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.