 Hello, and welcome to the backstory. My name is Tim waters and as a volunteer for long public media. I host this program, which is an opportunity for long monitors to learn more about what's going on in your town. And today, we have two guests who are who are familiar to viewers of the backstory and certainly familiar to all of long monitors as two members senior members of the city management team. Jim Golden, our chief financial officer and the other maker who is the deputy city manager. And our topic today is one that should be familiar to long monitors Costco and Costco is corporate decision to expand to long month, which will put this in in a timeframe in just a second. It's a conversation that's been under underway for a while it's had some new visibility just recently because of actions of the city council. But it does tee up now kind of an accelerated pace of visible activity and for long monitor curious about. And I know I get this question a lot as with another hat on. What's the timeline and when are we going to see Costco and when do we get a chance to start start shopping there so this will answer I think virtually every question that's out there. Not, you know how to get in touch with these two fellows or others in the city if you have questions, if you want to follow on so to both Jim and Dale thank you for I'm going to thank you now. I'm going to thank you again at the end of this, both for your time today and and the remarkable work you do on behalf of the residents of long month I hope people appreciate. I'm guessing they do, but depreciate just what what you two and your colleagues. Give to this town, in terms of your expertise and your expertise, a lifetime of service to long month so thanks for all that. This project has been in the works for coming up almost done on two years. I recall we did the first episode of a backstory, and they can early November of 2021. As the council was about to make a decision but that was was following actually months of kind of preliminary work right. Yeah, give us the give us the short history of this and how we where we started and how we got to where we are where we are right now. So I'll start off and I'm sure Jim can fill in some of the blanks but actually the city began being involved in the effort back in 2020, and possibly even before that. 2019 2019 right and at the time Costco was interested in moving to the long market, and they were trying to find a good location to do that on, and there were a number of areas that were considered in that process. And the city really got sort of heavily involved in it, as it was moving forward and together with the property owner brought forward the this property. The current site which is just east of the harvest junction commercial development on East Kenpratt Boulevard. So the city and property owner this was really been sort of a a the classic public private partnership where private property owners Costco and city have come together to craft a a an agreement and that that that agreement city council did act on in December of 2020. When they approved the will refer to it as the, the P three agreement but it was a public private partnership. And in that agreement, it laid out laid out the different roles and responsibilities of city and Costco and and and the developer who is Reggie Golden is the owner. The company he's working it through his diamond G concrete. And in that agreement, there was the city had several interests in mind, first and foremost of course was was landing and getting a Costco warehouse here in Longmont, as opposed to having it located in one of our neighboring cities. Secondly, we, we also have a large community need an interest in the affordable housing area. And so those were our two primary focus areas going into the project. And we were able to craft an agreement that provided about 17 acres for Costco to come in and build their, their warehouse at and then also additional nine acres for the city to use in the future for affordable housing needs in our community. As part of that, there's a cost sharing of the public improvements and those were based upon the acreages between the acres in the city's column which were the 17 acres for Costco and the nine acres for affordable housing about 26 acres. And then about 22.66 acres that were being retained by, by the private property owner. So that was the ratio that was used then to split the costs for the public improvements, meaning the streets, the utilities, all that type of work, as well as to allocate those costs back into the city. As a partner in the project. Costco was also bringing originally about 6.16 million dollars to the table to go towards the costs associated with the private site development costs, things like building the parking lots and utilities on their 17 acre site. The city was called on to back that up with up to $3 million in the event that the cost went above 6.16. And all of that was sort of memorialized in the P3 agreement back in 2020. And so that's sort of the background, you know, and the property, even going before Costco, it was annexed into the city as part of the Erwin Thomas annexation. A few years ago, it was a very large annexation of several parcels into the city. And it was slated to be the entire area to be gravel mine. And part of what this project is also doing is, is revising that that PUD on the property, removing, eliminating, if you will, reducing the amount of area that's going to be gravel mine. And essentially pushing that mining activity further to the east, further to the east of the apartments that are out there as well as the single family home. That was a long answer, but Jim. How could I add anything to that? There's a lot going on with the project so just I want to come circle back just on a couple of points to reiterate