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BACKGROUND Purpose of the JDEDZ & Transportation Improvement Costs The JDEDZ, approved by City Council at hearings held on December 5 and 19, 2017 changed General Plan land use designations and zoning to spur investment in 40 acres of mostly underutilized land primarily fronting Johnson Drive near Interstate 680 (1-680) and Stoneridge Drive. In order to accommodate the increased traffic that the JDEDZ will create at full build-out, there are several transportation improvement projects that need to be constructed, which are estimated to cost approximately $21.5 million. Anticipated Development& Daily Trips The first development in the JDEDZ is anticipated to be a Costco store. The Costco store is expected to comprise 44% of the total daily trips generated by the JDEDZ. Nearon Enterprises, a property owner in the JDEDZ, and Tharaldson Hospitality, a hotel developer, have also indicated their interest in developing two hotels with a maximum of 231 rooms on two sites that total approximately 5 acre site in the JDEDZ. The hotels would generate about 12% of the total daily trips at full build-out of the JDEDZ. Staff does not know when the remaining properties in the JDEDZ will be developed consistent with the JDEDZ zoning. On September 18, 2017, City Council provided policy direction to staff to ensure that all of the transportation improvements be constructed before Costco could open a store in the JDEDZ. That direction was reaffirmed with the EDZ approvals in December. Funding for Transportation Improvements Because the Costco store is only going to generate 44% of the total daily trips at full build-out of the JDEDZ, City staff negotiated a term sheet, which provides a framework for the City and Costco to fund 100% of the $21.5 million in transportation improvements. The term sheet includes future retail and hotel developments which account for the other 56% of the daily trips generated by projects in the JDEDZ. On September 18, 2017, City Council approved the term sheet with Costco. The following is a description of that funding plan included in the term sheet: ® Traffic Impact Fee (TIF) Funding. The Stoneridge Drive and 1- 680 onramp project has been included in the City's Transportation Impact Fee (TIF) since 1998 and is eligible to receive approximately $ 6.4 million in TIF revenues. The City's FY 2017/ 18 through 2020/21 Capital Improvement Program (CIP) allocates $ 6.4 million in TIF in FY 2018/ 19 for the Stoneridge Drive and 1-680 onramp project. ® Sales Tax Sharing Agreement with Costco. Costco would front $6,785,000 and be repaid through a sales tax sharing agreement not to exceed 25 years with 1. 5% interest where Costco receives 40 percent of the annual sales tax generated by the Costco store and the City would receive 60 percent. If repayment doesn' t occur in 25 years due to lower -than -anticipated sales tax revenues, or if Costco goes out of business within 25 years, the City would not be responsible for repayment. Page 2 of 5