A Costco in Dallas Could Provide More than $7 Million in Sales Tax Revenue Over 10 Years

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landscapingWe teased about this last April Fools Day — when we said that Costco was buying up the Hicks-Crespi Estate on Walnut Hill Lane for its hottest new North Dallas location. It was a joke. Then Andy Beal actually BOUGHT the Hicks-Crespi estate, no joke! Costco has been eyeing Dallas for years for a location, from the dealership sites on East Northwest Highway to the intersection of Coit and Churchill just west of Central Expressway for a North Dallas big box location, where they have finally landed.

Now we are giddy with delight!

The City Plan Commission recently gave Costco a green light. Now the city’s Office of Economic Development wants to give them a Chapter 380 economic development grant “not to exceed $3,000,000″ to get the job done and bring the retail giant’s sales revenues into the city.

I mean, this is a no-brainer. The money comes from the 2012 bond proposition specifically to attract businesses to Dallas. This is the first incentive money spent in District 11 in over 10 years. Full disclosure: I live in District 11. Frankly, anyone against it just is not thinking straight.Screen-Shot-2016-04-21-at-4.55.12-PM

landscapingI spoke with City Councilman Lee Kleinman briefly, who told me that sales tax revenues from the $3 million grant (remember, money already put aside to attract business to Dallas) could exceed ten million in sales tax revenues over the next ten years. He says he pushed Costco pretty hard last year, so hard, in fact, they almost walked away from the table.

“Is it that they want something economic, because the City gives other companies economic incentives? ” I asked.

Yes, he said. There are also costs inherent to the project, and the site is a little smaller than the behemoth discount retailer would have liked for maximum return on investment:

“They wouldn’t do the deal without the support due to overall project costs,” said J. Hammond Perot, assistant director in the Office of Economic Development, by email. “We had been trying to get a Costco for over 10 years, and that’s what it took.”

Jennifer Murillo, director of real estate development for Costco, told the City Plan Commission last week that the company “has been looking for a site in Dallas for many years,” and that it settled on the 13.2-acre Coit Road location, near the southwest corner of North Central Expressway and LBJ Freeway, after it came up for auction. The land had been owned by the Texas Department of Transportation.

The site, she said, is about 3 acres smaller than Costco would have preferred. But, she told the commission, it’s easy to access and has “fully developed infrastructure in place.”

The proposed store would be 151,000-square-feet with 16 fueling stations, 703 parking stalls and all the goodies Costco offers members, including a pharmacy, bakery, tire center. Not sure if it will also include a liquor store. Apparently the company also has worked with the CityDesign Studio to make the store better looking. It will have more parking spaces than the city requires. The store’s landscaping plan calls for 244 trees, which are 99 more than are required. Seems like a huge win win.

The City of Dallas desperately needs to expand its revenue base. It’s rapidly losing the tax on telephone land lines, as well as shopping center declining sales tax revenues as more people shop online. It is critical that they look for a logical means of expanding the city’s revenue base.

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A Costco in Dallas would capture the large share of shoppers who already head to Plano East or West (or Duncanville, Fort Worth, Arlington, Southlake, Lewisville, Frisco and Rockwall) to shop Costco. Hello, Park Cities shoppers!

“It is pretty easy to pay for a Costco membership with the fifteen cents per gallon savings on gasoline, particularly as the gas is the highest grade available, top tier,” says Dormand Long, a former businessman and consumer activist who has conceived many a way for the city to increase revenue, including suggesting we study the innovations of Denver and Seattle in converting coin parking meters to modern kiosks. Denver increased its parking and overdue fines by $42 million, enough to completely fund its great public library system.

The Coit/Churchill site is a perfect location: while it is well removed from single family residential neighborhoods, a Costco could improve nearby home values: studies have shown that the values of homes within a reasonable driving distance of either a Costco, Trader Joe’s or a Whole Foods are significantly enhanced.

“While I am generally opposed to municipal subsidies to privately owned enterprises, this appears to be an option that would fund direly needed library, streets and other much needed improvements in the City of Dallas,” says Dormand.

