Council approves Costco tax rebate

I still don’t think this is a good idea.

The Houston City Council on Wednesday approved a $1 million economic development deal to help Costco build a store outside the city limits.

In a rambling discussion ending in a 12-3 vote, supporters argued that the sales tax rebate would drive further development in the area around the site of the proposed store, at Interstate 10 and the Grand Parkway, generating revenue the city would not collect otherwise.

Opponents said they had heard no argument for why the rebates were needed for the store to be built, or, in Councilman Andrew Burks’ case, said the deal did not ask enough of Costco.

Corporations should take a more active role in funding after-school and summer jobs programs in the city, Burks said, and should give preference to veterans in hiring.

[…]

The store would sit on 14 acres Costco has under contract in the Cimarron Municipal Utility District. The city since 2003 has had an agreement with the district under which the parties 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.

Economic development experts have said the area is likely to develop without incentives, given that a new segment of the Grand Parkway connecting I-10 with U.S. 290 will open in December. Councilman C.O. Bradford, who joined Burks and Councilman Larry Green in opposing the deal, took a similar approach.

“Is the incentive necessary?” Bradford asked. “I haven’t heard anybody articulate the real need for the incentive.”

Councilman Ed Gonzalez said the proposal was necessary because Costco was considering a nearby site that would generate no revenue for the city.

“While technically, yes, it’s a very lucrative site, very high-profile and likely Costco would still come there, I think to some extent, by us having skin in the game, we guarantee they do come into this area,” Gonzalez said. “I would rather us control some of our own destiny here, make sure this investment is here and leverage our $1 million to bring a much greater return to the citizens of the city.”

See here for the background. I get why Council agreed to this, but the question I haven’t seen asked – let alone answered – is what the return for the city would be compared to what was likely to be built on that property if no rebate was offered. We all agree that something would be built, possibly this very Costco, but even if you accept that Costco would have gone elsewhere, something else would have been put there eventually. As such, it makes no sense to compare the revenue the city will get from making the deal to zero. Compare it to some scenarios where something else gets built, and compare it to that. Is it still worth the money the city is giving up? If it is, then I can live with this. If not, then we need to do a better job of making economic projections.

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