Open Letter to Elk Grove City Council - The Extortion of Elk Grove Taxpayers

April 11, 2017 |

Dear Council:  

As I am reluctant to attend our council meetings, I still feel it necessary to voice my concerns over the proposed $8 million incentive package that is being demanded by the property owner, Pappas Investments, in exchange for the building of a Costco within our city borders.

Unfortunately, our city has established a dangerous and expensive precedent that it is willing and able to offer up enticements to future tenants for the pleasure of having them do business here. Developers are very much aware of this practice and never seem to be reluctant to demand enticements for their projects. When Papas was asking the city to approve the Costco there was no mention of enticements. At the public hearings on the matter local residents voice vehemently, their concerns about increased traffic, noise, air pollution, loss of property value and diminished quality of life should this big box store be built at the Bruceville / Elk Grove Boulevard site. Their concerns were overruled and the plan was approved over strong community objection.

Once approved, then Pappas swooped in for the kill. The land owner (not the tenant) now needs $8 million to make the project viable. Didn’t they know this when they first came to the council seeking approval? Of course they did. They just kept their demands under wraps until they had the leverage they needed to put the squeeze on our city. Call it business if you’d prefer, but what it comes down to is;

Extortion.

Extortion is a criminal offense of obtaining money, property, or services from an individual or institution, through coercion. It is sometimes euphemistically referred to as a "protection racket" since the racketeers often phrase their demands as payment for "protection" from (real or hypothetical) threats from unspecified other parties. Extortion is commonly practiced by organized crime groups.

In its formal definition, extortion means the infliction of something such as pain and suffering or making somebody endure something unpleasant.[ The term extortion is often used metaphorically to refer to usury or to price-gouging, though neither is legally considered extortion. It is also often used loosely to refer to everyday situations where one person feels indebted against their will, to another, in order to receive an essential service or avoid legal consequences.2]

Neither extortion nor blackmail requires a threat of a criminal act, such as violence, merely a threat used to elicit actions, money, or property from the object of the extortion.

Wow, that seems to fit the bill doesn’t it. Pappas is essentially attempting to legally extort money from our city. I see that our Economic Development Director Darrell Doan is recommending the council acquiesce to the $8 million demand. There’s a guy I want to play poker with. He seems willing to play loose with our tax money and seems unfamiliar with the term “bluff.”

It’s time to “call” Pappas on this deal. If the project is NOT viable without $8 incentive then maybe it’s the wrong place for this tenant. This is what the community has always maintained. Let’s keep out community happy, let’s save $8 million and let Costco build at Delta Shores if they’d prefer. My guess is, Pappas will negotiate a deal much better for the city if this council draws a line in the sand and says the buck stops here. Too much money has already been committed for them to walk away.

Interestingly, when this item was up for public debate, I was there and I spoke to the Costco land procurement officer (a female, whose business card I have since misplaced) after I saw some confusion on her face as speaker after speaker inquired as to why the Costco wasn’t being considered near the mall site. I asked her if she knew what people were talking about. She said she had no idea of the mall site, where it was or what it was. I explained to her where it was, just off the highway, at a new six lane over pass just south of city hall. I told her she should really check this site out before committing to the Bruceville site. She explained she didn’t have time check the mall site out this trip.

Why wouldn’t our Director of Economic Development promote the mall site for this big box store?

Having a Costco near the mall site would likely expedite getting the mall re-started. The promise of a casino nearby, the fact that Elk Grove is again one of the fastest growing cities in the US all work in favor of city holding its ground. Costco wants to be here, were growth is rampant in a town already over 160,000 in population. Incentives aren’t needed, we just need to play smart and call their bluff. Even if we lose, we win.

Refuse to pay the incentive, any incentive. To do otherwise will only perpetuate the problem and lead us closer to bankruptcy.

Thank you for your consideration on this matter.

Steve Lee,

Elk Grove, Calif.