Costco getting $5.5 million tax rebate to build second store in Naperville

Naperville City Council members want a second Costco in town enough to pay $5.5 million for it in the form of sales tax incentives.

The council unanimously approved a deal Tuesday night that Costco says will allow the retailer to buy 18.5 acres at the high-vacancy Ogden Mall, tear down several existing businesses and then build and profitably operate a new store.

Costco's purchase of the site will result in the displacement of Classic Cinemas Ogden 6 Theatres, which has been in the strip mall since 1976, but the H Mart Asian grocery store along with a bank, a CVS and a Panera Bread on the property will be able to stay.

Mayor Steve Chirico recused himself from the discussion because he said his company, Great Western Flooring, works with Costco, and council member John Krummen was absent. But the rest of the council voted to approve the deal, which will rebate 75% of the city's portion of the state-imposed sales tax and 75% of the city's own home-rule sales tax on all purchases made at the new Costco.

The Naperville Area Chamber of Commerce offered its support of a plan its members believe will revitalize the East Ogden corridor, where business vacancies have been a challenge to fill since a Kmart at Ogden Mall closed in 2013.

The new Costco "will be a beacon to draw other successful businesses to that area of the city," Reba Osborne, the chamber's director of government affairs, said.

The incentive the city approved Tuesday is projected to pay out the $5.5 million within five years of the store's opening, based on expected sales tax receipts starting at $1.25 million in the first year and growing to $1.73 million in the fifth.

The deal is set to expire when $5.5 million is paid back to Costco or when 15 years passes - whichever comes first. It will not rebate any of the motor fuel tax from the gas station Costco plans to build.

Before the council voted in favor of the incentive, resident Barbara Grady asked the city to consider the many residential neighbors near the future Costco site when handling issues such as traffic. Resident George Howard spoke against the deal, saying it's a mistake to displace the longtime Ogden 6 theater and bring in a business that not all residents can access without paying a membership fee.

Christine Jeffries, president and CEO of the Naperville Development Partnership, said the addition of Costco will help spark more investment and redevelopment in an area the city has been working to improve for years.

She said a nearby auto dealership has upgraded its landscaping and facade, two new restaurants have opened just east of the Ogden Mall site and the city has been repainting electric boxes, burying power lines and planting more trees to beautify the corridor.

"We needed a catalyst," Jeffries said. "Costco coming in is a catalyst for the whole East Ogden area."

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