Pleasanton’s Financial Deal with Costco Released

An article published in the Town Square section of Pleasanton Weekly on October 3, 2016
The Pleasanton Citizens for Responsible Growth’s request for documents, under the California Information Act, has finally produced the details of The City of Pleasanton’s negotiations with Costco. An email from Nelson Fialho, City Manager, to Mike Dobrota , Costco Regional Manager, revealed the following:
$7,500,000 – Pleasanton Contribution, borrowing from Costco for 25 years, total with interest $10,067,006
$3,100,000 – Nearon Contribution, ($4,780,000 less credits $1,700,000)
$5,335,000- Pleasanton Contribution from Traffic Impact Fee Reserve Fund 

$16,005,000 Total Cost (engineers’ estimates)
$15,402,006 Pleasanton’s Contribution (with interest)

The borrowing and interest amounts were confirmed by Tina Olson, Pleasanton Director of Finance, on May 11 and by Mike Dobrota, Costco, on May 12. There have been no subsequent documents, or changes.

These were not the numbers used in the City Council meeting of April 12. Both the minutes and the audio of the City presentation are missing.

YES on MM Campaign Begins


YES on MM, the campaign to encourage Pleasanton voters to vote YES on Measure MM, the initiative to limit the size of retailers on Johnson Drive, has begun.

Organizers were met with a lot of enthusiasm at the Downtown First Wednesday event on Sept. 7, and have been handing out materials at the Farmers Market and other events.

On Sept. 22, the YES on MM Facebook page was launched.

If you are interested in putting a sign in your yard or on your business, or would like to help in getting the word out, contact us at inquiries@nocostcohere.com

Measure MM Initiative Supporters Dispute City Report

Reposted from The Independent (Livermore) website:

An analysis of Pleasanton Measure MM found differences in traffic and economic impacts between a citizen’s initiative and the proposed 40 acre Johnson Drive Economic Zone. Findings concluded that the initiative would have less traffic impact; it would have greater negative impact on existing retail.

The initiative, which if approved by voters in November, would limit individual retail uses to less than 50,000 square feet in the Johnson Drive Economic Zone area, located east of Johnson Drive and north of Stoneridge Drive.

Last December, Costco signed a letter of intent to acquire the 40-acre Johnson Drive site from Nearon Enterprises, which bought the property after Clorox moved its research center to a new corporate campus nearby. Once it was known that Costco was considering opening a store in Pleasanton, members of the public began attending council meetings, where they raised concerns about impacts of a Costco on local businesses and traffic. Eventually, they organized and launched an initiative drive, which was successful.

After placing the initiative on the ballot, the city council asked for an analysis of the impacts of the initiative on the city. Analyzed were such factors as fiscal impacts, economic impacts, traffic, and air quality.

The studies were conducted by ESA. They were paid for by Nearon Enterprises.

Citizens for Planned Growth, sponsors of the initiative, said they planned to hire a consultant to conduct a peer review of the study.

Christi Harris of ESA summarized the findings during last week’s Pleasanton City Council meeting.

The initiative would generate 1235 jobs compared to 678 for the zone, because general retail hires more employees than club retail, such as Costco. However, more employees would generate more demand for city services, such as water.

The initiative would generate less traffic. Both the initiative and zone would require similar improvements in traffic infrastructure. With no anchor store to generate funding, the initiative would be less likely to be able to finance the traffic improvements, said Harris.

Both the zone and initiative would exceed air quality standards.

The economic study found that the initiative would have somewhat greater impacts on existing retailers with the potential for existing businesses to lose sales and close. Harris explained that the report estimated that the initiative would divert $5.7 million of sales from local businesses, while the zone would divert $1.3 million at buildout.

Fiscal impacts were similar with the initiative generating $2.1 million a year by 2028 and the zone $2.5 million a year for the city’s general fund.

There were questions about whether the cost of traffic infrastructure was included in the studies.

City Manager Nelson Fialho set the estimated cost for improvements at $16 million. One-third would come from the developer; one-third from traffic impact fees accumulated by the city; and one-third would be paid from sales tax generated by Costco. Fialho explained that Costco would advance funds to the city and the city would pay back the money over time by returning sales tax over $700,000 a year to Costco.

Another concept would be for the city to borrow from its $270 million in reserves, then pay back the money overtime using Costco sales tax. Absent an anchor tenant such as Costco, another option would be to establish an improvement district that would issue bonds paid back by the tenants.

During the public hearing, Don Mayday, a resident, called the report an example of the city massaging assumptions, data and arguments that support the preconceived conclusions. He noted that the bottom line is that the initiative reduces traffic by over 2500 trips by day over the zone.

He disagreed that the initiative would have more negative impact on current retails than Costco, noting that Costco prices many commodities, such as gas, at or below what other retailers pay. “Small retailers cannot compete with Costco pricing strategies.” He added, “It’s not the city’s job to make a project feasible to a developer.”

Bill Wheeler, who heads Citizens for Planned Growth, stated, “It seems that some of the conclusions are debatable.” He noted that the purpose of the initiative is to allow voters to express their views about Costco or a new economic zone.

The council, consisting of Councilmembers Kathy Narum, Jerry Pentin, and Arne Olson voted to accept the report. Karla Brown was absent. The referred to it as a good report. Mayor Jerry Thorne was recused.

The study has been posted on the city’s website.

