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Costco sales tax sharing deal paid off
letter to editor

 Do you like having a Costco in town?
Having one just off Airport Way and the 120 Bypass is a real time saver, isn’t it?
It’s a 22 mile round trip to the Modesto Costco and 26 mile round-trip to the Tracy Costco. If you’re lucky the trip to Modesto and back would take 30 minutes and a round trip to Tracy 35 minutes. That’s assuming you don’t get caught in traffic on Interstate 205, Highway 99 or the 120 Bypass.
Let’s say you made a trip to Costco 50 times a year or almost once a week. That means over the course of a decade you will have spent 10½ days in terms of travel time going to and from the Costco in Modesto. And if gas cost a steady $3 a gallon over that time period and you got 22 miles a gallon you will have spent $1,500 driving to and from the Modesto Costco over the course of 10 years.
Why this matters is simple: Costco had no intention of building a store in Manteca 12 years ago. They were looking at other areas for their fifth San Joaquin-Stanislaus location and Manteca wasn’t on the radar.
Manteca leaders were tipped off to Costco’s search by Kitchell Development, the firm that built the Stadium Retail Center just east of where Costco ended up locating in Manteca.
When approached about Manteca, Costco confirmed they were looking elsewhere and that Manteca did not yet meet their population threshold for a store. Manteca asked what it would take to get Costco to build here and the reply was a permanent sales tax split. Manteca balked. Eventually a deal was hammered out. Costco would get 45 percent of the basic local annual sales tax it generates in Manteca each year until it recouped the cost of building a stare and the land it sits on.
The store opened in 2008 just as the Great Recession hit.
Fast forward to today. The City of Manteca is preparing to pay Costco $400,000 for its share of the 2017 sales tax receipts and another $50,000 to pay off the balance due Costco.
That means when the 2019-2020 fiscal year rolls around Manteca will see a $400,000 annual jump in general fund revenue to help pay for police, fire, parks, streets, and general government.
Critics of the deal correctly pointed out Manteca was giving up 45 percent of its sales tax. But it is also true Manteca residents, based on tracking information every time they used their Costco cards, were spending $60 million a year in taxable sales between the Tracy and Modesto stores. That was $60 million not being spent in Manteca that generated $600,000 a year to pick up the tab for municipal services in Modesto and Tracy.
The sales tax at the Manteca store over the past 10 years has helped pay for city services even with 45 percent being returned to Costco. A lot of sales tax paid by non-Manteca residents that shop at the Daniels Street store such as from Ripon and Lathrop flows into Manteca municipal coffers.
At the same time in the dark days of the Great Recession Manteca enjoyed a bump in sales tax it would not have received.
Now Manteca will soon get 100 percent of that sales tax which based on the $400,000 payment being made is somewhere north of $800,000 annually.
That means thanks to the deal cut Manteca landed a proverbial 900-pound gorilla of taxable sales a decade ago that they might not have lured for years if at all given the growth now in Lathrop and along the Interstate 5 corridor.
And since the Measure M half cent public safety tax collected during that time all went to the city you could argue somewhere between 2 and 3 police officers and/or firefighters are funded today thanks to the Costco deal.
Based on the $400,000 payment and the sales tax split of 45% to Costco and 55% to the city that is coming to the end, Measure M public safety tax receipts will be in the neighborhood of $405,000 this year.
Now factor in fuel savings of Costco cardholders in Manteca and the positive economic impact is rather significant.
It is against that back drop the Manteca city council on June 5 is considering a similar sales tax sharing arrangement with another regional sales tax draw — Living Spaces Furniture.
In exchange for building a 130,000-square-foot showroom/warehouse costing $12 million on Atherton Drive southwest of the Union Road and 120 Bypass the city will split annual sales tax generated from the store 50-50 until $3 million or 10 years depending upon which one is reached first.
The store is expected to generate $35 million in taxable sales annually. That means $350,000 in local sales tax with the reduced amount of $175,000 the city will receive until such time the terms of the deal are fulfilled.
An added dimension this time is Internet commerce that was in its infancy a decade ago accounts for just over 10 cents of every retail dollar spent today. Amazon has moved into the online furniture field and has one of its two distribution centers in Tracy devoted to large items trying to siphon off retail furniture spending.
You might have turned up your nose the concept of the Costco deal and others like it but the bottom line shows it made sense for Manteca.

This column is the opinion of executive editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA.  He can be contacted at or 209.249.3519.