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Costco, Fort Lincoln developers finalize deal for new store

Costco, the wholesale grocer, has reached an agreement to open a store in the planned Fort Lincoln development, a major boost to a project that has been stalled by the sluggish economy.

Council member Kwame Brown (D-At Large), chairman of the Economic Development Committee, said Costco executives finalized an agreement with the Fort Lincoln developers Wednesday.

By the end of the week, Brown said, Target may also have finalized plans to move into the proposed 375,000-square-foot shopping center.

"This is a great thing," Brown said. "We need to do everything in our power to bring both Costco and Target into the District of Columbia."

In 2005, the D.C. Council approved a $10 million loan for the Washington Gateway shopping center. The project is just inside the District line, bound by New York, South Dakota and Eastern avenues.

Costco, which does not have a store in the District, was long expected to anchor the project. But the project stalled until recently. As recently as mid-summer, there was talk that the entire project was threatened because Costco executives and city officials were unable to strike a deal.

As part the latest deal - which was made directly between Costco and the developer - Brown said the D.C. Council might have to approve additional financing. But Brown said the additional potential cost to taxpayers will be worth it if it means Costco will break ground as planned in 2010.

"If this happens, we send a signal D.C. is back open for business," Brown said.

-- Tim Craig

By Washington Post Editors  |  December 9, 2009; 3:23 PM ET
Categories:  Economic Development , Tim Craig  
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While I am a Costco member, that does not mean I support giving Costco special taxpayer supported subsidies for building and operating one of its warehouses in DC. Costco's presence will likely have a negative impact on smaller DC retailers, perhaps putting some of them and the neighborhoods they serve at risk. I've personally witnessed how the opening of a Walmart store a few miles outside of a large town's main business district led in less than five years to the complete demise of that main business core. I don't think taxpayers should subsidize this process.

Posted by: DCResident22 | December 10, 2009 8:36 AM | Report abuse

While "academically" I agree that tax payers shouldn't fund private enterprise, realistically there is no way around it. Thankfully in situations like this, the DC tax payers get back their investment, and much more. We did it for Target too.

Just from a comparison, Targets per store revenue averages 39 million per year. Costco averages 138 million per year per store. Simply from a DC tax collections standpoint, DC stands to collect 3.5 times the taxs every year from this Costco, than they do from the Target.

Also, every developement, especially one as remote and in such a depressed "ghetto" area like Fort Lincoln NE, needs an anchor store. A large, national chain that once opened, isn't going to go anywhere. Only then do the smaller businesses and chains feel comfortable enough to open.

Even with all the additional condos and gentrification of Columbia Heights, none of those dozens of new stores/restuarants would have taken the chance to open, if Target and Giant weren't there first.

Once Costco commits, you'll now see tons of other businesses and retailers commit to open there as well. The water fall effect will be a boon for that area of DC, and for the city as a whole.

I will definitely shop at that Costco, rather than going to the one in Pentagon City now.

Posted by: Nosh1 | December 10, 2009 10:33 AM | Report abuse

DCResident, but once Costco opens in DC they will be serving those underserved communities.

Posted by: bbcrock | December 10, 2009 10:36 AM | Report abuse

Ft Lincoln is comprised of single family homes, some apartment buildings, some condominiums, 209 new upscale townhomes, and several residences for the elderly... interesting, Nosh, what you define as "ghetto".

Posted by: andrewkk | December 10, 2009 12:57 PM | Report abuse

Costco's revenues are likely to come at the expense of other existing DC businesses. So, Nosh1, even if Costco averages $138 million per store (as you report), that does not mean this is NEW retail sales taking place in DC. Some proportion of those sales, perhaps a very large portion, are likely to come at the expense of other DC retailers and grocery stores. And remember that most food items, drugs and eyeglasses sold in DC do not generate sales taxes.

Nothing anyone has written has changed my view that DC taxpayers should not be subsidzing for-profit businesses (such as Costco or major league baseball).

Posted by: DCResident22 | December 10, 2009 1:35 PM | Report abuse

No DCResident, that's not remotely true. Costco will canibalize sales from Northern VA. Period. Your argument holds no water. It absolutely means new retail sales will take place in DC. Are you suggesting that the tens of thousands of DC residents with Costco memberships were holding off buying from Costco until they open in DC? One year I spent $4500 at Costco, that's like $100 per week spend in VA.

