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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 current traffic and 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 generate 44% of the total daily trips within 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 acres 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 and approval of agreement with Costco in February of 2018. 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, the City negotiated an agreement (Agreement) with Costco which provides a framework for the City and Costco to fund 100% of the $21.5 million in transportation improvements. The Agreement includes future retail and hotel developments which account for the other 56% of the daily trips generated by projects in the JDEDZ. On February 20, 2018, City Council approved the Agreement with Costco. The following is a description of that funding plan included in the Agreement: • 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 those improvements are 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 I- 680 onramp project. • Sales Tax Sharing Agreement with Costco. Costco would advance $6.785 million 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 does not occur in 25 years due to lower-than-anticipated sales tax revenues, or if the Costco store closes within 25 years, the City would not be responsible for repayment. Page 2 of 5