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JDEDZ PROJECT REVIEW
<br /> SEPTEMBER 2017
<br /> II: SALES TAX REVENUE SHARING REPAYMENT
<br /> The next step is to determine if these sales forecasts produce sufficient revenue to meet the
<br /> obligations the City of Pleasanton is assuming in the JDEDZ Sales Tax Sharing Agreement with
<br /> Costco.
<br /> The city and Costco have proposed to enter into a Sales Tax Sharing Agreement designed to
<br /> repay Costco's $6.8 million upfront investment in infrastructure necessary to the development of
<br /> the store plus 1.5% annual interest with a maximum term of 25 years. The agreement proposes
<br /> to return to Costco up to 40% of the sales tax revenue associated with taxable revenue at the
<br /> store, and does not include other retail facilities within the JDEDZ.
<br /> Taxable Sales
<br /> Civic Economics has not had the time to conduct its own assessment of Costco to estimate the
<br /> proportion of total sales that will be subject to the city's 1% sales tax. Fortunately, ALH Econ
<br /> did conduct such an analysis. We have no reason to believe that the mix of customers or of
<br /> goods sold has changed in significant ways since ALH conducted its study, and thus have here
<br /> adopted those analyses for the limited Figure 4
<br /> purpose of projecting sales tax revenues. A MORE REALISTIC FORECAST
<br /> MORE __. . - - - -
<br /> First, Costco is different from ordinary @eO000goCl Qottol to
<br /> retailers in that many of its business
<br /> members purchase goods from Costco for Growth
<br /> resale, and are thus exempt from paying Year Rate Total Sales Taxable Sales
<br /> sales taxes on those purchases. ALH 1 $ 108,750,000 $ 58,725,000
<br /> 2 4.48% $ 113,620,758 $ 61,355,209
<br /> estimated that 12% of all revenue at the 3 5.67% $ 120,059,419 $ 64,832,086
<br /> Pleasanton Costco would likely fall under 4 3.50% $ 124,259,921 $ 67,100,357
<br /> an exemption from sales tax collection. 5 3.48% $ 128,582,116 $ 69,434,343
<br /> Secondly, Costco sells a broad selection of 6 1.36% $ 130,325,732 $ 70,375,895
<br /> goods. Pharmacy and food are generally 7 2.64% $ 133,761,718 $ 72,231,328
<br /> exempt from sales tax and gasoline is 8 0.50% $ 134,430,527 $ 72,592,484
<br /> 9 0.50% $ 135,102,679 $ 72,955,447
<br /> subject to its own tax regime. ALH 10 0.50% $ 135,778,193 $ 73,320,224
<br /> estimated that 54.36% of all sales at a 11 0.50% $ 136,457,084 $ 73,686,825
<br /> Pleasanton Costco would be subject to city 12 0.50% $ 137,139,369 $ 74,055,259
<br /> sales tax. 13 0.50% $ 137,825,066 $ 74,425,536
<br /> 14 0.50% $ 138,514,191 $ 74,797,663
<br /> From that figure and the realistic sales
<br /> 0.50% $ 139,206,762 $ 75,171,652
<br /> forecasts developed in Section I, Civic 150
<br /> 16 0.50% $ 139,902,796 $ 75,547,510
<br /> Economics is able to project sales tax 17 0.50% $ 140,602,310 $ 75,925,247
<br /> revenues from the Costco (Figure 4). 18 0.50% $ 141,305,322 $ 76,304,874
<br /> 19 0.50% $ 142,011,848 $ 76,686,398
<br /> 20 0.50% $ 142,721,907 $ 77,069,830
<br /> 21 0.50% $ 143,435,517 $ 77,455,179
<br /> 22 0.50% $ 144,152,695 $ 77,842,455
<br /> 23 0.50% $ 144,873,458 $ 78,231,667
<br /> 24 0.50% $ 145,597,825 $ 78,622,826
<br /> 25 0.50% $ 146,325,814 $ 79,015,940
<br /> Civic Economics 7
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