Shakedown or Business as Usual? Pappas Seeks Millions From Elk Grove Taxpayers to Develop Costco

April 5, 2017 |  

After several weeks of whispers and parlor talk, last week residents learned the rumors that the developer of the new Costco approved for Elk Grove would seek an incentive had come true.

As posted last week by the Elk Grove City Clerk's office, the developer of the new Costco located near Elk Grove Boulevard and Bruceville Road, The Ridge EG East, LP, is seeking a 25-year $8 million sales tax sharing incentive. 

According to the documents associated with the request, "The agreement would provide for sales tax sharing between the City and the landlord/property owner in a present value amount of not more than $8,000,000, as escalated and adjusted over time, all as provided in the agreement. Payment would be made for up to 25 years, or until the entire economic development incentive amount of $8,000,000, as provided in the agreement, is paid, whichever occurs first."  

Aside from the information posted last week, there are unanswered questions regarding the matter such as who requested the placement of the item on the public hearing portion on the City Council agenda? Was it a city staff members who placed it at the request of Pappas Investments, developer of the Costco, or perhaps a City Council Member? 

Pappas Investments already has a successful track record extracting economic incentives from the City of Elk Grove. In the City's 2012 effort to recruit California Correctional Health Care Services to relocate to Elk Grove, a $1.4 million incentive was awarded to Pappas Investments as part of a larger $3.3 million package. 

The bigger question is how the City Council will react to this request, particularly given the acrimony expressed by nearby residents regarding the effects the big box store will have on their neighborhood and the already heavily traveled Elk Grove Boulevard. Given the comments these residents heard from former Mayor Gary Davis telling them "tough luck" when expressing their concerns, will they feel as if awarding a multi-million dollar incentive is rubbing salt in the wound? 

Moreover, more importantly, given that Pappas Investments has generously donated significant amounts of campaign cash to Mayor Steve Ly, Vice Mayor Steve Detrick, and Council Members Pat Hume and Darren Suen, will this affect their decision? Also, given Ly's indecisiveness on almost every tough decision brought to the council, how will he try to wiggle through what could be very controversial public comments. 

These questions should be answered next week at what could be an interesting meeting.   

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Capt. Benjamin Willard said...

Students of Elk Grove history will recognize the influence Mr. Pappas has had on this community and its council members and will acknowledge he will be awarded yet another multi-million dollar incentive. Undoubtedly there will be some upset residents speaking at next week’s meeting, but like other controversies, they will fade, and with the largesse of the people like Mr. Pappas, council members who want to continue holding office will do so.

The question becomes will every other developer who has donated money come hat-in-hand seeking incentives to move their development along? Will the Howard Hughes Company now pursue a sales tax incentive similar to what Mr. Pappas is about to be awarded to kick-start their moribund project? How about the construction labor unions, who have generously contributed cash to council members - will they now come to the council and demand project labor agreements for public works projects like the aquatics center?

As it relates to Mr. Pappas, he once again knew the weak spot of the council members and seized upon it, so it is business as usual. Additionally a new, albeit lower, standard for preservation of taxpayers’ money is being established before our eyes, so we had better become accustomed to it.

Connie said...

Capt. Willard, once again you never disappoint in your wisdom. After reading the first article on EGN, I emailed the Council the following, “When this government approves large incentives such as this to one developer, and not the others, its doing so has the appearance, if not the effect, of treating comparable developers unequally. So, if Sam’s Club wants to come to Elk Grove, will that developer receive the same deal?” I didn’t receive any responses.

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