 3% annual growth for 20+ years. No other Costco store has done that -- why should we think Pleasanton will do that?

I like to make decisions based on facts. I just re-read all the comments on this blog before posting this (you should, too). Most give us opinions, not facts.

I like to base my decisions on facts. No one has disputed the facts I have found from outside, objective sources. Those sources (Costco's own financial documents) show that the City's report is flawed. No decisions should be based on flawed reports.

By the way, Costco stock was down $7 today. Amazon and Whole Foods are maybe gonna start competing???? But, I guess some people will say that won't affect this deal.


Posted by Flightops
a resident of Downtown
on Aug 24, 2017 at 5:04 pm

Flightops is a registered user.

Here's a fact for all you naysayers- when Home Depot was chased away from Stanley and Bernal look what we got as a reward high end apartments(not affordable for everyday persons), a CVS store (#3 in town) and a real cluster of an intersection with more stop lights, thanks city planners and all you negative "not in my town" citizens, don't count on the city planners to take care of us.


Posted by Kelly K.
a resident of Ruby Hill
on Aug 24, 2017 at 5:36 pm

Kelly K. is a registered user.


Flightops,

How about just one fact on my this project: years to break even. Can you give me this fact?
Then tell me please if you think this is the best deal that our City leaders can negotiate.


Posted by DKHSK
a resident of Bridle Creek
on Aug 24, 2017 at 6:07 pm

DKHSK is a registered user.

Although I'm supporter of Costco coming to town and being in that space, this is a fiscally and politically a bad deal for the citizens.

I would love nothing more than cheaper gas and groceries, but not on behalf of approving this bad deal.

When politicians and city administrators make these bad deals I can only ask the following:

1.) what is in it for the politicians and administrators?
2.) how/why are such blatantly bad deals negotiated in the first place?
3.) what is the competency of the negotiators?

I've said it before and I'll say it again: our "best and brightest" are not really the best, nor are they the brightest.

This is a bad deal.


Posted by chas
a resident of Parkside
on Aug 24, 2017 at 7:52 pm

chas is a registered user.

And I've said it before and I'll say it again: it doesn't matter what any of us think! They are going to do what they want to do. We are speaking on deaf ears


Posted by Pleasanton Parent
a resident of Pleasanton Meadows
on Aug 24, 2017 at 8:02 pm

Pleasanton Parent is a registered user.

I'm disappointed to see traffic and surrounding infrastructure costs being associated with Costco. Those things will be required no matter what goes in. It's irrelevant to the conversation.

The only points to review are where and who is paying.

And Lisa and kelly and Matt are just as guilty for manipulating numbers.

It's wrong to use TIF fees used for 680 on ramp upgrades against Nearon and Costco. Any development should expect those fees be applied to their project infrastructure.

It's wrong for Nearon to pay nothing if developers traditionally contribute to some of these costs. That should be fixed.

It's wrong to criticize the deal without providing a counter to move things forward.

In my opinion, the biggest issue I see is the zero next to Nearon if that is a traditional contribution required.

I want Costco. I want a fair deal. I don't want extremists on either side pushing an agenda by skewing data in their favor.



Posted by Kelly K.
a resident of Ruby Hill
on Aug 24, 2017 at 9:51 pm

Kelly K. is a registered user.


Pleasanton Parent,

The City study uses the I-680 ramp improvements as a cost in this total project. These improvements are in the total cost of $21.5 million. I suppose the City includes them because these dollars could be used for other projects, if the ZDEDZ, or Costco is not approved. There could be other more pressing needs for the funds.

Did the City erroneously include these TIF dollars and ramp fees in the total and erroneously ask Costco to contribute 1/3 of the total which includes the I-680 ramps fees? No, I don't think this was erroneous.

I have used the City numbers, and there has been no manipulation on my part. If you have an argument, it is with the City report and their handling of these fees in the total.


Posted by Grapevines
a resident of Vintage Hills
on Aug 25, 2017 at 8:46 am

Grapevines is a registered user.

What will you (who are against Costco) do to change this deal? And what will you do if the city approves this deal? I'm curious what you think your next steps are?


Posted by Kelly K.
a resident of Ruby Hill
on Aug 25, 2017 at 9:30 am

Kelly K. is a registered user.


Pleasanton Parent,

As to your second statement that it is "wrong to to criticize without providing a counter", my counter is to say No to this deal, and then negotiations will either continue, resulting in a better deal -- or, they will fall apart, and another user or developer will appear. There aren't too many locations available with this type of high freeway visibility and freeway access.

A result of saying No would eliminate the borrowing for 17-25 years. If we contribute $6.4 million in TIF reserves, this is enough! The developer should be responsible for the remainder. We should not contribute more, requiring long term debt of more than $8 million with interest. I think you would agree with this. There should not be a ZERO next to the developers contribution. This is either very poor negotiating- or, some type of payback.

Even though I am against Costco for traffic reasons (as well as this very poor financial deal)-- those of you who are for Costco, should demand better, and not accept this deal.


Posted by Scott Hale
a resident of San Ramon
on Aug 25, 2017 at 9:58 am

Scott Hale is a registered user.

Kelly: You understand the 'people' aren't the ones accepting this deal (or not). they can (and do, at least here) jump up and down and complain, but end of day the elected officials decide.

Also, as I've stated before what makes you think another developer/tenant combo won't ask for the same deal? Most of the $$ is not for the parcel in question, you DO realize that, right? Why would any developer want to pay for highway/ramp/stop lights etc improvements? Clearly state or city responsibilities.
I wonder did you complain about traffic when the office building was fully leased?? I'm guessing not a peep.


Posted by Kelly K.
a resident of Ruby Hill
on Aug 25, 2017 at 10:33 am

Kelly K. is a registered user.


Scott,

If another developer asks to pay ZERO, we should say no. This is not how we do business in Pleasanton, at least not until now. Developers do not get a free ride.

Do you believe the developer should pay ZERO?


Posted by Hank Helper
a resident of Stoneridge
on Aug 25, 2017 at 12:35 pm

Hank Helper is a registered user.