Costco, he says, thrives because it is responsive to the wants and needs of its served markets. Customer service is among the highest in retail.

Kleinman agrees. Perhaps the biggest fiscal hawk on the City Council, he points out that the land has been lying fallow for years while we all drive north to the two Costco’s in Plano on both Central and the Dallas North Tollway to shop. He thinks TxDOT is great to be giving up the land.

Others on the City Council are not as excited. Phillip Kingston, for example, thinks Costco is rich enough and should need zero incentives — he has said there is no way he would support this. I would hope he would re-consider, and listen to his constituents who would also benefit.

There is speculation that Costco may raise membership fees, which account for “almost 70% of the $3.6 billion in operating profits it generated last year. The company has also said it will no longer accept American Express cards after June 19, switching to VISA instead.” In general, Costco appeals to higher net worth consumers who have an American Express (it’s that or cash) and don’t mind paying the annual fees of $55 to $110 (Executive Level). For these shoppers, an extra $5 or $10 a year is nothing, especially if they make up for it with cash back on their new VISA.

Side note: what is the deal with American Express? No Admiral’s Club, no JetBlue, soon no Costco, why have one?

This survey from Millionaire Corner, an investment site owned by the Spectrem Group in lake Forest, Ill. (where Nancy Carroll fled, remember?) is two years old, but still applicable:

… among those with a net worth of $5 million or more (not including their primary home) Home Depot is the favorite store, regularly visited by 57%, followed by Costco (46%), Lowe’s (44%) and Target (41%). A third say they shop at Walmart, too.

Where they don’t shop is just as intriguing: Only 2% of the survey (based on 1,200 investors with net worth ranging from less than $100,000 to more than $5 million) ever go to Lord & Taylor, for example. And only 8% of the highest net-worth shoppers go to Neiman Marcus.

I rest my case. We need a Costco in Dallas, it’s the best company to get the money already earmarked for economic investment, and there is no doubt the return on investment will be solid.

mm

Candy Evans

A real estate muckraker, Candy Evans is one of the nation’s leading real estate reporters. She is also the North Texas real estate editor for Forbes.com, CultureMap Dallas, Modern Luxury Dallas, & the Katy Trail Weekly. Candy has written for Joel Kotkin’s The New Geography, Inman Real Estate News, plus a host of national sites. Constantly breaking celebrity real estate news, she scooped former president George W. Bush's Dallas home in 2008. She is the founder and publisher of her signature CandysDirt.com, and SecondShelters.com, devoted to the vacation home market. Her verticals have won many awards, including Best Blog by the venerable National Association of Real Estate Editors, one of the nation’s oldest and most prestigious journalism associations. Candy holds an active Texas real estate license but does not sell. She is on the Board of Directors of Braemar Hotels & Resorts (BHR).

Reader Interactions

Comments

  1. Jon Anderson says

    I’d want to see the sales tax revenue numbers. How much of that $700k a year is additive revenue recaptured from buyers purchasing Costco and Costco-like items outside the county? How much of it is cannibalized from other Dallas County stores? Personally, I only visit Costco for a few certain items 2-3 times a year. I might spend more were Costco closer, but how much of that spending will come out of the pockets of the nearby Kroger or Racetrack? I’m not against Costco, but I’d want to understand if my $3.1 million in givebacks simply resulted in shifting sales tax from one pocket to another.

    • mmCandy Evans says

      As a Costco shopper, you buy certain items from there (I buy TP, paper goods, and certain fruits/veggies and vino) because most of the shelf goods are too big. I still frequent Tom Thumb/Whole Foods/Central Market. Or you make a party run. If anything, this Costco will steal some thunder from the Northwest Highway Sams Club, which may solve some traffic issues over there…

      • Wylie H. Dallas says

        So we are subsidizing one store (Costco) to compete against Sam’s Club?

        Who decides which stores are lucky enough to get taxpayer dollars and which ones are the losers?

        Also, did the City’s economic study consider the negative impact the Costco would have on tax revenues from existing Dallas businesses from whom it would steal business?