New City Report Says Measure MM Could Bring Less Traffic & Pollution, More Jobs

Original post in the Pleasanton Weekly’s Town Square made by Bob A., Another Pleasanton neighborhood, on Aug 18, 2016

At the City Council Meeting on Tuesday night, three consultants, paid for by Nearon Enterprises, the owner and developer of the Costco properties on Johnson Drive, presented a summary of a report comparing two options for the Johnson Drive Economic Development Zone (JDEDZ): one with a Costco “Big Box” and the other with a mix of retailers in buildings less than 50,000 sq. ft. as required by Measure MM, an initiative that Pleasanton Voters will decide on in November.

In order to prepare the analysis, the consultants, guided by City Staff, had to make a number of assumptions, and therefore the analysis was incomplete. Financial incentives to Costco have not been concluded. This is my recap of what I heard.

Employment: The consultants said the Measure MM Scenario would create over 550 more jobs than the Costco Scenario.

Traffic: The consultants said that development under Measure MM would result in over 2,500 less vehicle trips a day on week days and over 3,600 few vehicle trips on Saturdays. More than a 20% reduction. They added that the mitigations would be much more effective under the Initiative Measure Scenario.

Air Quality: The consultants said that due to the traffic reduction there would be less of an impact on air quality under Measure MM.

Noise: The consultants said that due to the traffic reduction there would be less noise generated by the development under Measure MM.

Economic Impact: The consultants said that the Costco Scenario would have less of an impact on local businesses than Measure MM. During the public comment period, one speaker, took exception with the consultants in this area. He said that local businesses would be hurt the most by the Costco Scenario. This has been shown in numerous independent studies.

Fiscal Impact: The consultants said that the Costco Scenario would result in about $400,000 more per year in net revenue to the city. This is number was pointed out by a speaker to be inaccurate and incomplete. It did not include additional incentives being negotiated, or debt repayment of infrastructure, or the cost of using existing reserve City funds. There is no break even analysis in number of years.

Feasibility: The consultants said that the Costco Scenario was more feasible for the developer because a large anchor tenant was already committed to the project. This assumption, too, is incomplete since no effort has been made to find tenants under Measure MM, even though the Pleasanton Weekly had reported that Trader Joe’s had interest.

Financing: There was a lot of discussion and regarding how the $16 Million in traffic improvements necessary to make the JDEDZ work would be paid for. The discussion did include the necessity to borrow 1/3 (actually $6 million) from Costco or from a general fund that has $270 million. Do we have such a fund?

The presentation left many unanswered questions. What we do know is that Pleasanton taxpayers are being asked to pay over $11 Million to bring Costco to Pleasanton. ($6 million in borrowing plus $5 million of reserve funds).

Other cities routinely make developers foot the bill for infrastructure improvements required to support projects they want to build. Why can’t Pleasanton do this? Are there other alternatives that might cost tax payers less? Why not choose an alternative that produces less traffic, less pollution and more jobs and no borrowing?

What’s the hurry? Aren’t we better to wait, rather than accept a less desirable alternative? I will vote for Measure MM to slow the process and achieve a better long term result.

Costco Could Be Drain on Pleasanton Economy for 30 Years

Post from Val in the Pleasanton Weekly Town Square on Aug. 9, 2016:
Yes, Costco could actually be a drain on the Pleasanton economy for 30 years.
There have been many stories in the Pleasanton Weekly regarding Costco in the last few months. A blog by Lisa S today on “Costco and the Mayor” made me do some research. She quoted information from “Lies-Tax revenue” saying that Costco has a net revenue loss on all but 2 out of 116 cities, in California. How could that be? Lies-Tax revenue uses a study from The Institute of Local Self-Reliance, a non-profit organization, “Impacts of Big Box Stores on Taxes and Public Costs.” I found the article easy to understand and straightforward. I am commenting based on Pleasanton’s fiscal annual impact of a Costco, which agrees with Lisa S’s analysis.

First, Costco demands incentives to locate within a community. Yes, it’s hard to believe, but this huge corporation, which makes billions of dollars in profits per year, demands that you pay taxpayer money to come to your city. These incentives in most cases studied result in a negative economic impact for many years. In Pleasanton’s case, it could be for 30 years.

Pleasanton is considering spending $11,000,000 of taxpayer money for infrastructure improvements to mitigate the negative impacts of traffic of the Costco. Normally, the developer would pay for these improvements to increase the value of their own property; but in this case, to incentivize Costco to come, Pleasanton will borrow $6,000,000 from Costco and use $5,000,000 of its reserve.

Second, much of Costco’s sales come from existing businesses within the local community: grocery stores, gas stations, appliance stores, automobile dealerships, tire stores, jewelry stores, pizza restaurants, florists, insurance companies, and on and on. A study by MIT: “Big-Box Impact Studies”, states much of the sales will come from the local county. It quotes 84%. So, using Lisa S’s rather conservative number of 50% from the City of Pleasanton, the financial impact for 30 years is below:

$750,000 annual net sales tax revenue from Costco (50% from existing businesses)
-373,740 annual payments of $6 million borrowing @4% for 30 years
-286,452 annual payments of $5 million borrowing to payback reserve 4% for 30 years
-153,450 annual costs of city services to support Costco ($1023 per 1000 sq ft)
————
$ -63,642 annual loss for 30 years

Yes, Costco could be a drain on our Pleasanton economy, the same as it is in 114 cities out of 116 cities in California, quoted from the Institute of Local Self-Reliance.