I just think its ironic that only 9 months ago, the other side was litterly making fun of our claims that the deal would not change.
"It is only early negotiations; of course we won't have 'worst deal in Costco history". I mean, you guys were so adimate that "business negotiations have to start somewhere, and the numbers will get better". Don't you remember this?

To those who agreed that it was a bad deal, yet had faith that a good deal would be negotiated, I ask:
"Is the deal better"?

To those who think the deal is good, financially (not talking about being happy to save 5 miles or other aspects), I ask:
"Which part of deal do you like"?


Posted by BobB
a resident of Another Pleasanton neighborhood
on Aug 25, 2017 at 1:56 pm

BobB is a registered user.

@Hank Helper,

I think the deal isn't that bad as it stands.


Posted by soccermom3
a resident of Parkside
on Aug 25, 2017 at 3:36 pm

soccermom3 is a registered user.

Help me understand how this is a good deal for the citizens of Pleasanton:

$6.4 million - Pleasanton contribution of TIF reserve
$6.8 million - Pleasanton borrows to contribute to infrastructure
$1.4 million - Pleasanton pays interest on loan
$3.7 million - Pleasanton uses TIF fees (which can be used for other needed projects)
$1.5 million - Pleasanton pays for right-of way expenses (not 50/50 as stated)

$0.0 million - Nearon (the developer) pays

I ask: how is this a good deal for the citizens of Pleasanton?


Posted by BobB
a resident of Another Pleasanton neighborhood
on Aug 25, 2017 at 4:00 pm

BobB is a registered user.

@soccermom3,

We get Costco at a location that works well for many local residents and businesses. That will translate into a lot of savings for those local residents and businesses on gas, groceries, and supplies.


Posted by Grapevines
a resident of Vintage Hills
on Aug 25, 2017 at 4:04 pm

Grapevines is a registered user.

But anythIng popular that is placed on that site will require ramp and street modifications. If the point is that the land owner should pay for those modifications in full--and it is immaterial whether that comes from a developer or intermediary so long as it comes from someone who is not the city--then I get it so long as everyone is aware that no one may want to pay and the lot may stay vacant. Then it reduces to what I said before: is securung the additional tax revenue with s "subsidy" better than leaving the land blank?

But if the argument is that the fees being paid should not go to ramps, then that's just folly. I don't understand the argument that the TIF can be spent anywhere else. That money doesn't get paid to the city unless the city uses it to improve the ramps and access. Otherwise, that site is not a first class site. It's really only suitable for offices.


Posted by Scott Hale
a resident of San Ramon
on Aug 25, 2017 at 7:55 pm

Scott Hale is a registered user.

Kelly: What you fail to understand is the 'people' don't get to say no and have it stick. Your elected officials do that. run for office. recall. Learn the details. the option for NOTHING to go in that development zone does not exist. I wonder where you were when the office buildings were torn down. did the naysayers expect a park? And wouldn't THAT also create traffic? Not to mention product no revenue and be a drain on the budget.


Posted by Michael Austin
a resident of Pleasanton Meadows
on Aug 25, 2017 at 8:10 pm

Michael Austin is a registered user.

Okay, if Costco is not built:

I will suggest the three top fast food restaurants: Chick-Fil-A, In-N-out Burger, and Panda Express, all with drive through and all with ample parking.

This would require the same infrastructure changes!


Posted by Kelly K.
a resident of Ruby Hill
on Aug 25, 2017 at 8:39 pm

Kelly K. is a registered user.


Soccermom3,

Your analysis of the contributions is succinct and very powerful, outlining the City of Pleasanton's contributions and Nearon's ZERO contribution. I doubt that in the history of Pleasanton, the City has ever proposed such a one-sided deal.

The opposition's argument is that you've listed the TIF funds, just as the City report listed them for the 8/29 meeting, Tuesday night. Certainly, neither of these funds MUST be used for this project- but, at the discretion of the City they are included. The $6.4 million reserve was designated for "overpass improvements" in 2009. It is at the descretiion of the City to use for this project. There are other overpasses. The $3.7 million anticipated future TIF collected from Costco can be used for any traffic need within the City. Again, the City has chosen to include these funds in this project for the presentation Tuesday night.

Now, with that said, because the opposition bemoans the inclusion of these TIF's in the total (they seem to have no other argument on the comparison of contributions), let's see what it looks like without them:

$6.8 million - Pleasanton contribution from borrowing
$1.4 million - Pleasanton contribution on interest of loan
$1.5 million - Pleasanton contribution for right-of-way purchases

$0.0 million - Nearon's contribution

Does this make the City negotiated deal look any better?

Is this the best deal our City could make?





Posted by Grapevines
a resident of Vintage Hills
on Aug 25, 2017 at 9:02 pm

Grapevines is a registered user.

Michael,

Are you sure? I know you're partially trying to be humorous, but the Chick-fil-A, In-n-out, and Home Depot do seem adequately served by the similar Hopyard interchange--and no changes were needed to accommodate Chick-fil-A. So why does everyone think there needs to be ramp modifications for Stoneridge? Must be some reason.


Posted by Michael Austin
a resident of Pleasanton Meadows
on Aug 25, 2017 at 9:17 pm

Michael Austin is a registered user.

Traffic into the popular Chic-fil-A will require the same interchange reconfigure. Add in the other two, it will be a worse nightmare over what Costco would ever present.

Have you noticed, the Chick-fil-A on Hopyard and I-580 interchange is over whelmed ever day? Without mentioning Home Depot and In-N-Out.

Have you noticed the new design that Chic-Fil-A have developed to accommodate their separate businesses?


Posted by Grapevines
a resident of Vintage Hills
on Aug 25, 2017 at 9:40 pm

Grapevines is a registered user.

Hmm. I've noticed that the businesses get crowded, but not the ramps. So I guess I'm not seeing why you say the intersection needs the change. I admit that I haven't looked up the changes yet.

