DISPUTE OVER INCENTIVES

Costco deal for Midlands site dead after dustup over incentives

and dhinshaw@thestate.com December 10, 2013 

  • How the deal collapsed Costco spent three years looking at Columbia-area sites before settling on Piney Grove Road. However, needed road improvements and topography issues pushed the project’s cost to almost $3 million over budget, a developer said. Then, the deal fell apart. What happened?

    •  Developers asked Richland County Council for economic-development incentives, usually reserved for manufacturers.

    •  Officials say the developers did not ask the county for a specific amount in incentives. The aid the county offered was not enough, developers say. Neither the county nor developers would say the amount offered.

    •  Developers say Costco is walking away from the Piney Grove site and likely will not choose another Columbia-area site. However, they add, if council offered more, Costco might reconsider Piney Grove.

    SOURCES: Interviews with developer Avtex Commercial Corp., Richland County Council members

— Costco will not build its first Columbia-area store on Piney Grove Road and could shun the Midlands altogether because, developers say, the warehouse retailer could not get enough in incentives from Richland County Council.

But some council members said the developer was not clear on how much in incentives Costco wanted. Council was trying to work with the developer and Costco, they added, despite an economic-development policy that does not allow incentives for retailers.

The warehouse retailer, where only members can shop, spent more than three years looking at more than a dozen Midlands locations before narrowing its search to three or four sites, said Tex Small, president of Mount Pleasant-based Avtex Commercial Corp., the developer for Costco.

Costco settled on a 17-acre site at Piney Grove and Fernandina roads, but topography and road-improvement costs drove the project’s price tag to nearly $3 million over budget, Small said.

In July, developers went to Richland County for assistance in paying that cost overrun in the form of tax incentives, Small said. The company did not ask for a specific amount. Instead, Small said, council was told governments in other states had offered up to $10 million in incentives and Costco’s cost overruns were less than $3 million.

Last week, Richland County Council held a first reading on a Costco assistance deal by title only, meaning it did not have to disclose details of the package offered, he said.

“They didn’t come close,” Small said, declining to say how much the county offered. “All the contracts just ran out of time.”

After conferring with county economic development director Nelson Lindsay, Richland County Councilman Greg Pearce would not place a value on the incentives package.

Council chairman Paul Livingston said the developer’s comments were off base. “Obviously, they’re trying to cover because their deal didn’t work.”

The first briefing of County Council’s economic-development committee on the Costco deal was in mid-October, said Livingston.

“What we asked them is: ‘Why (did) they need help?’” Livingston said. “Wal-Mart and other places come in and they don’t need incentives. How do we justify that to others?

“And the reason they gave us was mainly the additional cost in infrastructure there.”

Costco’s proposed site required a range of road improvements, including turn lanes and road widenings on Piney Grove, Fernandina and Piney Woods roads, according to the S.C. Department of Transportation. The developer would have been required to pay for those improvements, Transportation Department district engineering administrator Thad Brunson said.

Livingston, who said landing a Costco would be “a significant benefit” to Richland County residents, said council’s economic-development committee said it would consider providing “some infrastructure help” but didn’t get a response from the company.

Councilman Damon Jeter said Tuesday that Costco never said how much in incentives that it wanted, adding council recognized the Costco deal would spur redevelopment in the St. Andrews suburbs and provide attractive salaries.

He added by text: “Sometimes a public body’s timeline does not coincide with that of a for-profit entity. As a member of the economic-development committee who was very supportive, I was trying to determine the proper incentives to assist with the development, given the limited amount of information presented to us from our staff.”

Mount Pleasant developer Small said that even though Costco is not a manufacturer – typically, the recipient of economic-development incentives – the county should have done more to land the retailer.

“If you came to Richland County and said, ‘I’ve got 225 jobs that are going to pay $22 an hour, a $9 million payroll, and I am going to bring you $7 million in sales tax annually,’ why wouldn’t you want them? Why wouldn’t you do anything within reason?” Small asked. “There were so many ways to do it.”

Costco was left with a bad taste in its mouth, Small said. “They felt like they weren’t wanted.”

Columbia shoppers long have clamored for a Costco to compete with rival warehouse retailer Sam’s Club, which has had Midlands stores for decades. Three thousand Midlands shoppers have paid memberships to the warehouse club, Small said.

Small said he thinks Costco would reconsider the Piney Grove site if Richland County put together a better incentives package and the property owner still was willing to sell. “I think we could bring them back.”

However, he said it’s unlikely the Issaquah, Wash.,-based retailer would choose another Midlands site.

Costco does not comment on potential locations for its stores.

Real estate experts say there are other viable options for Costco in the Columbia area, and it would be unusual for it to drop its Columbia plans altogether.

“They’ve identified Columbia as a market in which they want to put a store,” said Ben Johnson, research director for CBRE|Columbia, who was not involved in the deal.

Just because one site didn’t work out, “that doesn’t mean that another piece of land that has less expensive constraints to deal with wouldn’t work out,” he said. “It’s just kind of a numbers thing.”

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