Costco in Elk Grove, CA Asking for Hidden Subsidy

Costco Elk Grove CA

An article in the May 24, 2016 Sacramento (CA) Bee outlines how Costco and Pappas Developments have created a new way to get the localities to subsidize the building of a new store so that the transaction is not apparent to the general public.

According to the article (see full text here),

Costco is known for requiring its development fees to be reimbursed through sales-tax sharing agreements with cities. In this case, Costco wants the city to give its landlord a subsidy while the company pays lower rent, he said.

Costco would still benefit financially, but in a less straightforward way that would avoid the public perceiving it as a tax kickback, Davis said.

“When I first met with Costco in 2008, they indicated very clearly that they only locate in cities where 100 percent of their impact fees are returned to them in terms of sales tax sharing,” the mayor said. “They didn’t want to do that directly (in Elk Grove). They said, ‘Work that through the lease with Pappas.’ ”

Local residents have raised objections to the store’s placement because of traffic concerns and its proximity to a residential neighborhood. But it appears that the Elk Grove City Council will be proceeding with approval using the developer subsidy approach. It has asked for design changes, which are due to be submitted by July 13.