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Costco attaches $3 million in taxpayer strings to its Dallas debut

Costco elevations

Renderings of Costco’s proposed Dallas store at Central Expressway-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.

East Dallas Councilman Philip Kingston told Wilonsky he’s not on board: “Economic Development can get away with this one because of the popularity of Costco, but there’s no way I will support this.”

Costco map

Aerial rendering of Costco’s proposed Dallas warehouse

East Dallas Councilman Mark Clayton was more open but still skeptical: “It can’t just be, ‘Let’s throw out the brand name and vote.’ 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.

“I looked at the math on Cypress Waters, and from the best napkin math I can do, it will take 40 years for us to recoup that money,” Clayton says.

The proposed Costco is located in the district of Councilman Lee Kleinman, who represents parts of Preston Hollow and North Dallas. 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 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.

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.”

Though Kleinman is convinced the numbers work for the city, Clayton is skeptical. Maybe if the city can break even in 18 months, it’s worth it, he says.

“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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By |2016-05-02T13:17:54-05:00May 2nd, 2016|Business, City Hall, News|1 Comment

About the Author:

Keri Mitchell
KERI MITCHELL is an Advocate editor and reporter, and also an East Dallas resident and parent of a student at Dallas ISD's Mata Montessori. Email kmitchell@advocatemag.com or follow twitter.com/thequotablelife.