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A tax break where?

I don’t quite understand this.

The Houston City Council on Wednesday will consider giving up to $1 million in tax rebates to a Costco store that would be built outside city limits.

City officials say the proposed 151,600-square-foot warehouse and liquor store, in the 23600 block of Katy Freeway, will act as a catalyst for further development in the area around Interstate 10 and the Grand Parkway, and generate tax revenues the city otherwise would not collect.

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The 14 acres Costco is under contract to buy is in Cimarron Municipal Utility District, with which the city cut a special-purpose annexation deal in 2003. Under the agreement, the city and utility district split the revenues of a 1-cent sales tax collected within the district’s boundaries. The city provides only animal control services there, and property owners pay no city property taxes.

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Without the incentive, Chief Development Officer Andy Icken said, the company likely would have picked a tract it had under contract a mile west of the utility district, near Katy Mills Mall, where no revenue would have been generated for the city.

Icken said the city expects to collect $8 million in sales tax revenues from the store during the life of its annexation agreement, after rebates. The rebates will come from sales taxes generated by the store, and will be used to reimburse Costco for infrastructure work, mainly a road connecting it to the I-10 feeder road. The Cimarron district will pay for soil work to make the site suitable for construction.

Combined, Costco would be reimbursed about $2.5 million. Costco representatives declined to comment on the project or the rebates.

Councilwoman Melissa Noriega said she has concerns about the proposal, but has not decided how she will vote. “It seems like Costco is an awfully big, well-funded company to need that kind of infrastructure assistance,” she said. “Having said that, I know we want to incentivize the kind of retail they produce for the tax rolls.”

I get wanting to have the place built in an area that benefits the city. The usual arguments about this kind of subsidy relocating retail activity instead of increasing it is a bit less concerning when the location of the retail activity is the point. While it is unquestionably true that something is going to be built at this location, given the upcoming Grand Parkway expansion, I get wanting to make it happen sooner, since the city’s revenue sharing deal with the Cimarron MUD expires in 2033, and I get wanting to ensure that what does get built is of top quality. But yeah, I don’t really see why a large well-funded company like Costco needs the incentive. I’m sure they know which location is best for them, and I don’t know how much difference a relatively minor tax break will make to their bottom line. Council should be very skeptical of this.

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3 Comments

  1. Jules says:

    Some of the stuff I’ve read makes it sound like Costco has already committed to this site. What is the point of this tax rebate?

  2. Hobby Lobby says:

    That area will grow whether they build this or not. Why not offer these incentives in areas that are more in need of retail and ALREADY a part of the city of Houston?

  3. [...] here for the background. I get why Council agreed to this, but the question I haven’t seen asked [...]

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