Auburn to sue Placer County over controversial Costco project

A customer watches a butcher at a Costco in Mountain View.
A customer watches a butcher at a Costco in Mountain View. Associated Press file

The city of Auburn is poised to sue Placer County this week over a proposal to bring Costco to an unincorporated area north of the city limits.

Auburn officials say the Washington state-based warehouse retailer would push small businesses out of the foothills town and significantly reduce the city’s sales tax base.

“The county is treating north Auburn as its cash cow without regard to the impact on the city and the residents who live around here,” said city attorney Michael Colantuono. “If Costco comes in and we end up with a bunch of empty storefronts, we won’t be able to pay for the services that residents expect.”

In addition to the economic impact, Auburn leaders fear the big-box store will add traffic and congestion to Highway 49, the area’s main thoroughfare.

Despite the city’s concerns, county officials have pressed forward, signing a contract last month that gives Costco the right to a ground lease once environmental and planning approvals are obtained.

“Until they have a use permit, and (have) gone through the entirety of the process, they won’t have control of this property,” said Mary Dietrich, facility services director for Placer County.

The proposed 148,000-square-foot warehouse would occupy 16 acres and include 750 parking spaces and a gas station. According to Dietrich, the deal is expected to generate an estimated $18 million primarily in rent and tax revenue for the county over 20 years. She said it would also create 165 jobs.

The site, just off Highway 49 at the Placer County Government Administrative Center, is considered ideal to capture shoppers from the Placer foothills and Nevada County. The closest Costco to Auburn is in Roseville.

The site currently houses several nonprofits and the DeWitt Theatre. Tenants have been told to vacate by June 30 so the county can demolish the buildings before Costco assumes the lease.

Auburn leaders argue the county’s rush to enter into a lease with Costco means it has already given “de facto” approval for the project. Coluantano said the actions are a violation of the California Environmental Quality Act, which requires reviews to take place before any work occurs.

“They’ve already made a bunch of choices – choices that should have been studied in the environmental impact report,” Colantuono said.

But Dietrich denied the county had jumped the gun. She said the demolition of the buildings would take place with or without Costco.

Auburn Mayor Keith Nesbitt voiced concern that Costco could open the floodgates to more big-box retailers in north Auburn. The county brought Home Depot to an adjacent site in 2009, and a Best Buy store sits a mile away. Home Depot pays nearly $200,000 annually for its lease on county property.

“There’s always a lot of other outlets and retail stores that follow Costco. We feel like Costco is the beginning, not the end all,” said Nesbitt, who described the county’s attitude as “cavalier.”

Placer County’s 20-year ground lease with Costco calls for an annual rent payment of $325,000 with a 10 percent hike every decade. The contract includes options to extend the lease up to an additional 30 years.

The county is providing Costco with a million-dollar rent credit over a decade because the retailer is paying for infrastructure improvements, according to Dietrich. However, Costco will pay Placer $650,000 for relocating certain county offices.

The project has forced the relocation of key community services, including the Auburn Senior Center and a local theater group. The senior center received $530,000 from Costco in relocation costs, but the nonprofit’s board president, Eric Hill, said it is struggling to find a suitable location.

The Music and More Visual and Performing Arts also is slated to move in June, after its leaders failed to persuade county officials to save the DeWitt Theatre as a historic building. “We don’t seem to have any other option at this point,” said Michael Coder, who sits on the nonprofit’s board.

Auburn officials emphasized they weren’t necessarily opposed to Costco and suggested the lawsuit could be dropped in exchange for certain concessions like a sales tax sharing agreement. The suit will trigger a mandatory mediation session, which city officials hope will set the stage for settling the case outside of the courts.

“We are looking forward to that conversation,” Colantuono said.

Supervisor Jim Holmes, who represents north Auburn, said the Costco project has the backing of community members.

“I can tell you the majority of people I talk to want to see Costco,” Holmes said. “People from Colfax and Grass Valley are already driving through Auburn on the way to Roseville to shop. You might as well capture some revenue for the county.”

Call The Bee’s Richard Chang at (916) 321-1018. Follow him on Twitter @RichardYChang.