Costco coming to city
Commerce City will pay $1.6 million for Retail Drive project
DAVE MACLEAN
Telegraph-Journal
http://telegraphjournal.canadaeast.com/city/article/281144
SAINT JOHN - Costco could soon be coming to Saint John.
Although the retailer wasn't specifically mentioned by name, common council voted Monday night to make an additional contribution of $1.6 million toward the construction of the city-owned street known as Retail Drive.
East Point Inc., which has developed the retail area on Westmorland Road known as East Point Shopping, asked the city to make an additional investment in the roadway.
The developer had originally planned to build only a small portion of Retail Drive, but council and city staff encouraged it to construct the road all the way from Rothesay Avenue to Westmorland Road.
City manager Terry Totten explained the city's contribution to the project was capped during original negotiations at $3.5 million, of which $650,000 is repayable to the city if the developer achieves a specified level of development.
While council's decision Monday means an additional $1.6-million contribution toward the final cost of the roadway, it is understood the money will enable East Point to make its prices more affordable and attractive to potential new retail tenants. These potential new tenants will also mean East Point would meet the development target that would see it repay the $650,000 from the original payment, meaning the net new contribution to the project is just under $1 million.
Totten explained to council that he has seen purchase-sale agreements between East Point and the unnamed retailer that could see the new development move forward with documents presented to the planning advisory committee as early as today.
The city manager said East Point has always taken the position the city hadn't paid its fair share of the road, especially since the city insisted Retail Drive be four lanes wide, instead of two and changed the slope of the roadway.
In its pitch to staff, East Point says it believes the city will recover the investment in six to seven years, a figure that staff believes to be very conservative, Totten said in his report.
As an added precaution to protect taxpayers, Totten says staff has written the deal in such a way that East Point won't get any money until the steel work has been erected for an additional 135,000 square feel of retail space.
In other words, he says, the money won't change hands until construction on a new structure has begun, thus generating additional revenue to the city through property taxes.
Totten also pointed out that ADI Limited had prepared an analysis of the Retail Drive project and after studying traffic patterns in the area, had come to the conclusion that Retail Drive serves not only the retail shops in the area, but also helps ease traffic congestion in the eastern part of the city. ADI had suggested the city should fork over about half the cost of Retail Drive, which would have been about $4.2 million.
Totten said the new development is expected to be in the range of between 137,000 and 153,000 square feet.
"If they don't proceed, then no money is to change hands," he said. "We're investing more in the municipal infrastructure ... giving them an opportunity to conclude a deal with international big-box retailer."
Totten added he expects the big-box retailer to attract additional development in the range of an added 100,000 square feet.
Coun. Jay-Young Chang noted that "over the last 10 years, people have been talking about this big box store. It's going to change the shopping life of Saint John forever."
He said he likes the idea of the safety net. "If they don't meet the terms of the deal, they won't receive a cent."
Coun. Stephen Chase said it's great news for the city.
"I think it's very remarkable that when major retailers are scaling back ... that a big-box retailer is looking at our city," said Chase. "If we have an opportunity to provide an incentive to facilitate that, I'm in favour. We'll get the tax return from property taxes.
Chase also mentioned the arrival of Costco to the Halifax market help drive a major retail development around that site. This is a good investment for the city of Saint John.
Mayor Norm McFarlane then noted he has been lobbying the corporate headquarters of a major big-box retailer for years, noting that headquarters is located in Seattle. Costco is headquartered in Issaquah, Wash., with its flagship warehouse in nearby Seattle.
Costco's Canadian operations are based in Ottawa. It offers members low prices on products in a wide range of merchandise.
Costco is the fourth-biggest general retailer in the United States, after Wal-Mart, The Home Depot, and Kroger.
The company operates in 392 locations in 40 U.S. States and Puerto Rico and 75 locations in nine Canadian provinces, including one in Moncton.
It also operations in the United Kingdom, Korea; Japan and Mexico.
As of mid-February, Costco's investor relations website says, the company had 51.8 million cardholders. The company's annual revenue for its last fiscal year was US$64.4 billion.
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