this land was going to be gravel mine, this property. And there still may be some gravel mining east of what is what's going to be developed. But as people think about land use and what's the best and highest use of that land. The alternative to a Costco was gravel mining. So people need to just kind of contemplate that. You also made reference to locating in Longmont versus other municipalities. What should people know when when Costco in particular or corporations in general, look to expand. Do they have a single location in mind or they are looking at a range of options. In addition to what they finally settle on with, in this case, with this 17 acres or part of this combination this public partnership in Longmont. So, maybe I'll try that one. So, you know, with, with Costco, they were, they have, they have locations in superior and Thornton and Tim. Pretty much those are their three closest locations to Longmont, which aren't necessarily that close for Longmont shoppers. But I think what Costco is looking at is, is there areas that they're serving and we're in identifying where they may be not reaching customers as well as in other areas and they know who their customers are from the data they have from folks making their purchases with credit cards and such. So they did have an intention to be somewhere in this area. They were certainly taken interest in the fact that Longmont has grown to a size where we have a pretty good population base here. We're also in a location that's that's central to to meeting some other areas that they are possibly not serving to the west of us, even to the north of us into the east of us. So they were going to locate somewhere in the general vicinity, it didn't necessarily need to be within Longmont, though. And so we did know that what we were dealing with is a potential of a Costco either being built in Longmont, or being built near Longmont. And if it's being built near Longmont and not within the city limits, then that's a totally different sales tax revenue situation for the city. And that's something we, we could not really see happen we had to, to make sure that that took place here within the city limits. So when you when when any municipality, Longmont in particular has an opportunity to work with a corporation to do this kind of expansion. And there are competing venues. It's not always that you calculate potential losses along with gains but in this case sounds like the calculus required also the analysis of what do we lose. So Costco locates one mile to the east of city of our eastern city limit or boundary, as opposed to one mile west. Those implications are pretty significant in terms of the economics, the economic impact in Longmont is that fair. You know, even having a Costco, locate here in Longmont is going to certainly have an impact on businesses that already exist here in Longmont that they will potentially lose some sales for the city that's going to just distribute it from one entity that's in the city to another entity within the city we would still receive that revenue. But if it's a mile outside the city of Longmont like you refer to, then those businesses are still going to lose that business because Longmont residents are now instead of shopping at current retailers are potentially going to go a mile outside the city because they preferred it to shop at a Costco, and we would lose significant sales tax revenue. I know as Costco customers my wife and I, and we do we frequent the Costco in Thornton every time I leave I think gosh this is sales tax that could be going to Longmont. But I, we don't, it's not that we don't shop locally, we do a lot of business in town and I, I don't imagine having a cop for us having a Costco in closer proximity means we shop there more, or we shop any less in our local businesses. It simply is a convenience, and actually, in terms of the environment for all of the narrative there is about environmental impacts. In some ways, the beneficial effect is fewer of us are driving those miles, right to to Thornton or Temneth or Superior wherever you might be shopping in a Costco. So, the land would have been used for gravel mining. It would have been used for Costco had been located just outside our city limits. There would have been this, this sucking sound right of of tax revenue is leaving Longmont, as opposed to staying in Longmont. Just talk drill down some more on the economics of it. There was a cost allocated to this early on. That's the decision that City Council just recently made added to the funding for this so you might just explain why all that represents, and maybe parts of this way, they'll kind of give us that update. And then Jim, you, you have specific responsibility to oversee city investments and returns on investments and, and you concluded this is a pretty good investment. It's opposed to just a cost. And so it'd be interesting to get your take on from your financial expertise kind of what does that investment look like what are the, the schedule of returns and both short term when whatever debt we accept or costs. When are those covered and then what does it look like over the long month but they'll bring us up to date on why did the city have City Council have to make an adjustment to the funding for this. And also to just talk about, why does an outfit is biggest Costco, why do they want cities or need cities to be bringing money to the table anyway, they got, they have lots of money why do they need us to have skin in this game. So just quickly that you know the, the reason the costs changed on the project were really no different than what all of us seeing out in the marketplace right now. There's an increased level of inflation overall in the overall economy. Probably more acutely though, in the construction industry, several things