  2. Wylie H. Dallas says

    Why do Dallas taxpayers have to pay a bribe to Costco to come to Dallas, when they willingly locate without bribes elsewhere in Texas?

    Also, if the deal doesn’t make sense, isn’t that because TxDOT is overcharging for the land? Why don’t they just knock $3 million to make the sale happen?

    Why does Lee Kleinman feel he has to be grateful to TxDOT for selling this land? He should be angry that they’ve been holding off of the tax rolls as productive property while they try to achieve a record breaking sales price.

    • mmCandy Evans says

      As he explained to me, the money is already there just for this purpose. The TxDOT point is very valid. But land costs are pretty high in Dallas currently. I guess you could ask, why shouldn’t they get the most they can? Ahhh how I love it when one government arm screws the other!

      • Wylie H. Dallas says

        It’s only there for economic development purposes, not for COSTCO specifically. $3 million spent here is $3 million less that would be available for legitimate economic development purposes.

        TxDOT has been sitting on this land for years. The fact that they haven’t sold it is indicative of the fact that they have been asking an above-market price for it. This is effectively just a wealth transfer from City of Dallas to TxDOT.

  3. lakewoodhobo says

    “2012 bond proposition specifically to attract businesses to Dallas”

    Wait, what? I don’t remember that part of the 2012 bond program. As I recall, PROP 1 was for streets, PROP 2 was for flood control and PROP 3 was for southern Dallas and transit-oriented development projects citywide (this is not a TOD unless you consider paying TxDOT too much money a TOD).

  4. dormand says

    In Texas, many retailers and especially restaurants, have as a constraint convenient and adequate parking.

    While Costco is among the best in retailing, it may be putting a ceiling on future growth that its excellent customer satisfaction drives.

    If the plat of land is smaller than its optimal requirements, it might consider either making a modular plan for multiple levels, as has the successful Whole Foods Market near NorthPark. As there is not a critical mass of available land with ingress and egress available in North Dallas, allowing for a modular expansion of parking levels.

    An additional option is to break off the essential gasoline dispensary operations onto a nearby lot. The Rockwall Costco has done this successfully. Costco successfully uses the highest quality gasoline as a booster of traffic. Reports published indicate that Costco gas prices are fifteen cents per gallon under the market.

    I am hoping that they will implement operations research methodology to ease traffic flow through both their gas facility and their main store. Gas stations set at a diagonal have far more ease of use to customers and it allows for superior throughput via minimizing customers who have poor social skills.

    Costco should also note that the failure to utilize both right turn only as well as acceleration lanes at its Plano facility on North Central creates a highly hazardous scenario. The combination of having to make ninety degree ( right angle ) turns both to enter and to exit that facility while near Type A overly caffeinated
    Plano drives in the four lane service road enables some to reach 80 miles per hour.

    Many QT stations successfully utilize right turn only lanes for ingress and acceleration lanes for egress.

    The Plano City Manager has twice failed to respond to my request to address this easily implemented and minimal cost traffic smoothing best practice.

    Due to the failure to respond by the Plano City Manger, we drive a few extra miles to shop at the Costco in ?Rockwall, which does not have the excess number of customers common to the Plano facility.

    For many families, the payback from a Costco membership is a no-brainer. We save some 15 cents per gallon on gas purchases of the highest grade ( top tier ) and our Acura dealer gives a 15% discount on service work to Costco members.

    Texas Instruments will be a key beneficiary from that new Costco as it is a stone’s throw from their headquarters. TI is a super corporate citizen and this should help them recruit and retain those creative class wizards that it must have to dominate its markets.

  5. Amy S says

    There’s no way to put a liquor store there unless state law is changed, which could not happen before 2017. It would also require a vote by the residents of Dallas. Not only very expensive thing to do, it would never pass. The area is too close to very expensive residential, and it is too close to already “wet” areas that would fight the competition of a new “wet” zone. That’s the way the Texas Alcoholic Beverage Code rolls.

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