If the changes weren't needed, then the opponents of Costco might have a point. To be sure, the Livermore and Danville Costcos do not have any benefit of decent access. So the current configuration would not be worse for Costco. Perhaps the city sees the change as a way to differentiate?


Posted by Leftsidehill
a resident of West of Foothill
on Aug 25, 2017 at 9:51 pm

Leftsidehill is a registered user.

The anticipated 3% growth in sales of a physical big-box store such as Costco does not take into account the realities of on-line shopping. Costco has fallen behind the same store growth projections at the same time not investing in a better online footprint: Web Link


Posted by Leftsidehill
a resident of West of Foothill
on Aug 25, 2017 at 10:06 pm

Leftsidehill is a registered user.

tigergin and others who have asked essentially "if not Costco, then what?" One would have hoped that the planning department had done due diligence in asking that question. From the meetings that I have attended it would appear that retail has been their go to for that location from the start. This is regardless of the nearly ideal setting/location for light industrial/mfg - eg additive manufacturing and other related activities with mixed use office space. Yes the tax dollars (the portion
of sales tax that would stay in Pleasanton) would be different and maybe that swayed the planning folks and the council (and again regardless of close to a 20 year break even point). But the counter argument would be that the median salary for such an industrial park would be higher than that of retail and the workers could afford to live in Pleasanton and surrounding areas.


Posted by Grapevines
a resident of Vintage Hills
on Aug 26, 2017 at 6:43 am

Grapevines is a registered user.

Maybe your last point is part of the reason. We're penalied by state law for every job we create. An option to not place high density offices there but instead lower density retail would help to reduce the need for more housing. And if Costco doesn't pay so well, that might force those workers to have to live in neighboring cities, further reducing the stress on housing here compared to high paying professional jobs.

If that's been part of the thinking then I imagine many residents might like it considering how there is a real anti-housing group here.


Posted by Crumudgeon
a resident of Vintage Hills
on Aug 26, 2017 at 8:25 am

Crumudgeon is a registered user.

Our city representatives terrible negotiators. You must inform costco that pleasanton will walk away from the deal if they dont pay up.

If they balk we walk. Then sit back and let somone else step up. If no one does, shelve it.


Posted by Lisa S.
a resident of Stoneridge
on Aug 26, 2017 at 9:35 am

Lisa S. is a registered user.


I agree. If we accept this deal, it will be the worst negotiated deal for a Costco ever made (that I can find). I believe it will be the worst negotiated deal in our City history. How could we negotiate ZERO DOLLARS from the developer?

When a deal is this bad you say NO.

ZERO?? This is negotiating?? My 4 year old grandson negotiates better than this.




Posted by City of Pleasanton
a resident of Downtown
on Aug 26, 2017 at 11:44 am

City of Pleasanton is a registered user.

Here is a link to the City's Johnson Drive Economic Development Zone (EDZ) webpage: cityofpleasantonca.gov/JDEDZ
where you can find everything related to the EDZ, from staff reports to economic and environmental impact studies, and more.

Staff also posted updated FAQs to the webpage, and here is that link: Web Link

Please join us for the City Council special meeting on Tuesday, August 29, 2017 at 6:30 p.m. at 200 Old Bernal Ave. to learn about possible financing options for EDZ transportation improvements.


Posted by Michael Austin
a resident of Pleasanton Meadows
on Aug 26, 2017 at 12:00 pm

Michael Austin is a registered user.

Thanks for that post.
I did not see anything in there that represents a bad deal!


Posted by Long Timer
a resident of Golden Eagle
on Aug 26, 2017 at 3:06 pm

Long Timer is a registered user.

I been reading all of this.

I voted to have a Costco.... but not with the financial arrangements.
I actually think that I represent the majority. We want a Costco, but
we should not be subsidizing this at all. IMHO, I love our businesses here
and support them, it is unclear to me as to why the City would think that
this is OK. Costco is a ranked #16 in the Fortune 500 for 2017. They really do not need a subsidy. To come out with a sweetheart deal like this means that they have much better negotiators than the City or that there may be vested interested.

I pretty much agree with Matt Sullivan, Kelly K and others... that this is a bad deal.
I am very surprised that there are not more businesses vocalizing their displeasure that their tax dollars being being used to subsidize their competition.

I was very much offended that an outsider Bill Wheeler of Black Tie Transportation managed to pit residents of different areas of Pleasanton against each other under the disguise of "Big Box" when he really wanted was to preserve the parking spaces for his own employees of his growing business.

It is interesting to me that we have an outsider like Scott Hale from San Ramon providing so much input. Other than a shorter shopping commute.... are you affiliated with Costco in anyway?

Livermore just when through a complete upheaval for their downtown planning process. The Livermore Council had selected a developer without sufficient community input, who designed a Canyon like downtown structure which was targeted for the Millennials....Four story high rises, minimal open space, parking issues not addressed ... et al.

Their community banded together and replaced two of the council members....ones that was more open to hearing what the community wanted. One of the new councilperson articulated what the rest of the community wanted. RESET AND START AGAIN.

We should avoid what is happening in Dublin. The developers had a field day, build, $build, $$ build $$. So, they are talking about having to build more schools....and building a second HIGH SCHOOL. The developers are not going to be paying for the2nd High School .... the taxpayers of Dublin are.

IMHO, we need to do a major RESET and START AGAIN. Nearon and Costco need to pay their fair share of the infrastructure cost.

If not,
Matt Sullivan and Kelly K. do you have any interest in running for council?

Long Timer


Posted by Kelly K.
a resident of Ruby Hill
on Aug 27, 2017 at 3:04 pm

Kelly K. is a registered user.


Goodness...Long Timer...You made some powerful statements in a humble way (loved IMHO).

First, you and many people, either want or will accept a Costco at that location. This I get. I really do. I, for one, do not want a Costco at that location, but would respect the will of those who do, IF THIS WERE a fair deal. This is a deal, which at best, makes the City of Pleasanton look like an incompetent negotiator; or, at worst, makes Pleasanton look corrupt in "giving a sweetheart deal" to a developer who pays ZERO in infrastructure.