are in play, both an increase in the cost of everything from PVC pipe to steel. Together with supply train interruptions that have really driven up the costs, especially when we have such a sort of a vibrant construction industry going on right now along the entire region in the front range of Colorado and arguably in many areas across the country and so you put all that together. The natural outcome is a classic supply and demand where prices are going to go up and so it's we're not immune to that. And what we've done since 2020 when the council originally approved the agreement is we've now received the actual construction bids from contractors that have really sort of drilled down to a far deeper level of review and analysis to arrive at those construction costs. Those costs are the ones that we are now included in our project estimates, while still keeping a contingency in there because this project is going to take anywhere from 12 to 18 months to build from the time we started until the time the stores opened. And during that time, you can run into construction issues that raise the cost you can also run into additional cost inflationary issues that happen so we believe we should be in pretty good shape with contingencies that we have which are about 10% of those bid amounts. And so, you know the next steps that we're going through our to working hard now, given the council's action recently at the council meeting to approve the appropriation of additional funds is to complete and prepare all the documents necessary to go to a closing. And those are everything from the, the, the escrow agreements to the final plots of the property that that need to be completed in order for land to be sold and conveyed so we're working hard to get to closing in the first half of February. And it's our understanding and expectation that Costco will then give direction to the developer and contractor to commence with construction. And then it's just a matter of how mother nature treats us in February and March as we all know we tend to get a bunch of snow or not so, but we're going to be under construction. So people will start to see some significant activity in the air, but but Jim may want to also talk further about some of the cost benefits and and cost to the city and the payback periods. So, Jim just before we get started so we should expect to see dirt moving by the end of March, depending on whether and I think into March would be reasonable. And then for not under a photo. And as we're recording this we're anticipating makes no storm in the next 36 hours so yeah. So, so I heard a number once in a month time early in this discussion that once all that's done once Costco is ready to start going vertical once the horizontal infrastructure is work is finished it takes them about 100 days to actually construct the warehouse is that about right. So, I'm not sure if you're aware of the market that that too has has has gotten a little bit longer. I believe because of difficulties in obtaining materials now about 130 days from the day that the developer turns over to Costco a pad ready site. That Costco will take to erect and open the building. That's pretty remarkable. I'm just saying that they put it up in that short of time train. So Jim talk about the, the economics of it and kind of investments and returns on investments and long term forecast. Sure, I will but I will say that even though we're expecting a snowstorm within 36 hours, I think, you know this is Colorado so by the time most people see half half the people see this, that's no be gone right. So as far as this is an investment, I believe I can safely say that that Costco would be by far our largest retail sales generator in the city. We've got sales projections from Costco. And we believe that they're reasonable based on what we know other area cow nearby Costco's have generated. So we're projecting that in the first year of operation this Costco would generate over $4 million of sales tax to the city. Now as I mentioned before, some sales will be transferred from elsewhere in the city we call that cannibalization. We realize and acknowledge that we're projecting that the city would still net over $3 million on net of cannibalization of new sales tax in the first year. That's a rough estimate and we could be wrong in either direction, but still it's a significant amount of new sales tax and so we think that that's a pretty strong investment for the city. And really the reason why we think there's so much new sales tax is what we were talking about is that Longmont residents currently travel to other Costco's to to shop currently. But in addition to that long by Longmont having its Costco here, locating here in the city, it would draw shoppers from outside of Longmont that are not maybe currently shopping here in Longmont so that's a, that's a key part as of bringing this development into the city is not just what it generates, but what what it could bring with it, maybe as other retail might open around it that isn't currently located here in Longmont. And plus the folks that might come into Longmont that aren't shopping now, but would come here to shop at a Costco. We did make those estimates and and the hard costs for the Costco portion of this project, just separating out the affordable housing part of this. The Costco hard costs are $10.86 million with our current estimates. And so we are estimating that we would recover the gross sales tax with gross sales tax we recover that amount within 28 months of opening. And if we just look at net sales tax, backing out the cannibalized portion, it will be recovered within 43 months of opening so we think that's a pretty good investment because over over the long term. And that would be over $90 million of sales tax from a Costco in in over the next 