Costco Is Coming to Brea As Concerns Grow Over Controversial Tax-Sharing Agreement

In a quiet suburban community known for its surging retail appeal, an ambitious project is set to alter the landscape of Brea, California. A 50-year tax-sharing deal forged in secrecy between city officials and developer Dwight Manley has sparked outrage among residents who believe they are being shortchanged in the quest to bring a Costco Wholesale store and gas station to the eastern part of the city. For Brea, which has long grappled with fiscal struggles, this development charmed council members as a potential economic boon, but the execution and terms of the agreement have provoked significant scrutiny.

The Allure of Costco: A Community’s Dream or Devastation?

City officials, including Assistant City Manager Jason Killebrew, argue that the tax-sharing agreement is crucial for attracting the big-box retailer. “Without the Costco, there is no sales tax generation to begin with,” Killebrew asserts, suggesting that the city benefits from the influx of jobs and increased revenue over time. However, local residents are questioning the wisdom of a long-term arrangement that oddly sidelines their community’s immediate financial needs.

Brea resident Mark Strom, living just a quarter-mile from the proposed site, expressed his discontent, saying, “It absolutely raises eyebrows. It’s the complete lack of transparency, the sneaking around making decisions in private.” Residents like Strom are concerned about the deal’s implications for city services and infrastructure and how a significant portion of the sales tax revenue will flow away from the city’s general fund for the first 30 years.

Breaking Down the Numbers: Who Wins and Loses?

The tax-sharing agreement stipulates that Brea won’t see any sales tax revenue for discretionary use for the first two years. Thereafter, the city will receive a mere 5% of annual sales tax revenue, which will gradually increase over the years but won’t reach full parity until 30 years have passed. During this period, the breakdown of the revenue generated by the Costco project will be dramatically skewed toward Manley.

• Year 1: City receives 0%, Manley gets 100%
• Year 2: City receives 0%, Manley gets 100%
• Years 3-30: City starts at 5%, increasing by 5% every few years until 50% is reached
• Years 41-50: City will receive only 35% of sales tax revenue

Experts have labelled such long-term tax-share agreements as “dangerous,” pointing to a 2022 study by the Institute for Public Policy which found that cities entering similar agreements often experience long-term fiscal distress as immediate needs go unmet. “These deals manipulate future cash flows but ignore current budgetary health,” noted Dr. Emily Cartwright, an economic analyst at the university.

Community Response: Fear of Secrecy and Future Uncertainty

As pressure mounts, the Brea4All resident group has raised alarms regarding numerous alleged violations of California’s open meeting laws, particularly the Brown Act, which mandates transparency in public discourse. Resident activists have circulated evidence of text messages between Killebrew and Manley that they believe confirm these allegations of secret negotiations.

In one exchange, Killebrew purportedly indicated he had received a consensus from city council members regarding Manley’s application before it was publicly discussed. “It appears they were looking to secure decisions without adequate public scrutiny,” said attorney Michael Reynolds, representing Brea4All. “This raises concerns about accountability and governance.” Killebrew, however, denies any wrongdoing, maintaining that city council members only reviewed the taxes shortly before they approved the agreement.

Is This Just a ‘Regular Business Deal’?

Manley, who purchased the 34-acre site for the development, defends the tax agreement. He cited hefty land costs of $140 million, coupled with development expenses, which he says necessitate a share of the revenue to make his investment viable. “The cumulative return, being a mid-single-digit percentage amount, is incredibly low by any developer standard,” Manley explained, emphasizing his commitment to the community. Yet, despite assurances, the overwhelming consensus among analysts is that this agreement may impede the city from addressing other pressing needs.

A Balancing Act: Economic Growth Versus Community Needs

Brea has historically relied on sales tax revenue for essential services like police and fire. Councilmember Christine Marick voted against the tax-sharing agreement, expressing concern that the risks of the project had not been fully addressed and that it effectively starved the city’s general fund of necessary resources for decades. “You’re giving away future money that you don’t even have yet,” she poignantly remarked during the December public hearing.

Although city leaders aim to attract community-centered projects like Costco, the implications of this agreement are widely debated. As Killebrew himself admitted, the project is still in a preliminary phase and could take years to come to fruition. Yet, residents worry that the long wait will translate into lost opportunities for immediate improvements and community engagement.

With a potential lawsuit looming, city officials find themselves at a crossroads, grappling with the dual pressures of attracting investment while maintaining public trust. For concerned citizens like Mark Strom, the lesson is clear: transparency in governance is non-negotiable. As Brea stands on the brink of transformation, only time will tell whether this deal becomes a beacon of economic growth or a cautionary tale of civic mismanagement.