Second your advice to: RESET AND START AGAIN is a great one. This is a very bad deal. I refer those who are interested to:

Web Link

It is rather lengthy, but here are some key pages in the 44 page report and attachments:

Page 2 - "Streamlining the development review process for the new land uses through the California Environmental Quality Act (CEQA) documentation and in most cases staff level review process". -- If this is approved, the staff can make most all decisions on uses of the 40 acres? Really? This is a major concession for Pleasanton. Staff level approval of most all cases and uses. Do we want to give the staff this power? I wonder who had the idea to include this into the JDEDZ?

Page 4- talks about mitigation producing "acceptable levels of mitigation" , yet previous studies show that Hopyard/Owens would have no mitigation from the infrastructure spending, and is already at an unacceptable level. (LOS D). Was Hopyard/Owens purposely omitted? Much of the traffic will come through this intersection.

Page 6 - states: "The Stoneridge Drive and I-680 onramp improvements is the only project that is included...in the 2009 TIF update"-- Al Arthur's blog in this thread says this is not true.

Page 8 - The Tri-Valley Transportation Fee is not included in the $21.5 million. Who knows how much this is? The City will pay? Is it millions of dollars? They don't say. I also see nowhere is there a mention of who pays COST OVERUNS. I suspect we will pay.

Page 10 - the City contracted Century Urban for a study which concluded that Nearon, the developer, would require an outside contribution. The City of Pleasanton became that outside contributor. Somehow it was deemed that Nearon contributes ZERO.
The study also said Costco would require a contribution too. REALLY? Costco needs a contribution?

Page 11 - The developer pays zero toward rage city estimated $21.5 million of infrastructure.

Right of Way costs of $1.5 million to be split 50/50 between Pleasanton and Costco, ..."but Costco's portion will be added to the $6.785 million sales tax sharing agreement at no interest." In other words, the 50% Costco is said to pay, the City will pay by adding to its borrowing from Costco. How is this 50/50 split on the right of way expenses? So we are really borrowing $7.535 million. With $1.4 million interest to Costco? A total payback to Costco of $8.935 million.

Attachment 3 - uses a 3% growth rate for the Pleasanton Costco in determining the sales tax which we must share with Costco to pay back the $6.785 million plus their share of right of way fees. I encourage all to read the post from "27-year Resident" on this thread on Aug 22 at 8:35 pm. Costco same store sales are flat or declining after 5 years. With Amazon/ Whole Foods, there could be faster declining, resulting in a much longer payback than 17-25 years.


Posted by Crumudgeon
a resident of Vintage Hills
on Aug 27, 2017 at 9:42 pm

Crumudgeon is a registered user.

So just to boil it down. If this deal goes through taxpayers shell out aroound 20 million dollars in cash and loans for improvements. Some of this will be paid back go the city in the form of a tax on sales at costco.

If the deal is rejected, the city does not spend 20 million smackers.

Its a no brainer. THUMBD DOWN!


Posted by chas
a resident of Parkside
on Aug 28, 2017 at 5:26 am

chas is a registered user.

That site is not going to sit vacant forever. Someone will want it and the city is going to be faced with the same thing again. And it just might be worse. Somehow, someway the city is going to spend money on this site.
They will make this Costco deal and it doesn't matter what any of us want or think.
They want it, they will do it.


Posted by Lisa S.
a resident of Stoneridge
on Aug 28, 2017 at 7:40 am

Lisa S. is a registered user.


Kelly K,

Thanks for reviewing the 44 pages, and for posting your findings before tomorrow night's meeting.

You make many good points. In your last comment on Attachment 3, the total the City must pay before TIF should be shown as $9.685 million ($6.785 million plus $1.4 million interest plus $1.5 million in right of way purchases).

Actually, the interest will go higher than $1.4 million since 3% annual sales growth for 25 years for the Pleasanton Costco is known to be incorrect. Same store sales begin to decline after 4-5 years. This will also lengthen the term of the loan and the break even years which has not been calculated or shown in any report, including this one.


Posted by Matt Sullivan
a resident of Stoneridge
on Aug 28, 2017 at 11:48 am

Matt Sullivan is a registered user.

The following questions and comments were submitted to the City of Pleasanton in response to the JDEDZ Staff Report for the City Council meeting on 8/29/17.

--------------------------------------------------------

The Staff Report attempts to justify taxpayer subsidies to Costco and project developer Nearon to fund the infrastructure costs to mitigate the impacts of Costco and the EDZ. The city tries to make the case that this is a good long term investment for the city. They have presented the economics in a superficial and misleading manner that disguises the flaws of the agreement and the true cost to the public. My contention, based on a close analysis of the city’s justification, is that it is not a good investment but simply corporate welfare to the extreme.

Questions and Comments

1. The city staff is requesting final direction on the JDEZ subsidy plan at the Council’s Sept. 18th meeting. Approval of the financing plan should occur at the same time as land use approvals are made, not in advance. This would be like me agreeing to pay you $10,000 for a car without me knowing what kind of car it is or its condition.

2. Top of page 2 – all major land use approvals (hotels, club retail) should be considered using a PUD and public hearing process and retaining all rights of referendum as has the been the traditional land use process in Pleasanton. Major land use decisions should not be staff-level approvals without public oversight.

3. Page 8 of the SR indicates that the infrastructure costs do not include the Tri Valley Transportation Fee to mitigate the impacts of the project on I-680. How much is that fee estimated to be and who will pay it?

4. Page 10 states that consultant Century Urban performed a study to determine the ability for Nearon and Costco to absorb the costs associated with the $21.5 million infrastructure improvements. Has this study been made public? I can’t find it on the JDEDZ city website. Please provide a copy or post it on the JDEDZ website.

The study found that Costco will require “partial reimbursement” to construct the improvements. A corporation with $120 billion in annual sales and $16 billion in annual gross profit (from Costco’s 2016 financial statement) and with $3.3 billion in cash on hand can’t afford $21 million in infrastructure costs? This is a ridiculous attempt at justifying taxpayer subsidies for this project.

