St. Charles tries to lure Costco, hoping to jumpstart growth

St. Charles aldermen Tuesday tentatively approved $8.1 million in sales tax and infrastructure incentives related to the development of a Costco store at Route 64 and Randall Road.

City Administrator Brian Townsend said the investments are intended to not only ensure the wholesale retailer's arrival in the city later this year, but to jumpstart growth at the busy intersection's southwest corner.

The land has been slated for development under an agreement between the city and the landowner, Zylstra Harley-Davidson, since 2005. So far, only a motorcycle dealership has opened there.

"At the time (in 2005), we really thought this would be the crown jewel of the west gateway," Townsend told members of the city's government services committee Tuesday. "Three years have passed, and I think it's safe to say it's been a disappointment."

In April, the city council approved plans for a 154,000-square-foot Costco on 15 acres at the intersection -- the first big development to come along since the Harley dealership opened two years ago.

But the price of the land -- about $15 million -- was roughly twice as much as Costco wanted to pay, Townsend said, despite significant improvements Zylstra undertook in the past three years. Still hoping to entice the retailer, he said, the city negotiated a plan to "buy down" the cost of the land for Costco by essentially refunding up to $7.5 million in sales tax the store is expected to generate in coming years.

The money would be given up front -- likely by way of sales tax revenue bonds -- to Zylstra to offset the reduced land price, Townsend said. The city then would commit 75 percent of Costco's annual sales tax receipts to paying off the debt in the next six to 17 years, depending on the store's success.

Officials stressed the city would commit to the $7.5 million incentive only if the proceeds were generated by the development itself.

"If they perform, the bonds get paid off," 1st Ward Alderman Dan Stellato said. "If they don't, it's their problem."

In addition, aldermen Tuesday tentatively approved spending $600,000 to relocate infrastructure on the property to fit with Costco's store design. The committee also said it would support Zylstra's attempt to have an estimated $425,000 in Kane County road impact fees reduced or waived because the company already has paid for "significant" road improvements at Route 64 and Randall Road.

Townsend said the incentives are crucial to the project.

"But for the city's financial assistance, this deal would not happen," he said.