After $10M tax rebate gets approval, Costco is coming to area

A unanimous vote by the Yorkville City Council approved the economic incentives agreement necessary to finalize Costco coming to Yorkville.

City Administrator Bart Olson previously said city officials were particularly eager to finalize the deal with Costco, because once fully operational, the business is projected to generate as much as $1 million annually in sales taxes for the city.

Olson said the incentives package followed past examples of tax rebate agreements granted by the city to spur developments with companies such as Menards, Jewel, and within The Kendall Marketplace.

Olson said city officials feared if the economic incentives requested by Costco representatives were not granted by the city, that Costco would walk away from the deal. The agreement received unanimous approval at the Feb. 11 city council meeting.

According to documents of the agreement, Costco will receive a $10 million sales tax rebate, which will most likely be paid off between 10-20 years. The rebate will be generated from both Costco’s consumer shopping warehouse and its gas station. This includes a 0.75% rebate for the first six years and a 0.5% rebate for the next 14 years.

City council previously gave full approval to allow Costco to build a 160,000 square-foot members-only retail store and a gas fueling facility. The site of the development is located on 33.14 acres at the northwest corner of Veterans Parkway and Countryside Parkway in the Yorkville Crossing development area.

The site plans include a parking lot with up to 956 parking stalls. When completed, the gas fueling facility will house 16 gas pumps with 32 fuel dispensers. Costco wants to eventually expand to include 20 gas pumps with 40 fuel dispensers.

Before the economic incentives agreement was drafted, Costco representatives asked for assurances from the city that they would not increase the current non-home rule sales tax or any future home-rule sales tax. They also requested assurance the city would not implement a home rule gas tax, according to city documents.

The city is expected to receive home-rule status after the completion of a city-funded census documenting the city’s population rise above 25,000 residents.

The city responded to Costco’s request by included a fee lock clause providing an effective fee lock for Costco customers. The clause dictates that if Costco does not collect the incremental sales taxes or gas taxes at the point of sale, and if Costco directly pays the amounts that should have been collected to the city, then the city will rebate 100% of that amount back to Costco during the term of the agreement.

City officials are not likely to increase the non-home rule sales tax beyond its current 1% amount, according to city documents. The city has also never entertained a home rule gas tax.

The current 1% non-home rule sales tax was authorized via public referendum in the early 2010’s to offset city infrastructure projects.

In addition to Costco generating large sales tax revenues for the city, Olson said the economic incentives package was favored because of the number of jobs it will provide for the city’s residents, for the property taxes the development will generate, and for the project’s ability to strengthen the city’s commercial sector.

It is the city’s hope that the Costco project will spur further development of adjacent areas near the Yorkville Crossing development area. At a previous public hearing, several residents voiced concerns that the influx of shoppers could lead to traffic and safety issues for the adjacent residential area and nearby baseball park.

According to the economic incentives agreement, Costco will not receive any money from the city that is not generated from their own sales.

The agreement also states that the incentive offer does not include the places of eating tax implemented by the city. That tax is earmarked to offset the Lake Michigan water sourcing infrastructure project.

The current property owner of the 33.14-acre development site is Joda Land Holding, LLC.