20 years. And that would be a $73 million net of the of the cannibalization so those are big dollars that can really go a long ways here for the city. I don't want to I won't I don't want to overstate this, which I'm prone to do. But, but listeners should know Jim Golden like other chief financial officers gets paid to be conservative. There aren't very many chief financial officers last as long as he has in any organization with with being anything other than balanced and a bit conservative in their estimates. That's their job. That's his job. The Costco folks are less conservative when they do their forecasting so I won't say the numbers for fear that that you know ranges too many expectations but long monitor should know that what Jim just shared was probably the most conservative forecast or estimate of what those net revenues sales tax revenues would look like the long month over the next 20 years. If you guys could kind of tag team put that in a in the context, 20 years in a municipality like long month where we are 20 years from now we've we've forecasted build out in long month meaning residential kind of getting to the to the limits of our of our residential capacity or you know space use us utilizations of land in the year I think 2035. Envision long month. A master plan forecast I think is build up by around 2035. And I think the original build out was like 116,000 residents and maybe with density we get to 125,000 but somewhere in that range. But over that 20 year period of time we're going to start to see fewer homes built, I would guess we need to see homes built right now for our housing crisis but over time. And as that declines as residential construction declines that has a huge impact on the city's budget does it not. Yeah, it does I mean, we, you know, in my career, we've only seen a growing retail base and so it's not something that we've had to deal with except in periods of time when the economy has slowed dramatically. But when that does occur, we have very tight budgets. It becomes a problem to be able to allocate resources for all the various services that the city is providing. So what it's really critical I think looking ahead that we have those type of core retail that is going to be, you know, over there, they're in the long term, the type of retail that that doesn't suffer through even like the pandemic that we just have gone through over the last few years but in the worst part of that pandemic. This type of retail actually thrive. And I think Longmont has has has been able to benefit in a period like that, because of the fact that it's retail is of the core type of unnecessary purchases versus some of the thrill type stuff you might see in a regional mall. And, and being dependent on that type of revenue is not always consistent throughout different economic cycles. I just think Longmonters. I mean part of the story here this is long, the back story is all about storytelling. Part of the story is what this looks like, not just today. It's not just a financial forecast but in the context of other economics in a municipality like this as you start to reach build out and making good decisions today that position the city well for 2035 and, and, and beyond in terms of continuity of revenues. I know that Dale you mentioned the 17 acres on which the Costco site will sit. In 18 acres the city has purchased or is purchasing for the development of housing that leaves some other acreage you mentioned another 26 or so 22 acres to be developed. And I understand this is I'm asking you to do some speculation. But what would you, is there speculation you're willing to do about what you might see in terms of other development around a Costco because that's, that's what we see around Costco's right that Costco and other businesses know where those synergies are, and, and which would like to be in close proximity to a box store like a Costco or warehouse like a Costco. So I don't know that we are aware of any specific entity that might come in but there are a number of commercial pad sites that are being developed and planted as part of the, the overall effort here. And I believe what you see around other Costco's are complimentary types of of businesses. Could be restaurants that that that will come in that you know people like to shop and then like to go out to eat close to where they are. And the other types of industries that are businesses I should say that don't compete necessarily with Costco, but, but sort of have a synergy with them. I'm confident that they are going to be very attractive. And I would anticipate that there's going to be a bit of competition on on who is is finally purchases and acquires those sites and builds on himself. You know it's hard to speculate but I don't believe any of our financial models and I'll have Jim clarify me are necessarily relying on additional sales tax coming in from those development pads, but it's reasonable to expect that that will be occurring. Probably not long after the Costco warehouses open itself so Jim I will put you on the spot to speculate I appreciate your willingness to go that far down, but we're talking about an ecosystem and economic kind of financial ecosystem that begins to develop around a facility like a Costco warehouse. And I just think that's part of the story and long monitors stay tuned I think there's some will be some pretty interesting and exciting opportunities to develop around this. Let's assume we fast forward. We get past March. There have been supply chain issues we you know labor Costco but let's assume at some point in the future Jim Costco says well, we're overextending ourselves right we're we're not we're not going to open doors to this Costco. You know it's time for us to focus on something else is the city left holding the bag on. We've put