5. Transportation Impact Fee’s (TIF) should not be applied to fund direct project infrastructure improvements. TIF funds are paid by developers to offset offsite impacts to the overall General Plan circulation system from past development, not to be used to help fund new projects.

The General Plan Circulation Element, Policy 1 contains the following two programs:

Program 1.1: Require new developments to pay for their fair share of planned roadway improvement costs.
Program 1.2: Update the Traffic Development Fee study consistent with improvements needed to implement the General Plan circulation system.

Program 1.1 is related to direct roadway improvements to mitigate the project (the $21.5 million identified). According to this policy, Costco and Nearon should pay the full amount without city subsidies.

Program 1.2 refers to the TIF and that these funds should be applied to the city as a whole, not to the currently proposed project. The TIF should be used to mitigate the overall impacts to the General Plan circulation system from past projects.

The TIF belongs to the public. Diverting TIF funds to mitigate new projects is essentially stealing from the public and a failure to mitigate impacts from previous development. The city proposal to use TIF funds as direct project mitigation is a misuse of the funds and likely would open the city to litigation.

6. Even if it was legitimate to use the TIF for this project, according to the 2010 TIF Nexus Study, only projects listed in the report qualify for TIF funds. The new I-680 NB onramp lane is not included in the report and therefore does not qualify for the TIF to fund the $6.4 million project. There is a $400,000 project identified in the 2010 study at Stoneridge Dr. and Johnson Dr. but that does not justify a $3.7 million contribution. Furthermore, the 2010 study is based on the growth identified in the existing General Plan. The proposed EDZ project is not included in the General Plan and therefore not relevant to the 2010 TIF. The proposal is clearly a misuse of TIF funds and will likely leave the city open to litigation.

7. The strategy of inappropriately using the TIF to offset project infrastructure essentially shifts the majority of costs to the city. Using the TIF and the 50% share of Right of Way costs to fund the project results in a taxpayer contribution of $19 million, reduces Costco’s true contribution to $2.45 million, and developer Nearon pays nothing. See table below:

Total Infrastructure Cost = $21.5 million
City TIF Contribution for additional I-680 onramp lane = $6.4 million
City Tax Sharing Contribution (with interest) = $8.2 million
Costco TIF Contribution = $3.7 million (otherwise would go to other needed city projects)
City ROW contribution = $750,000
Total City Contribution = $19.05 million
Total Costco contribution = $2.45 million
Total Nearon contribution = $0

In addition, any future payment by the city for the Tri Valley Transportation Fee will only increase the city’s contribution. This is creative financing at best and hides the true nature of the public subsidy for the project.

8. How will the inevitable construction cost overruns be funded?

9. Page 12 indicates that sales tax revenue from Costco would grow 3% per year for 25 years. What is the basis for this estimate? Historically, new Costco’s have seen revenue growth for the first few years and then flat sales thereafter. Assuming 3% sales growth for 25 years in an era of increasing online sales (e.g. Amazon) and the likelihood of recession over this period makes this estimate unrealistic. Even using the unrealistic 3% annual sales increase the city would not break even on the deal for 20 years based on Costco revenue alone (Attachment 3). Payback would be 11 years for total revenue (Attachment 4).

10. Prudent investors perform a sensitivity analysis of potential return on investment when analyzing a new business or project. The city should run a number of scenarios evaluating potential sales and tax revenue return to evaluate the true benefits of the project. Using an unrealistic figure of 3% without examining other possibilities is a failure of the city’s fiduciary responsibility to the taxpayers.

11. Is the city responsible for the full $6.8 million ($8.2 million with interest) of the tax sharing agreement if the sales don’t materialize as expected, or if Costco abandons the project before the payment is made?

Conclusion

Even if you subscribe to the idea that the public should subsidize private development (which I don’t), the risk/reward structure of this deal is way out of whack. Most of the risk (almost 90% of the infrastructure costs) are the responsibility of the city, and by far the biggest rewards go to Costco, as described below.

Costco gross profit over 25 years = $830,000,000 (see attached spreadsheet)
Potential City Revenue from Costco over 25 years = $25,000,000 (Attachment 3)
Potential City total revenue from EDZ (including Costco) over 25 years = $76,000,000 (Attachment 4)

These results are using the city’s numbers, which have already be shown to be faulty. Hardly an equitable deal considering the city has most of the risk for a reward equal to 2% of the city Operating Budget.

What are our Values?

The question of whether the public should subsidize Costco and Nearon is not really one of dollars and cents, but one of values. Do we want to use taxpayer dollars to maintain and enhance our community, provide for our existing roads and infrastructure, parks, police and fire services, cultural resources, the human needs of our residents, water and sewer systems, and environmental protection? Do we value a transparent, democratic local government that truly represents the public and presents projects and proposals in an honest and straightforward manner rather than a misleading way?

Or would we spend our limited resources as a handout to a multibillion-dollar corporation whose business model is destructive to local economies and the environment to entice them to come to Pleasanton? Are willing to allow our public officials to deceive the community with misleading information and undermine the public, democratic process we have fought so hard for over the years just so we can have a Costco?

This proposal suggests that taxpayer money from all Pleasanton residents be used to subsidize a project that benefits not all, but the few who are members of a private buying club so they may have access to large quantities of cheap junk that most people really don’t need. Does this truly represent our community values?

Final question

This proposal could only make sense if there was a long-term fiscal benefit to the city. As described above, this is not the case, is clearly a bad deal, and is not in the interest of the public at large. One must then ask, why the city is pursuing it?


Posted by Fact Checker
a resident of Downtown
on Aug 28, 2017 at 12:36 pm

Fact Checker is a registered user.

