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 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.

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.

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D.J. Blutarsky said...

I take exception to this letter.

I am one of the apathetic who like the way our city is being run. My wife and I are government workers with a guaranteed paycheck; my family and I live in a nice stucco box in the first crown-jewel elite master planned community the city approved; my kids play soccer at the local parks and swim during the summer; we have two late-model SUVs we bought at the Elk Grove Auto Mall; our kids go to the award-winning public schools in the EGUSD and taught by 'nationally-recognized' educators; and we just love all the high-end restaurants in town!

I know our City Council has our interests in mind when they negotiate these deals, and anyone who brings shopping to our town has my vote. Unfortunately, I won't be able to attend the next City Council hearing because the kids needs help with their homework after soccer practice, I have family visiting, my wife has the sniffles, and Dancing With The Stars is on.

Unknown said...

I am out of town for the City Council meeting but will submit this comment to the City Council:

I feel the need to comment on the proposal to grant the Pappas group $8 million in tax incentives in return for their development to build a shopping complex that will include a new Costco.

I have heard many people complain that Elk Grove is a great place and Costco (or Pappas) shouldn’t need these incentives to come here. While Elk Grove is a great place, we also live in a competitive environment where businesses and developers can choose to invest in other communities in the region, the state, and the country. Sadly, Elk Grove (as well as the Sacramento region and the State of California) are often not at the top of the list for many developments. A good example of these decisions was Aerojet Rocketdyne’s recent decision to lay off 1100 employees in Rancho Cordova.

The truth is this: the type of incentive and investment proposed here is needed for certain developments. It was important for locating State jobs in Elk Grove over the past couple of years and this type of incentive for a Costco is more the norm than the exception. Costco represents a high-quality employer and retailer that will provide a net benefit to the City of Elk Grove.

The City Council should approve this $8 million incentive but it should also be scaled with the sales tax revenue that the City receives from Costco. For example, the incentive paid to Pappas should be 50% of the sales tax collected from Costco in any given year. In that way, Pappas has an incentive to ensure Costco is successful while the City continues to receive some of the tax revenue.

Elk Grove is a great city. However, the arrogance of saying “Costco should not need an incentive to locate here” represents the short-sighted thinking of our City Council in the early 2000’s. Elk Grove suffered from this arrogance and I’d rather ensure that this high quality retailer is located in Elk Grove sooner rather than later.

Unknown said...

A big BS to anyone claiming to be just another citizen of EG and who thinks handing out 8M in tax payer dollars to the land provider is ok. This particular individual has already received significant preferential treatment from our city. Enough! The city doesn't need to buy shopping especially from low dollar big box stores. Costco and Walmart are bottom feeders who offer nothing but low paying jobs and destroy small business. You want to shop there drive North 10 dam minutes to the one in Sacramento.

It's time we start investigating these decisions by city council. They ignored the community when we said we didn't want it where Costco wanted to be and now they are going to pay them to be there??? Somebody is getting something from these kind of deals and it's not the citizens of EG.

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