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BACKGROUND To implement the City's goals for the JDEDZ and as a necessary first step in encouraging new businesses to locate in the JDEDZ, various public roadway improvements need to be completed along Johnson Drive, Commerce Drive and Stoneridge Drive, including new traffic signals, construction of new lanes and onramp improvements ("JDEDZ Street Improvements"). On September 18, 2017, the City Council authorized the City Manager to execute a term sheet for the design and construction of the JDEDZ Street Improvements between the City and Costco ("Term Sheet" a copy of which is attached). Based on the Term Sheet, staff and Costco representatives have developed a proposed JDEDZ Transportation Improvement and Cost Allocation Agreement ("Agreement"). The Agreement is consistent with the policy objectives of the Term Sheet. DISCUSSION Under the proposed Agreement, Costco is responsible for the design and construction of the JDEDZ Street Improvements. The details of the construction of the JDEDZ Street Improvements will be outlined in a future improvement agreement between Costco and the City. No certificate of occupancy will be issued by the City for the Costco Store prior to the substantial completion of the JDEDZ Street Improvements. Costco will dedicate the right-of-way needed for the JDEDZ Street Improvements that is on the Costco site at no cost to the City. The cost of acquiring all other necessary right- of-way will be split equally between Costco and the City. Any cost overruns in the design and construction of the JDEDZ Street Improvements will also be split equally between Costco and the City. Upon the acceptance of the JDEDZ Street Improvements by the City, Costco will receive a fee credit in the maximum amount of$3,700,000 against Costco's obligation to pay the City's Traffic Development Fee. The City will also pay Costco approximately $6,400,000 to reimburse Costco for those costs of the JDEDZ Street Improvements which would otherwise be constructed by the City using Traffic Impact Fee (Development) funds. Finally, the City will share with Costco 40% of the sales tax generated by the Costco store to be constructed in Pleasanton up to approximately $6.8 million at 1.5% interest, plus Costco's share of acquiring right-of-way (as discussed above) at no interest. The City is not liable for repaying any outstanding balances to Costco in the event Costco ceases to operate within the City. A summary of the proposed Agreement is attached. Page 2 of 3