City transportation improvements at buildout are required and must be done with or without Costco:
• 680/Stoneridge Drive onramps
• Stoneridge at Johnson
*General Plan, Circulation Element, p. 3-18, table 3-7

Traffic Impact Fees have already been collected and already allocated to Stoneridge and I-680 onramp improvements prior to Costco discussions.
*Staff Report p.6 ,11, see also City of Pleasanton Traffic Impact Fee, 2009 TIF Update and City of Pleasanton FY2017/18-2020/21 Capital Improvement Program (CIP)

Costco only represents 44% of the EDZ traffic at buildout. No sales tax incentive is being given to Costco. Costco is loaning the City money for the City’s share of transportation improvements.
*Staff Report p. 11, 13

Costco paying $3.1 million IN ADDITION TO the TIF fees they would owe of $3.7 million due to transportation impacts from their project. Costco is also contributing the value of any required land acquisition that they own for EDZ transportation improvements.
*Staff Report p.11

Costco has an agreement to purchase one parcel from Nearon Enterprises. The remaining vacant parcels will still be owned by Nearon Enterprises.
*Staff Report p. 10

Nearon isn’t paying zero, will pay as they submit projects. City will establish a JDEDZ Transportation Fund this fall.
*Staff Report p. 13-14


Posted by Fact Checker
a resident of Downtown
on Aug 28, 2017 at 12:47 pm

Fact Checker is a registered user.

We had a referendum on Costco. I remember that the signs clearly said, "No on MM, We Want Costco!"

Referendum Vote: November 8, 2016
Measure MM

YES 12,849, 37.37%
NO 21,532, 62.63%


Posted by Grapevines
a resident of Vintage Hills
on Aug 28, 2017 at 1:58 pm

Grapevines is a registered user.

I don't understand the point that the city shells out money. The city will shell out money that it gets from the additional sales taxes that Costco will bring in. The only hitch is that Costco is lending the money in advance rather than the city borrowing it from traditional sources. Since that work is necessary anyway to repurpose the area to retail, then this deal is not a loser of a deal in that the city will not lose money on it. It may still be a bad deal because the city could have made a lot MORE money on it--but it won't increase its general obligation debt from it.

If instead the argument is why is the city shelling out to make this area retail when the retailers should pay us 100% for the opportunity to be there, I actually buy that argument. The developer should pay to widen the road 100%, and not get a sales tax break in return. So I'm inclined to agree that this is not a good deal. But it certainly isn't a deal that's putting the city on the hook for money, and so it's better than revenue neutral.

It doesn't help the discussion to then frame his repeatedly as the city is spendig $20 million.


Posted by soccermom3
a resident of Parkside
on Aug 28, 2017 at 2:22 pm

soccermom3 is a registered user.

Fact Checker

Impressive handle - but come on, really? As I said before, I'm just a soccer mom with 3 kids, but I have several questions on your "fact checking"

1) If there is no Costco, the traffic will decrease dramatically with other uses. Will we need 7 lanes on Johnson Drive? Will the infrastructure still be $21.5 million without Costco?
2) You say Nearon isn't paying ZERO. Can you tell me what their contribution is for the $21.5 infrastructure? The answer is Zero.
3) There was no referendum. It was an Initiative. The Initiative never mentioned Costco. Citizens were not voting on this massive giveaway.


Posted by Fact Checker
a resident of Downtown
on Aug 28, 2017 at 4:10 pm

Fact Checker is a registered user.

I am a longtime Pleasanton resident and mom. I am just trying to provide factual information. I included footnotes so you can verify all of the information I post.

1) The City portion at buildout remains the same. That is why you find the Stoneridge/680 and Stoneridge/Johnson improvements already mentioned in the 2009 General Plan Update (Circulation Element), well before any Costco discussion took place. It is also why the Stoneridge/680 item is already in CIP budget. These are projects that the City will need to improve, regardless of Costco.

2) The City's share is an advance and will be reimbursed as the non-Costco projects come up for approval. The City indicates they will be instituting a JDEDZ Transportation Fund to charge appropriately for future non-Costco projects. Therefore, Nearon is a "to be determined". Since Costco is purchasing one of the Nearon parcels, Costco is paying for that parcel's share of improvements.
See staff report, p. 13-14

3) The initiative repeatedly mentioned Costco. In fact, it was referred to as the Costco initiative. The signs for No on MM said We Want Costco! That is why I said, we have already had our referendum on Costco.

Where is the massive giveaway? Costco is paying the City MORE than their share of the traffic improvements.


Posted by Hank Helper
a resident of Stoneridge
on Aug 28, 2017 at 4:54 pm

Hank Helper is a registered user.

I am a bit embarrassed for those who keep defending this gawd aweful deal.

Any business deal needs to be profitable.

How much money will the City of Pleasanton be ahead after 5, 10, 15, heck 20 years.

Enough said. Heck, I could put a hot dog stand out there and provide more money for Pleasanton.

Come on folks! It could be profitable, Pleasanton just did a very poor job negotiating. And I would have more respect for the other side if they would admit this and focus on getting us a better deal. Interestingly, 9 months ago, many of you agreed the deal was sour, but insisted it would get better. How is it better now? I agree with Kelly, in fact, it's substantially worse.

Again, I ask,
How much money will the city of Pleasanton be ahead, financially, after 5, 10, 15, heck, 20 years? Not to be childish, but isn't that kinda important?


Posted by Lisa S.
a resident of Stoneridge
on Aug 28, 2017 at 5:06 pm

Lisa S. is a registered user.


Let's look at the City's contribution:

$6.785 million - per City report
$1.400 million - interest - per City report
$1.500 million - right of way costs - per City report
$6.400 milliin - TIF reserves- per City report
$3.700 million - TIF fees collected from Costco - per City report

If you can find one example where a City has contributed this much for a Costco anywhere in the United States, please show me.

If you can find one example in the history of Pleasanton where this has happened, please show me.


Posted by Hank Helper
a resident of Stoneridge
on Aug 28, 2017 at 8:50 pm

Hank Helper is a registered user.