it, you know cities made an investment here. What does this what are the city's options if Costco works to take steps backward, which we don't anticipate but I know that's a question out there. Well, you know the the p3 agreement that that Dale has referred to between the city in the Costco and developer includes some clawback provisions they address various failure scenarios that anytime after closing takes place and all the way up until about five years after the opening of Costco and under each one of them, either one or both of the parties would be required to reimburse the city for its sunken cost. There is some sort of failure scenario, and I dealt by even has more specific detail that he could add to that if that's of interest. So even if it gets building good gets constructed and the doors open, and then they close a year later. The city's not at risk. Exactly as Jim was saying, the p3 agreement has the three to four sort of key scenarios. Let's say the agreement goes south before Costco ever breaks ground. Well, then there are certain costs that the city will would get back could be the costs associated with the property acquisition. Again, depending on whether or not any costs been expended towards the public improvements, but all along the way there's protection and Costco is the protector if you will, where they are legally obligated to reimburse some costs. Ultimately, the highest some costs that we've recalculated as part of this, the site agreement that we entered into a Costco, I think puts that number somewhere around 11.2 million. And, and again that would be in the event that we make it all the way to opening. In other words, all the money has been expended, but they either don't open, or they don't stay open for at least five years and so you know no agreement is perfect. And, and no agreement is without its own risk. But this is one that I think is structured in a, in a way that will both protect the city, as well as make it advantageous for all parties to move as expeditiously as they can. But to get to an open store situation. And so we tried to build that in to the strategy of the overall agreement. So when a corporation or the staff or our partners, like the Alangman Economic Development Partnership, bring an opportunity to the city to attract, in this case a Costco could be other other businesses or corporations. The calculus that the city does is based on benefits, not just to the corporation, and not, not just in terms of sales tax but multiple, how dollars multiple turnover in multiple times in the, in the community. Collateral benefits for for long month what in terms of the criteria that you would consider the numbers of jobs the compensation levels, how employees are treated, not just in Costco I mean this is, you could generalize this others but this in relationship to Costco what are the, what are the other benefits that we'll see to Longmont and to Longmonters into the surrounding area when Costco gets open. Well, Jim, do you want to go first, go ahead. You know, I think in general, what I would say that that we think, you know, first of all, all Longmont citizens would would benefit from the revenue stability that that Costco would provide, because you know sales taxes is our primary source of revenue and it funds things like public safety library museum senior services, youth services and then we, we also have voter designated sales tax going for open space and streets as well. So, those of course are things that that the community benefits by and of course the affordable how housing project once developed would also benefit Longmont residents so there are certainly benefits in that respect I don't have job data or spent off revenues to throw at you I don't have any of that, but certainly there it be that be that and probably within let's say the harvest junction area itself you might see some more business come in in that area as well to fill holes in that space because just of the Costco opening nearby synergy that that creates. Do you know what you're going to add to that. I was going to add you know we we don't talk about it a lot but you know Costco is known in the industry as a as an employer that takes pretty good care of their employees. There are a number of jobs coming to the area. And I think it's important for the city to have a whole mix of jobs right that that are that our folks are qualified to do and eligible to to compete for and also understand that there's you know quite a bit of longevity and a Costco employee they tend to hire in and then have some opportunities to move up through the company and so I think we also look at that you know that's not necessarily a huge determining factor, but they again they're they're they're known as a, a corporation that treats their employees. Any corporation or business that wants to to partner with the city and take advantage of whatever incentives the city might make available. Aren't they required to meet some thresholds in terms of compensation of their employees like their wages need to be at least at the count Boulder County medium, which would be true for for this Costco. I think that might be, and I'll let Jim know because he's more or respond but I think those tie in more when we are recruiting a primary employer. I think I think the Costco project was the criteria it was reviewed under was tied more to the revenues that it was bringing to the city in the form of sales tax. And you'll, you'll recall that we did pass an ordinance that in order to save the eligible for a reimbursement or refund of some of the raw water costs that they had, they have to be a business that will generate. I believe it's two and a half million dollars of revenue back to the city in order to be eligible. So it did get scored on those kinds of criteria but Jim. Yeah, I think