Updated Nov. 13, 2012 – 3 p.m.
North Riverside’s village board on Nov. 5 voted unanimously to give staff the OK to negotiate the terms of a financial incentives package that will bring Costco to the corner of 26th Street and Harlem Avenue in the fall of 2013.
Attorneys will try to hammer out the details of the $6.8 million incentives package so that the village board can vote to approve the deal at its next regularly scheduled meeting, on Nov. 19.
According to Village Administrator Guy Belmonte and Finance Director Sue Scarpiniti, North Riverside will pay Monroe Investment Partners the $6.8 million at the same time Costco’s purchases 16 acres of the roughly 20-acre property at 2500 Harlem Ave. at the end of February 2013.
The incentive is being given to the developer, not Costco, and the village will begin collecting the full amount of sales taxes from purchases immediately after the store opens.
Village officials say that the $6.8 million North Riverside is paying up front to Monroe Investment Partners will be repaid many times over in the form of sales taxes.
“I don’t think [paying the incentive] will be a hardship,” said Belmonte. “To get a retailer like Costco, if they are doing what the average Costco does in five years, it will be more money than Edward Don brought us.”
Costco has told North Riverside officials that the average store books sales of $60 to $65 million during the first year it’s open. Within five years of opening, the company says, an average Costco rings up about $125 million per year.
That would mean North Riverside could realize annual sales taxes of $1 million or more from Costco alone. Those kinds of sales taxes would outstrip the sales tax revenues derived from the Edward Don Company, which formerly called the site its headquarters. Edward Don has long been North Riverside’s highest producer of sales tax revenue.
“It will definitely far exceed what the village received from the Edward Don Company,” said Scarpiniti.
In late October, Tom Brashler of Monroe Investment Partners told the village’s Plan Commission and Zoning Board of Appeals that Costco intends to break ground on a new 150,000-square-foot warehouse by July 1, 2013 and be open for business by October or November.
Village officials have not determined how to raise the $6.8 million needed to pay the incentive to the developer, but it will involve using some sort of debt instrument. If the village wishes to avoid putting the debt issuance to referendum, the most likely options appear to be issuing alternate revenue bonds or debt certificates.
For example, North Riverside could pledge a portion of future sales tax revenues from Costco to pay for a bond issuance. Alternate revenue bonds would come at a lower interest rate than debt certificates, which are backed by general operating funds.
“We’re investigating all of our options at this point in time,” said Scarpiniti.
In December 2011, the village board approved issuing $4 million in debt certificates to implement a water meter replacement program and to restructure other existing debt. That issuance is the only outstanding debt the village has, said Scarpiniti.
Also at their Nov. 5 meeting, the village board voted unanimously to pass the zoning requests that previously won the approval of the Plan Commission and Zoning Board of Appeals.
Trustees paved the way for Monroe Investment Partners to seal its deal with Costco by rezoning the 20-acre parcel at 26th Street and Harlem Avenue to allow for retail use, allowing the property to be subdivided into six lots and to create a planned development district for the property.
Village officials and Monroe Investment partners are hammering out a planned development agreement, which will serve as the guiding plan for future development on the entire property.
The village board expects to vote to accept the agreement in ordinance form at its Nov. 19 meeting.