Costco entry contingent on city financing deal

Mary Lilly Smith: Costco has been interested in Springfield for five years.

The rumors are true: Costco Wholesale Corp. (Nasdaq: COST) is eyeing Springfield.

The Issaquah, Washington-based membership warehouse store wants to build on the southeast corner of Chestnut Expressway and U.S. Highway 65 – but only if the Springfield City Council approves a $4.8 million access and infrastructure agreement.

City Planning and Development Director Mary Lilly Smith said at the June 1 City Council meeting that she has been working with Costco to find a suitable site for the project for the last five years.

But, she said, Costco’s plan hinges on council passing an agreement that would reimburse the developer for public infrastructure improvements to the east Springfield site.

“Costco has had a long-term interest in Springfield,” she said.

“We’ve only now been able to find a site that was suitable and could be made financially feasible.”

The company has identified roughly 18 acres across from a Menards store that opened in August 2018. Burks Development Corp. owns the land, as well as an adjacent 32 acres set to be developed as Kirkland Commons.

Costco’s planned market entry is news that Springfieldians have long anticipated. In an opinion column by Springfield Business Journal Editorial Director Eric Olson in November 2019, Olson said people have been asking the company to open one of its members-only stores in Springfield as far back as 2016. Rumors have circulated for several years that Costco would be developing on the East Chestnut Expressway parcel, though company officials continuously declined to comment on expansion plans.

Now that it’s been made public, council members are slated to vote on the access and infrastructure agreement June 15.

Local consumer sentiment appears to be in Costco’s favor: Roughly 75% of SBJ poll respondents May 29-June 4 said the city should approve the financing plan for the warehouse store. The poll generated response from over 969 participants.

City agreement
In the proposal before council, Costco officials say they will build a 160,000-square-foot wholesale warehouse and gas station if the city reimburses the company for some $4.8 million in public improvements that they say are necessary to build the store.

The site plans call for moving Eastgate Avenue, and making traffic signal modifications and stormwater improvements. The costs are slated to be repaid to Costco over a 15-year period through half of the 1% general sales tax, quarter-cent capital improvements sales taxes and eighth-cent transportation sales taxes generated by the store.

At the council meeting, Costco site selector Mike Stratis spoke about the project via videoconferencing.

“We utilize incentives only when required to meet the company’s minimum ROI thresholds,” said Stratis, who’s been working as a site selector for the company for 28 years. “I’ve been personally involved in roughly 70 Costco transactions, and I think that we have utilized public incentives in less than one-third of those.”

The city hasn’t entered into an access and infrastructure agreement in sometime, Smith told SBJ. The latest use of the agreement was the Lowe’s store on North Highway 13 and the Walmart Supercenter on East Independence – both completed in the mid-1990s.

Smith said many developers have opted for tax increment financing plans and community improvement districts in recent years for project incentives. Unlike a TIF, which captures multiple taxes and typically involves blighted properties, Smith said the access and infrastructure agreements tend to be more straightforward projects that only capture a portion of city-levied sales taxes. In contrast, a TIF captures several taxes levied by multiple taxing jurisdictions, such as Springfield Public Schools, the Springfield-Greene County Library District, Ozarks Technical Community College and Greene County.

The access and infrastructure agreement also requires a two-reading process by council, unlike a TIF plan, which goes through several city committees before council approval.

If the financing agreement is approved, Stratis said the company plans to finalize the land purchase off Chestnut Expressway and U.S. Highway 65 in September and complete infrastructure improvements by April 2021. The store will then be slated to open by August 2021, he said.

Stratis could not be reached for additional comment following the council meeting, and Costco officials declined to comment on the future project or other projects in the pipeline nationwide. They’d only say it’s against company policy to comment on stores that are more than three months from opening.

Costco’s website did not list any planned stores by press time, but online media reports show the company is building stores in Little Rock, Arkansas; Idaho Falls, Idaho; and Naperville, Illinois. The Little Rock store will be the first Costco for the state, which is home to the Walmart and Sam’s Club headquarters.

In Springfield, the store is anticipated to create at least 125 jobs with an average hourly wage of $25.50. It’s also expected to draw membership from over a 60-mile radius from the Queen City, according to city documents.

Smith said she’s been told by several Springfield residents that they have Costco memberships and travel monthly to St. Louis or Kansas City, which collectively have eight stores, to make purchases. Since the city announced Costco’s plans, Smith said she’s been contacted by several people from Joplin and Camdenton who plan to utilize the Springfield store.

Council members expressed general support for the company’s proposal. Councilman Matt Simpson said the store is a positive move for the community, and Councilman Andrew Lear jokingly asked when he could get his membership to the store.

“We are so pleased to welcome Costco to our community,” said Mayor Ken McClure.

Kirkland Commons
The city Planning and Zoning Commission was scheduled to consider a preliminary plat and final development plan for Kirkland Commons on June 4. The proposal is to divide the 50 acres into a three-lot subdivision, according to city documents.

Burks Development Corp. owner Gary Burks said the Kirkland Commons subdivision would be a development between Costco and his company, but he declined to comment further on plans. Neither Costco officials nor Burks would confirm whether Kirkland Commons was named after Costco’s private label, Kirkland Signature.

City documents show that plans have not been filed to the city for the other two lots, and Smith said she was unaware of additional development plans.

Burks confirmed Costco was in the process of finalizing the purchase of its roughly 18 acres by press time and that the remaining acreage had not yet been purchased. The cost of the proposed land purchase was not disclosed.