And let's not forget how foolish it is for the City of Pleasanton to gamble our future with the hopes that in 25 years from now Costco will be thriving. Oh, boy! It is stunning to research all the huge companies that have folded, despite all the promise in the world.
JC Penny
Kodak
Pan Am airlines
Sears
Borders
Blockbuster.
Good thing the City did not bank our future with these companies. Seems to me that expecting 3% growth, annually, for 20+ years is to overlook business history and the data that Costco when opting new stores: growth builds for first five years and then remain flat.


Posted by Kelly K.
a resident of Ruby Hill
on Aug 28, 2017 at 9:16 pm

Kelly K. is a registered user.

Agree with Crududgeon. Looks like $20 million smackers to me too. The TIF has to be counted. The City study counted it in their report for tomorrow night. Was the City wrong to include TIF in the $21.5 million? No, I don't think so.

At $900,000 sales tax per year (this is generous), it will take 22 years to recover our investment. With cost overruns, 25 years?

Shelve it. Let it sit. We don't need the traffic. Costco may not be around in 25 years

Or...for those of you who want Costco, demand that the developer pays a fair share. I can see the City contributing our $6.4 million TIF reserve. That's enough. I don't respect the City negotiators allowing the developer to pay ZERO.

So here's a solution for those who want Costco: we contribute $6.4 million from our TIF reserve, Costco contributes $7 million, and the developer contributes $7 million. This will get you Costco, and the respect of the citizens.

No free ride for the developer.


Posted by BobB
a resident of Another Pleasanton neighborhood
on Aug 28, 2017 at 9:34 pm

BobB is a registered user.

@Hank Helper,

"Any business deal needs to be profitable."

I think you are missing an important point. Looking at this as some kind of financial investment where the city of Pleasanton expects to make a profit, like when buying a mutual isn't a sensible way to look at it.

When does the sports park expect to turn a profit? The Veterans Memorial? Amador Valley High?


Posted by Jake Waters
a resident of Birdland
on Aug 28, 2017 at 9:39 pm

Jake Waters is a registered user.

I have to laugh, we are still talking about this win. I hear in these comments: too much traffic, Costco may not be here in hundred years, I don't shop at Costco, and more. First, boo hoo. There isn't life shattering traffic at the other Costco's. Stoneridge isn't overwhelmed, unless it's Christmas. If you don't shop there, than good for you, it gives us another parking space. Lastly, nothing is around for ever that we know, but it shouldn't stop progress.

Something will be built there, that we can count on, and I rather it not be another park, low income housing project, or strip mall with little junk stores going in and out of business every 6 months.

Start the tractors and hand out the shovels. Nothing is free in life.


Posted by Lisa S.
a resident of Stoneridge
on Aug 28, 2017 at 9:43 pm

Lisa S. is a registered user.

Kelly K,

Seems strange for you to propose a way for financing a Costco. I suppose that an equitable deal is more palatable.

I don't want Costco at any price. Here we disagree


Posted by Crumudgeon
a resident of Vintage Hills
on Aug 28, 2017 at 10:04 pm

Crumudgeon is a registered user.

Government entities often fail to recognize inevitable unforseen technological change. Here we have the city council using a 20 year model to project a break even point (OF THE LOAN). Even if you ignore the rosy projections, it will likely be fail due to powerfull market forces (Amazon for one).

I attatched the story of BART building a direct dedicated line from the coliseum to the OAK airport. It was projected to run a million dollar a year surplus. It is actually losing a half million a year.

How did this happen? It was blindsided by uber and lyft.
Web Link
I AM SKEPTICAL THE COUNCIL USING A 20 YEAR MODEL TO PROJECT PAYBACK.


Posted by Kelly K.
a resident of Ruby Hill
on Aug 29, 2017 at 9:21 am

Kelly K. is a registered user.

Crumudgeon,

I agree that the premise of a 20 year model with 3% growth is incorrect.

The 50/50 sharing of right away costs is false. The developer paying zero toward infrastructure is wrong. Borrowing for 20-25 years is foolish. A study contracted by the City which shows neither the developer, nor Costco are financially capable of making the necessary financial contributions is wrong. Giving the staff authority to approve most all uses without Planning Commission or City Council approval is wrong.

This is a bad deal. People did not vote for this lopsided, giveaway of our taxpayer money.

If people want Costco, let all 3 parties share in the infrastructure: Costco $7 million; Nearon, the developer, $7 million; Pleasanton $6.4 million in TIF reserves. No borrowing.

Let all 3 parties share in the Tri Valley Transportation Fees. Let all 3 parties share in cost overruns.

There is much work to be done to make this fair and equitable--if, there is to be a Costco.

As Long Timer says, lets RESET AND RESTART.


Sent from my iPad


Posted by soccermom3
a resident of Parkside
on Aug 29, 2017 at 11:09 am

soccermom3 is a registered user.

Kelly,

When the deal seems fair, as you presented it, no one seems to complain, or comment.

I, personally, don't think we need a Costco in Pleasanton, but if the people want one, it should not be a deal which produces debt, and a deal where the developer pays zero for infrastructure.

Is there any dispute to this?


Posted by Hank Helper
a resident of Stoneridge
on Aug 29, 2017 at 11:58 am

Hank Helper is a registered user.

That would silence me regarding the finical aspect.

I live near Stoneridge and do not want the mega gas station, that will pump about 10x the average gas station. If I want discounted gas, I can go to Safeway, Arco, etc... I currently fill up at Bernal Chevron, as it is close to my work.

I find it interesting that nobody is talking about this. At 1,000,000 gallons a month, if the average car gets, say 8 gallons, that's about
an additional 125,000 cars a month or 4,100 +, per day. Gee, how many tankers would be delivering each day??

Anyway, I agree to the above, with soccermom3 and Kelly K, and would be fine with Costco, without the gas.


Posted by Brian Ishaug
a resident of Another Pleasanton neighborhood
on Aug 29, 2017 at 12:27 pm

Brian Ishaug is a registered user.

@Matt Sulivan

You say, “TIF are paid by project developers to mitigate offsite impacts to traffic resulting from their project. Onsite infrastructure is always paid by the developer with a cash contribution.”

