News Local/State

City Council Endorses Plan To Share Sales Tax If New Costco Builds At Mall

The vacant Bergner's site at Market Place Mall in Champaign.

The vacant Bergner's building, where it joins the main section of Market Place Mall. A proposal before the Champaign City Council would share tax revenue with Costco Wholesale, if they build a new store at the Bergner's site. Jim Meadows/Illinois Public Media

UPDATE: A sales tax revenue-sharing agreement with Costco won the unanimous support of Champaign City Council members Tuesday night. During a study session, council members endorsed a proposal to share $2.75 million in future tax revenue with Costco, if it builds on a site at Market Place Mall.

ORIGINAL STORY: Champaign could be home to a Costco store by 2020. And a revenue-sharing proposal coming before the Champaign City Council Tuesday evening would ensure the warehouse club retailer builds a store at Market Place Mall, where the city would like it to be.

Costco Wholesale Corporation, which currently has no stores in east-central Illinois, has looked at potential store sites along Olympian Drive, on the edge of Champaign’s north side shopping area. That’s according to the city’s Assistant Planning and Development Director Rob Kowalski.

Kowalski says building a new store on farmland at the edge of town (what is known as a “greenfield” site) would be the Wisconsin-based retailer’s cheapest option. But he says that under an incentive request made by Costco, the city would pay the retailer a share of the sales tax revenue that the new Champaign store generates, if it builds the store at Market Place Mall.

The Champaign City Council will consider the proposed development agreement at a study session during its Tuesday, April 8 meeting, which begins at 7 PM at the Champaign City Building. Kowalski says if the proposal is ultimately approved, the new Costco store could be built in 2020.

The proposal, as outlined in a memo to city council members, calls for Costco to be reimbursed with $2.75 million in sales tax revenue during a period of up to ten years, if it’s built at an “infill” location at the mall. That would cover most of the estimated $2.9 million in extra cost to Costco, if it were to build at the mall instead of a greenfield site.

The proposal projects that the store would generate a total of $7.1 million in total sales tax revenue within its first six years of operation. Sharing revenue with Costco would leave approximately $4.3 million in sales tax revenue for the city of Champaign.

Kowalski says persuading Costco to build a new store within the current North Neil & North Prospect shopping area helps fulfill a city goal of supporting Market Place Mall. Paradoxically, he says one way it would do that would be to allow mall owner Brookfield Properties to reduce the total size of the mall.

“There’s no question that malls in American today are overbuilt and have more square footage than they can refill,” said Kowalski. “So this proposal actually allows Brookfield Properties to reduce the size of their mall, and at the same time locate a huge customer generator right next to the mall.”

Under the proposal, Brookfield Properties would tear down the former Bergner’s department store building at the mall, along with a small section of adjacent mall property. Costco would buy the site, and build its new store as a standalone property.

Currently, the Costco stores nearest to east-central Illinois, are in the Chicago, St. Louis, Indianapolis, Quad Cities and Peoria areas. According to the city council memo, the new Costco in Champaign would employ 150 to 225 workers. The company’s starting hourly wage is $14.00 per hour, with company employees earning an average of $22.50 per hour, and being eligible for healthcare benefits.