Tucson council directs staff to formalize development agreement for proposed Costco at Houghton/Old Vail

Mayor and the City Council on Feb. 3 voted to move forward with a proposed development agreement with Costco Wholesale for a 158,000‑square‑foot warehouse and fuel facility on about 22 acres at Houghton and Old Vail.

City staff presented an independent economic analysis showing the project’s projected economic footprint; Mike Joukowsky of the city’s economic‑issues team told the council the study projects roughly 320 full‑ and part‑time jobs and estimated gross city sales and property taxes of about $22.7 million over five years. Joukowsky said the city projection is driven largely by sales tax and that the company projects additional state and county receipts as well.

Councilwoman Lee, who led the motion to formalize a development agreement, sought clarity on the terms. “Can you explain to us kind of what this is and what it isn’t with respect to the fact that the city's not writing a check to Costco for $7,300,000,” she asked during the study session. Staff answered that the incentive is a sales‑tax reimbursement mechanism: the city reimburses eligible costs only after the developer has built the project, paid the requisite taxes and proven that the costs are eligible for reimbursement.

City staff described eligible reimbursements as costs tied to on‑site or off‑site public improvements, impact and permit fees, or workforce training. As staff put it, “If they build it, then we reimburse. We do not do anything until they do what they say they were gonna do.” The presentation also noted a traffic‑impact study has been submitted and will be reviewed as part of normal development and permitting.

Under the terms summarized for council, the maximum incentive is capped at the city’s 2% sales‑tax rate and the lesser of (a) actual taxes collected or (b) the value of eligible reimbursements. Staff said the five‑year projected value of the incentive under current assumptions is $7.3 million (about $1.46 million per year on average), subject to the limits above and the verification process.

By unanimous vote the council directed staff to formalize a development agreement and return later with a notice of intent followed by a formal agreement for final council consideration. The council emphasized that required studies and any infrastructure improvements (including Old Vail/Old Vale roadway capacity) must be addressed in the permitting and agreement process.

Next steps: if staff proceed as directed, council will see a notice of intent and subsequent development agreement for formal action at a future mayor‑and‑council meeting.