Costco Wholesale could open in Baton Rouge in a year if the East Baton Rouge Parish Metro Council approves the creation of an economic development district on Wednesday to pay for infrastructure improvements in the area.
The superstore is planning a $38 million capital investment into its 150,000-square-foot warehouse on Dawnadele Avenue at the former Coca-Cola bottling facility.
The city-parish and Costco have negotiated the creation of the Dawnadele Economic Development District, which would rebate $7 million of local sales taxes, plus interest, back to Costco to pay for infrastructure improvements and demolition costs.
William Daniel, chief administrative officer for Mayor-President Kip Holden, said the projects should be paid off in less than four years at an interest rate of 4.5 percent, which is estimated to bring the total city-parish price tag to $7.8 million.
“To me, it’s a great deal,” Daniel said. “It’s an opportunity to get a really good company that, by the way, would be going somewhere else.”
Costco has agreed to hire an average of 120 part-time and full-time employees, maintaining a minimum payroll of at least $3.7 million, according to the cooperative endeavor agreement.
Costco also agreed to make a “good faith effort” to hire 50 percent or more of its employees from East Baton Rouge Parish, according to the agreement.
Daniel said, on average, Costco employees are paid $23 per hour.
He also said the membership-only retailer is considered a “destination store” that draws shoppers from up to 60 miles away.
Of the $7 million sales tax rebate, $5.5 million would go toward infrastructure and road improvements in the area, and the other $1.5 million would go toward the $4.5 million cost of tearing down the building.
He said the road improvements will include adding turn lanes and realigning Dawnadele Avenue to correct traffic congestion in the area.
Daniel said Costco, rather than the city-parish, would oversee all of the construction and be reimbursed with the sales taxes collected over the years.
The bottling plant has been empty for at least six years, and the blighted area is not attractive to businesses, Daniel said.
“That property will remain blighted for the next 20 years if Costco doesn’t come in,” he said.
Daniel said Costco also intends to sell a portion of the property to Celtic Studios for below-market cost, which benefits the local movie industry.
Daniel was quoted in April as saying the district will be a Tax Increment Financing district. However, in recent weeks, Daniel has said the district will not be a TIF.
A TIF allows the use of future sales taxes to finance private economic development.
Daniel said the Costco district differs from a TIF because no bonds will be issued, and no city-parish money will go directly toward the construction or operation of Costco.
The Metro Council will vote on the economic development district at 4 p.m. Wednesday at City Hall following a public hearing.
Councilman Ryan Heck, whose district encompasses the proposed Costco location, said he would support the project because he sees value in the new jobs and in returning a blighted property in the middle of town to an operational business.
But Heck said he does have concerns about what he called “continued corporate welfare.”
“It does seem like the economic development opportunity seems to be only for the big boys and not for the mom and pops out there,” he said. “Unfortunately, we have to ratify an agreement and it’s either take it or leave it. I’ll take 250 jobs and an additional high-quality company in Baton Rouge.”
Councilman John Delgado said the city-parish’s investment is well worth it to attract Costco to Baton Rouge.
“They have the highest-paid employees of any national chain,” he said. “I recognize the concern about spending money to bring in business, but that’s the world we live in. To think otherwise would be fooling ourselves.”
Councilwoman Chauna Banks-Daniel said she also supports the Costco deal, but would like to see the city-parish offer the same sort of incentives to businesses and developers in North Baton Rouge, which is heavily industrial.
“Tax dollars to the parish are tax dollars to the parish, but when we talk about ‘no district left behind,’ I feel like the playing field needs to be a bit more level,” she said.
Gordon Mese, a Government Street small-business owner and 2012 candidate for mayor-president, said the city-parish is setting an unfair precedent that will hurt small businesses.
When Wal-Mart came to College Drive several years ago, Mese and a group of civic association members fought the city-parish’s deal to pay for road improvements for the super store.
Ultimately, Wal-Mart paid for the road improvements.
“I don’t think anyone in the city-parish knows that actual retailers like me work 80 hours a week to make a modest living,” Mese said. “Every time they help a national retailer and cut the cost for them to come to town, it’s another nail in the coffin for the local retailer.”
Mayor Pro Tem Chandler Loupe, who has a Wal-Mart and a Sam’s Club in his district, said he’d reserve judgment until the council meeting.
“I do want Costco in our parish, but I am afraid if we continue with any form of tax refund financing, it will be expected by all businesses to the detriment of those already here,” he said.
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