Baton Rouge, LA (FOX44) — Big savings are coming to Baton Rouge. But even some of Costco's supporters worry that the city is paying too big a price to attract it.
The East Baton Rouge Metro Council voted 10-1 to create an economic development district to attract the wholesale chain.
"Baton Rouge, now, when we look at, from the IBM to all these other things, there are a lot of cities that would like to be like Baton Rouge," said Mayor-President Kip Holden in a speech thanking the council.
But the arrangement may have set a precedent that could hurt the city for years to come.
In order to lure Costco, the city-parish will provide $7 million to help demolish the former Coca-Cola bottling plant which sits on the site near Interstate 12 and Airline Highway, as well as road improvements.
"So that people can get home faster, that people can get around the neighborhood faster, so that people can get through the intersection safer," said William Daniel, the mayor's chief administrative officer.
East Baton Rouge Parish will pay Costco in the form of a sales tax rebate. With interest, the total is expected to reach $7.8 million.
Costco said it plans to spend an additional $30 million of its own money in capital improvements.
"Our share of the investment is about 15 percent," noted Councilwoman Ronnie Edwards, "and that Costco is actually putting up the owner's equity for 85 percent. That's a pretty good ratio in my mind."
Other retailers have tried to get help with infrastructure payments in the past, but the city turned them down.
Now that Baton Rouge has shown it will pay big money for a retailer, even its supporters are afraid of the consequences of their vote.
"If you're a business coming to Baton Rouge or East Baton Rouge Parish, and you don't ask for a (tax increment financing plan) now, shame on you," said Mayor Pro Tem Chandler Loupe.
In the past, Baton Rouge offered similar incentives to industrial projects. Even members of the council who voted for the Costco project, such as Loupe, worried about the consequences of their actions.
"That there has to be some limit to these," Loupe warned. "I don't want it to be Costco.
"So I guess if you want to call me a hypocrite, the shoe will fit."
Some people complained that Costco would bring so much traffic to the area that shoppers will try to cut through the neighborhood.
Others told the council that Costco will be bad for local small businesses.
"Retail is not economic development," stated Gordon Mese, a retailer who ran for mayor in 2012. "Retail will redistribute wealth, it will redistribute jobs, and it will redistribute sales tax. It does not make our pie any bigger."
One reason the council approved the proposal is that a typical Costco store will have 250 employees. Half will be full-time and half will be part-time. But Costco is known for a generous benefit plan, which extends to part-time workers, and salaries that are better than other large retailers.
"The average hourly wage at Costco in the United States in $23 an hour," Ted Johnson, a Costco representative, told the council.
Daniel said he expects the city to fully pay off its debt to Costco four years after the store opens, which is likely to happen in 2014.
He said that is preferable to having to issue bonds, which the city has to pay for decades even if the deal falls apart.
But Costco reassured the council that it has never closed any of the 622 stores it has opened nationwide.
In addition to the high hourly salary for floor employees, the council members took note of the way Costco pays its managers.
"A hundred and sixty five thousand dollars a year for the warehouse manager," Loupe mentioned. And we'll race to put in applications for that job."