What is your definition of onsite vs offsite traffic mitigation? My definition of onsite would be anything done on the actual property being developed and offsite is anything done anywhere else including improvements to roads leading to/from to the property being developed. Is your definition of onsite anything in the Johnson Dr EDZ?


Posted by Fact Checker
a resident of Downtown
on Aug 29, 2017 at 1:56 pm

Fact Checker is a registered user.

27-year resident

You are wrong. Costco's bay area locations are the top performing stores in the country. 3% is a conservative estimate of growth.


Posted by Fact Checker
a resident of Downtown
on Aug 29, 2017 at 2:01 pm

Fact Checker is a registered user.

Yes, soccermom3, there is a dispute to your claim. The developer's contribution (Nearon) is to be determined. It isn't zero. The fees will be paid for as projects come into the JDEDZ. See staff report p.13-14. The City is establishing a JDEDZ Transportation Fee.

Costco is paying MORE than their share of the associated traffic impact. See staff report p.11 and p.13


Posted by Fact Checker
a resident of Downtown
on Aug 29, 2017 at 2:08 pm

Fact Checker is a registered user.

Lisa S. If you want examples of actual subsidies for a Costco, see Elk Grove, CA or Tinmouth, CO for two. There is no subsidy here. The City has to make traffic improvements in this area, with or without a Costco. See 2009 General Plan. See also Staff Report p. 6 and p. 11. Moreover, the City is advancing (see JDEDZ Transportation Fund) 89% of the transportation improvements associated with the non-Costco land uses. See Staff report p. 14.


Posted by Fact Checker
a resident of Downtown
on Aug 29, 2017 at 2:13 pm

Fact Checker is a registered user.

The term of the loan will not/cannot be lengthened. It is 25 years of a sales tax share for repayment. The City anticipates paying it off sooner than 25 years.


Posted by Lisa S.
a resident of Stoneridge
on Aug 29, 2017 at 2:24 pm

Lisa S. is a registered user.

Fact Checker

Which of the Cities that you mentioned paid almost $20 million for infrastructure.
$6.4 million TIF reserve contribution
$6.785 million borrowing
$1.4 million interest
$1.5 million right of way costs
$3.7 TIF contribution

How many did the developer pay zero for the initial infrastructure?


Posted by Fact Checker
a resident of Downtown
on Aug 29, 2017 at 2:29 pm

Fact Checker is a registered user.

Lisa S.

How much will the City have to pay in infrastructure if there is no Costco?


Posted by Lisa S.
a resident of Stoneridge
on Aug 29, 2017 at 2:35 pm

Lisa S. is a registered user.

Fact Checker,

A lot less than $20 million!!


Posted by Crumudgeon
a resident of Vintage Hills
on Aug 29, 2017 at 2:53 pm

Crumudgeon is a registered user.

To the council,

I have a poker game lined up for saturday night. You are all invited. Bring plenty of cash.


Posted by Lisa S.
a resident of Stoneridge
on Aug 29, 2017 at 3:32 pm

Lisa S. is a registered user.

Council...please bring Fact Checker with you to the poker game. (Or, maybe she/he is one of you- or your hired gun.)


Posted by Dale M.
a resident of Stoneridge
on Aug 29, 2017 at 3:34 pm

Dale M. is a registered user.

Fact Checker: Which City Department do you work for? The City's repayment expectations are flawed. Built on Costco sales growth projections which are totally unrealistic based on Costco's historic performance. If that's not enough, today the Pleasanton Weekly posted an article which discusses the mayor and city manager bemoaning the fact that sales tax revenues from existing retailers in Pleasanton are down due to online sales growth. Couple this with the massive growth of competitive retail in Dublin and San Ramon and you really have to question investing "tax payers'" dollars to prop this segment up.


Posted by Crumudgeon
a resident of Vintage Hills
on Aug 29, 2017 at 3:48 pm

Crumudgeon is a registered user.

Here are some better ways to spend $20 million bucks. Feel free to make suggestions.

1. Plant some dang grass at Bernal Park

2. Build multi purpose gyms for Amador and Foothill High

3. Hire a cop and a special prosecutor to arrest and convict people that don't pick up after their dogs.

4. Construct a new building to house all of the massage parlors. This will reduce the city's carbon footprint.


Posted by 27-year resident
a resident of Grey Eagle Estates
on Aug 29, 2017 at 4:02 pm

27-year resident is a registered user.

Fact Checker:

Just noticed that you said my facts were wrong. Sorry! They are not my facts. I didn't say anything. All I did was quote Costco's own facts. So I guess you are saying that Costco is wrong. You sure seem to be an expert on this whole project -- inside information? "3% is a conservative estimate of growth". Three other stores within 10 miles and you think this one will grow at 3% for 25 years with "brick and mortar" declining in today's economy? I think you and the Pleasanton City Council/City Manager are the only ones who believe that in today's economic world. Of course, it's not your money -- you have no "skin in the game". No sane person would put their own money behind this plan. Read today's article in this paper -- Tim Hunt and even Mayor Thorne don't paint such a rosey picture for brick and mortar.


Posted by Fact Checker
a resident of Downtown
on Aug 29, 2017 at 5:39 pm

Fact Checker is a registered user.

27 year resident

As stated before I am a Pleasanton resident, 20 years to be precise. I guess that means I do actually have "skin in the game." Costco does not release their actual sales information for individual warehouses. However, Costco has stated that the Bay Area region is the top performing region in the country. The information from staff report, attachment 3 came from numbers Costco provided the City. Sorry, but Bay Area Costco warehouses are not declining.


Posted by Flightops
a resident of Downtown
on Aug 29, 2017 at 5:40 pm

Flightops is a registered user.

Great ping pong match going on here, im right you're wrong, no I'm right you're wrong! We shall see. @ Crumudgeon- I would almost give up our Costco if you added a #5 for adding red light cameras all over town and we would hire more PPD officers for traffic enforcement. Can't believe you got away with #4, every time I bring up that subject I get deleted or bleeped.


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