With dirt flying and construction about to begin, the taxpayer dollars being used to woo a Costco store to Duluth are back in the news.
The bottom line: The public investment remains a good deal for Duluth, the Northland, shoppers, and all of us tax-paying residents, as was echoed in a News Tribune editorial in August.
Back then, the Duluth City Council voted unanimously to forgo $1.35 million in property taxes and the St. Louis County Board approved another $650,000 of property-tax relief to make possible the Costco store at Haines and Arrowhead roads, not far from Duluth International Airport.
While $2 million in public subsidies may seem pretty steep, the money is being used to make public improvements like traffic lights; sidewalks; turn lanes; and upgraded water, sewer, and stormwater systems. They’re improvements that benefit the whole community while also allowing for welcome and desirable development.
In addition, the delayed tax collections are expected to be recouped via sales taxes paid by the new store within about three years for the county and within about 12 to 13 years for the city. The deal also includes a project-labor agreement with the city for the public-infrastructure improvements and site-development costs. And the county will enter into a cooperative construction agreement, detailing road improvement requirements.
Perhaps the best part of the deal: the new Costco is expected to provide approximately 150 full- and part-time jobs that Duluth desperately needs, according to planning documents. The store is forecast to clear $70 million in gross sales every year.
"St. Louis County and Duluth are not giving away any money here," St. Louis County Commissioner Keith Nelson said at a July 28 County Board meeting. "If we were not putting this up (in) support … this project probably wouldn't happen, and the future taxes would not be collected."
“There's good reason to believe that Costco will lead to a real increase in our overall sales tax revenue sufficient to justify the aid," City Councilor Joel Sipress said at the council's July 20 meeting.
A comparison of our local subsidy with the tax breaks being offered by other communities also looking to land a Costco provides more evidence of a good deal. As the News Tribune reported last week, Springfield, Missouri, is providing $4.8 million in public subsidy; Georgetown and Midland, Texas, about $11 million; and University City, Missouri, $70 million.
Costco is so sought after because, unlike other big-box retailers, it attracts customers from large regions, not just local communities. Duluth’s store is expected to even bring in Canadians who’ll also shop and spend money elsewhere in the Twin Ports. As City Councilor Arik Forsman pointed out, Costco has the ability to grow the retail-sales pie in Duluth rather than leaving smaller pieces for existing retailers.
“That helps alleviate concerns that you're just replacing one thing for another that you would otherwise be benefiting from. That wouldn't make any sense," Forsman said in the News Tribune on Nov. 24. "They are going to help attract new customers to Duluth that would not be here without a Costco or who would not be spending their money for certain things in Duluth without a Costco.”
This public-private partnership just makes sense — for Costco, for Duluth and the Northland, and for all of us who pay taxes here and are eager for the community to prosper.