Posted by: bbcrock | December 10, 2009 1:38 PM | Report abuse

Bbcrock is correct... thousands of DC residents travel out to NOVA and MD to find Costco and costco like stores. Now they won't have to. In addition, Eastern DC, (NE/SE, both sides of the Anacostia) are short on retail. There, frankly, isn't much to cannibalize (Costco is not going to shut down Eastern Market or Union Station the two largest retail hubs East of the Capitol). And I know, from conversations with the developer, that without a Costco and perhaps a target they would not build anything in the FT lincoln retail zone because smaller business on their own, would likely die (Nosh's comment re: Columbia Heights development). In addition, 50 is a major route in and out of the city and think of the revenue that could be generated by a Costco, Target, or a few sit down restaurants from commuters out of PG and Anne Arundel. Brown's assesment of the situation as it impacts DC taxpayers, myself included, is totally on point.

Posted by: andrewkk | December 10, 2009 2:07 PM | Report abuse

Just a guess, but I would assume that part of the deal to get Costco to open the store is a deal on taxes. As in they won't have to pay a portion of them for a significant period of time. Whether that is property, sales, or a combination of the two is yet to be seen. But to think that DC residents will immediately get tax revenue from this deal is incorrect. For a significant period of time we will be paying for the financing of this store before we ever see any of the real revenues. I'd like that money to go elsewhere please.

Posted by: scinerd1 | December 10, 2009 2:38 PM | Report abuse

bbcrock and andrewkk, when totalled up, DC taxpayers paid $800 million or more to the already-wealthy owners of major league baseball in the form of the Nationals' stadium. I feel very strongly that was a monumental waste of our money. Likewise, I believe subsidizing Target, Costco, Abe Polin (the Verizon Center), the building of a convention center hotel, etc., etc., etc., is a waste of our money. DC taxpayers should not be subsidizing private, for-profit enterprises.

Instead, DC should provide excellent transportation, education, safety (police, fire, EMS), health, parks, libraries, and other core government services. Spending tax dollars to subsidize for-profit enterprises takes away from these core government functions.

Posted by: DCResident22 | December 10, 2009 5:01 PM | Report abuse

For the millionth time, the stadium financing was arranged via a special tax on downtown businesses and bonds. So it wasn't "your money." It is money that would have never materialized had a capitol project such as this not been undertaken.

In any case, sales taxes are sales taxes and a Costco will generate more of them any other single retail outlet East of the Capitol.

Posted by: 8-man | December 10, 2009 5:19 PM | Report abuse

8-man, I strongly disagree with the implication that the tax subsidies provided by DC taxpayers for the Nationals' stadium did not adversely impact on ordinary DC residents.

First, DC taxpayers are paying directly for the security related to the stadium.

Second, the DC business that were and are still being assessed special taxes to pay for the stadium bonds have to choose whether to increase the prices for their goods and services, reduce the quality of their services, reduce the number of employees they hire, or reduce the return to their shareholders (lower profits). Each of those choices impacts on DC residents.

Third, businesses that might have otherwise located in DC may have opted to locate in Maryland or Virginia to avoid these (and other) higher taxes. Higher tax burdens in DC may also contribute to business failures.

Fourth, by providing the huge, ongoing stadium subsidies, the city has lost the opportunity to use those same dollars for other, more useful purposes -- building schools, libraries, parks, rec centers, better transportation network, health clinics in needed areas, etc.

Fifth, because of these stadium bonds, the city is very close to the limit Wall Street investment firms use for purchasing bonds from jurisdictions with the best credit ratings. In other words, the city is now more limited how it can fund large capital projects while qualifying for the best interest rates. This was a serious consideration when the DC Council was considering its subsidies for the convention center hotel.

Posted by: DCResident22 | December 10, 2009 5:35 PM | Report abuse

One additional point, 8-man,

The stadium tax assessment was not limited to downtown businesses as you wrote. It was and is assessed for all companies meeting a specified revenue threshold. So, for example, Neiman Marcus executives in Texas complained about the assessment for their department store in Friendship Heights because they knew their store would receive no benefit from the statium built far from that store. This was reported in the press at the time of the stadium tax subsidy debate.

Posted by: DCResident22 | December 10, 2009 5:40 PM | Report abuse

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