The Pleasanton City Council last week approved a formal agreement with Costco that finalizes the broad term sheet council members endorsed last year outlining how to pay for road improvements around the Johnson Drive site the wholesale retail giant is eyeing for its third Tri-Valley warehouse store.
City leaders hope Costco will anchor a future commercial center in the newly formed, 40-acre Johnson Drive Economic Development Zone (JDEDZ), southeast of the interchange of interstates 580 and 680.
But Costco and other new retail uses in the area will come with significant traffic increases, which left city officials figuring out how to fund the nearly $21.47 million worth of roadwork needed to accommodate the JDEDZ.
As a result, the city and Costco agreed to a term sheet approved by the council last September to cover project costs.
The two sides then worked several months to formalize the terms into a final "transportation improvement and cost allocation agreement," which was brought to the council for approval last week.
The key provisions remain the same, including the sales tax sharing agreement that serves as the centerpiece of the financing deal to cover design and construction costs at $19.97 million and $1.5 million for right-of-way acquisitions.
Costco is paying $6,785,000 in cash for roadwork as part of its developer fee package, and the city is paying $6.4 million from its city traffic impact fee reserves.
For the other design and construction costs, Costco is fronting another $6,785,000 and the city will repay that money with 40% of the sales tax revenue generated by the Costco until the debt is repaid.
The balance due to Costco will be subject to 1.5% annual interest, and the 60-40 sales tax sharing agreement would remain in place until the balance is paid off with a maximum period of 25 years. The outstanding balance would be forgiven if Costco's Pleasanton store closes before the debt is paid off.
Any other developer who builds in the JDEDZ in the future would need to pay their proportional share of the infrastructure costs back to the city, and the city officials plan to use those funds to pay down their debt to Costco.
The agreement also calls for Costco to donate any of its right-of-way needed to complete the roadwork, and the city will ask other JDEDZ landowners to donate their right-of-way. Any remaining right-of-way will be purchased, and the costs split evenly between Costco and the city -- and tacked on to the city's Costco debt balance without interest.
Construction cost overruns will also be split evenly between Costco and the city.
Under the final agreement, Costco will be responsible for design and construction of all JDEDZ road improvements, and the store could not open before "substantial completion" of the roadwork.
Final project design and construction details will be outlined in a future agreement between the city and Costco. The pending roadwork includes Stoneridge Drive and Interstate 680 northbound onramp improvements, Johnson Drive widening, improvements at the Johnson-Stoneridge intersection, and new traffic signals at Johnson and Commerce Circle and Johnson and Owens Drive (north).
Though the city has been sued over its JDEDZ approvals, Costco and other potential developers can apply to bring their project to the zone because no court injunction has been ordered to halt projects with the case pending. No project applications have been filed to date.
The council's approval of the Costco agreement came with a 4-0 vote on Feb. 20, with Mayor Jerry Thorne continuing to recuse himself from all JDEDZ-related items. The agreement was part of the council's consent calendar, a collection of items deemed routine and voted upon all at once unless pulled for separate consideration.
Other consent business
* The council had a crowded consent calendar at last week's regular meeting -- 18 items in all.
Other consent highlights, approved unanimously, included final adoption of an ordinance approving the development plan from Sunflower Hill to build Pleasanton's first-ever housing community for adults with special needs, just outside downtown.
The Pleasanton-based nonprofit, in partnership with Satellite Affordable Housing Associates, plans to construct a two-story apartment building with 31 units (along with a community center, a central courtyard and other amenities) adjacent to a new neighborhood planned for the Irby Ranch site where Stanley Boulevard turns into First Street.
The council signed off on the project two weeks earlier -- everything except for the ordinance's second reading and final adoption, which needed to occur at a separate meeting.
* More city utility boxes will be spruced up artistically after the council approved four painting designs as part of the city's "Project Paint Box" program.
"Poetree" by artist Molly Green is a design centered on an oak tree for a box at the corner of Black Avenue and Hopyard Road. Next, "Bicycle Box" by Irma Grant takes inspiration from cyclists' efforts at healthy and active living and will be painted on a box at West Las Positas Boulevard and the Iron Horse Regional Trail.
Coming to Stanley Boulevard and Valley Avenue, "Stop and Smell the Flowers" by Ally McKay focuses on living well and creating a stress-free life. The final design (untitled) by Pedro Mercado draws on Pleasanton's horse racing history for the corner of Bernal and Valley avenues.
* The council endorsed a mural project with Kaiser Permanente to bring local artist Mark Shawver's 12-foot-by-20-foot mural "live well, be well" to the hospital's north building at 7601 Stoneridge Drive.
Mural costs are being split between the city's public art acquisition fund ($4,000) and Kaiser Permanente and Gary and Nancy Harrington, at $3,000 each.
* The city extended its contract and lease with the Amador-Livermore Valley Historical Society for technical support and programming at the Museum on Main.
* Council members approved a cooperative agreement with Caltrans for work to produce a project initiation document for improvements to the Interstate 680 and Sunol Boulevard interchange -- the first step in the state process for highway improvement projects.
* They signed off on a $850,735 construction contract, plus $127,100 for contingencies, with San Jose-based Northern Underground Construction for work to replace fire hydrant laterals and various control valves, a key component of which is work in Hacienda along West Las Positas Boulevard. Construction is expected to start this month and wrap up in July.
* They also approved a maximum $316,464 contract with FBD Vanguard Construction of Livermore to replace a deteriorating sidewalk on the east side of Foothill Road between Stoneridge Drive and Canyon Way, a project expected to be completed by May.
* The Pleasanton Police Department is on track to receive new equipment and training after the council supported allocating nearly $193,000 in state Citizens' Options for Public Safety (COPS) funding for specific efforts.
The new tools will include an integrated interview room camera system, TruNarc handheld narcotics identification system, less-than-lethal weapons, handgun lock box and advanced law enforcement training.
* The council also accepted the city's audited comprehensive annual financial report for 2016-17 (an item that was presented to the council, and not on consent). Third-party auditor Maze & Associates rendered an unmodified opinion, determining the city's financial statements were free of material misstatements and fairly represented the city's actual financial situation as of June 30 -- the end of last fiscal year.