Renderings of Costco's proposed Dallas store at Central and Churchill

Renderings of Costco’s proposed Dallas store at Central and Churchill

“Give us $3 million or we walk.” That, essentially, is what Fortune 500 company Costco is telling the City of Dallas.

The Dallas Morning News is reporting that Costco’s zoning request and plans to finally move into the city limits, at Central Expressway and Churchill just east of Medical City hospital, are not without strings attached: The company wants $3 million in a city economic development grant.

In his story, the DMN’s Robert Wilonsky details why Costco is flush with cash, implying that $3 million may be unnecessary chump change to a business doing billions in profit annually. But an update this morning says the council’s Economic Development Committee didn’t hesitate to recommend giving Costco the money.

 

The proposed Costco is located in the district of Preston Hollow Councilman Lee Kleinman. Kleinman tells us he fully supports the $3 million grant, saying “it pays for itself the first year, and after four years, there’s no more payout at all.”

Costco map

Aerial rendering of the proposed Costco warehouse in Dallas at Central and Churchill

Costco is planning to begin construction in August and open in February 2017. Within the first decade, Kleinman says, Costco will generate real property tax revenue of about $900,000, business tax revenue of $900,000 and sales tax revenue of $10 million. The land currently is owned by TxDOT so doesn’t generate any revenue for the city. A multi-family development would have been the best prospect for the land if Costco hadn’t claimed it, he says, and that might have produced more property taxes “but I think the sales tax component more than offsets it.”

“I think it pencils out financially but also with respect to trying to deliver to our residents and not to have to drive to Plano to go shopping,” Kleinman says of the company’s current suburban locations. “I’d rather have our tax dollars stay here.” Not to mention, Kleinman says, “this is the only zoning case where people have called me to say, ‘How soon can you make this happen?’ ” rather than calling to protest.

Other council members, including East Dallas Councilman Mark Clayton, are more skeptical: “It can’t just be, ‘Let’s throw out the brand name and vote.’ ” Clayton told Wilonsky. “It needs to show when Dallas breaks even. I would love to have a Costco here. But I’d like to have an Old Monk on every corner too. I can’t always get my way.”

The problem, Clayton tells us, is that “there’s not a clear council directive of ‘here’s why we’re doing what we’re doing,’ and that’s a shame.” He references the recent council decision to give the Cypress Waters project a $450,000 economic development grant, which he voted against.

“From the best napkin math I can do, it will take 40 years for us to recoup that money,” Clayton says.

With the Costco grant, maybe if the city can break even in 18 months, it’s worth it, Clayton says.

Costco is notorious for waiting until it gets exactly what it wants in a real estate deal before signing on the dotted line. Kleinman points out that Costco walked away from the same deal in early 2015 “because the numbers didn’t work.”

Kleinman believes the numbers work for the city, too. Clayton still isn’t sure.

“What checks the box to get something in the city limits?” Clayton asks. “Even if it’s the right thing to do, if you can’t articulate why it’s the right thing to do in the light of day, then why shouldn’t the money go to fix streets?”


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