Dale really stated it correctly that it's a section of the code that that you were referring to is about the primary employers and the incentives that go there. The majority of the city's dollars in this project are really from the sales tax dollars that in a sense we're used to paying for these improvements, and none of that is really covered in that section of that code. So I think Dale really covered the rest of it that we are doing from other criteria though that that's sort of the difference between a Costco project and say smuckers project. Smuckers came in as a large industry with hundreds of jobs. We definitely looked at and looked at the their pay scale for the variety of jobs there. In those cases we want to make sure that they're like 5% above the average of the county living wage. And what I'm saying is we did not make that measurement against the Costco project because it wasn't incentives that fell under that area of code. I'm not saying that they don't meet that but we haven't measured that. Yeah, I appreciate that. And I, and I, and I obviously merged the two in my question. But we do going back to what we know about how Costco treats their employees and in what their wages are I'm confident that they would meet that criteria. I've been far the threshold they made to, to be eligible for any kind of an incentive program. And just maybe one more, one more comment on that on the incentive that that the city would bring through a public private partnership. I think there's a Costco when a Costco is considering Costco in particular, considering moving to a municipality. Do they locate in municipalities that won't won't partner with them and have some skin in the game in terms of investment in the infrastructure required to make this happen. But I'm going to speculate. I don't know the clear answer to that. I don't think in general that that would be the case, unless they felt that they needed to locate in a certain community. They needed to be there for other reasons, and whether they got something or not so that that may happen in some places. I think it's happening in Colorado though. The ones the ones that we have heard about, you know, certainly the tennis store as well as the store that's being built in the North Denver area. Both have substantial economic incentives for them to be located there. And I just think for general consumption for citizens who don't understand who have concerns or questions about how all that works. Understand, if you're going to compete for an enterprise like this. Other municipalities are willing to have skin in the game and for those that are not you have a chance to watch them progress with their own economic development efforts and create the kind of benefits for their for the residents that this one's going to create for us for our residents so anything we've missed in terms of updating this chapter the story. If we get it all closed in February, we start to see potentially dirt moving in March. And then, when would the doors open maybe, if all things go well. That's the one thing we probably haven't hit yet. And, you know, we're anticipating that it could be opening in the, the second half of 2023. In late summer, early fall, Costco does have criteria though, they will not open a store. I believe it's anytime after October, and they will defer it then to the following March and so we are our goal, our interest is to get this thing built and and those doors open as soon as you can. That's new information that there's a dark period or quiet period from him in terms of opening new warehouses. So I have, when people have asked, what do you know about Costco I said well maybe you'll do your Christmas shopping there in 2023 sounds like maybe they'll do their back to school shopping there in 2023. We're lucky you bet. Right. So is it is there anything else that you think long monitors ought to know about this. I appreciate the opportunity Tim to, to, to get some additional information out into the community. And, and let Longmont folks know, again to the best of our understanding how how it's, how it's coming forward. And I just say that, you know, I know there's a lot of work has gone into this Dallas probably lived this for two years now or something but you know I, I, we feel real confident that we got the best deal possible in getting this Costco here to the city that is where, when this first began other locations the cost was dramatically more, more than we've even been close to considering for this site. And so I think it's, it's going to be a good deal for the city. And I think I'd be remiss to having worked with the Costco as well as. They have both been incredibly business like, and, and have looked up to their commitments and to the city and so that's always helpful as well. Those are kind of people in organizations you want to work with strong party or trustworthy because they've earned your trust yep. And, and I know Jim has recently consistently pointed out that he is not part of the golden family. So, that easy for Jim. So, gentlemen, thanks again for your time today and like I said earlier thank you so much for what you've done for the city and its residents over such a long period of time. This will be a fun part of your legacy. I mean I know you're there are many parts, many contributions and are part of that legacy but this is going to be a great big visible one that serves the community well for a long time. So long monitors, the back story is all about learning what's going on in your town from the people who are making it happen. And in this case you heard from the two people been in the middle of this from the very beginning, and they're going to see it through and make certain it comes to successful conclusion and long month. And that's the back story on Costco and what comes next.