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JDEDZ PROJECT REVIEW SEPTEMBER 2017 INTRODUCTION Civic Economics was retained by Pleasanton Citizens for Responsible Growth to provide an outside review of various aspects of the proposed Johnson Drive Economic Development Zone. Our work involved a review of existing documents prepared by or for the City of Pleasanton analyzing the likely economic activity and impact associated with the JDEDZ. Our work focused on the inclusion of a Costco store because (a) it is the primary driver of sales in the project, (b) its sales is the source of revenues to repay a portion of the infrastructure investment, and (c) its presence is the reason for most of that infrastructure need. The JDEDZ is made up of several parcels of land along Johnson Drive, near the junction of Interstates 590 and 680. Vehicle access to the site is currently sized for its former uses, including an R&D facility for Clorox, but the key feature of the proposed development is a Costco warehouse store of 148,000 square feet located well into the site. Thus, the JDEDZ calls for infrastructure improvements needed make the site suitable for large format retail, costing an estimated $21.5 million. The city has proposed to fund these improvements through a mixed package including the following: • Existing TIF funds of$6.4 million would enhance onramps at Stoneridge Drive and 1680. According to the city's Capital Improvement Program budget for 2017/18, these funds will only be expended if the rest of the JDEDZ project comes together. Otherwise, it will be redirected to other projects the city has deemed necessary. • Costco is said to be contributing $6.8 million in cash. Some of that is in the form of donated right of way on Costco land to facilitate access to Costco. Another $3.7 million of that is the amount Costco would be required to contribute to the TIF pool independent of the JDEDZ project. • Finally, another$6.8 million is proposed as a loan from Costco to the city, to be repaid over up to 25 years by rebating 40% of the sales tax revenue from the store until the principal and interest (at 1.5% per year) is repaid. Additional amounts may be added to this loan at no interest for right of way acquisition. Costco operates in the warehouse club sector of general merchandise retailing. It has 506-and- counting US locations and more than 200 international locations. The chain has a heavy presence in California, with 122 stores including Danville (8.4 miles from the JDEDZ site) and Livermore (7.3 miles). Civic Economics 1