The REAL Problem With Costco

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Thu, Aug 16, 2012, 11:50 pm  //  Wendy Harris

There is a problem with Costco, but it does not involve Canadians. The problem is found much closer to home and involves an offer of municipal assistance for a private development project that lacks public transparency and disclosure.

In July, the Bellingham Herald reported that Mayor Linville was talking with Costco about relocating to a new site to expand operations.  While no details were provided, the mayor indicated her desire to keep Costco in Bellingham, but assured the public there would be no backroom deal.  She stated, "nothing will happen in private that the public should know about."  Turns out, this was not such an accurate prediction. 

On August 3, 2012, the Herald revealed that the mayor offered assistance to Costco in replacing its existing store. In a letter dated June 20, 2012, obtained by the Herald through a Public Records Act request, the mayor offered $1.5 million in road construction to improve store access from I-5, subject to city council approval.  The mayor also offered Costco the assistance of experienced Planning and Public Works staff for site-specific questions and concerns regarding state and federal agencies. Other proposed forms of assistance listed in the letter were redacted. 

The city administration and Costco appear to be in agreement over the proposed development site, nine acres of undeveloped land along Bakerview Road.  It is noteworthy that Costco has already hired a consultant, Ed Sewall of Sewall Wetland Consulting, Inc., to work on this project. There has been at least one meeting, and a number of email communications between the administration and Costco.

This would be less concerning if Costco had a permit application on file, but it does not.  Assisting a large corporation to expand operations at an undeveloped site containing wetlands regulated under local, state, and federal law, before permits are filed and public notice is issued, is the essence of a backroom deal. 

In contrast, the U.S. Army Corp. of Engineers refused to meet with Costco in advance of a submitted application, and limited its assistance to pre-application information. The Costco consultant notified his client that the U.S. Army Corp. “won't commit to any guarantee of approval or anything at this point,” and then solicited input and suggestions from city employees regarding the situation. 

The Department of Ecology (DOE) wetland specialist went on a site tour with Costco, and then sent an email detailing mitigation requirements for the state permit required for site development.  Again, the Costco consultant shared the DOE email with city employees. 

While federal and state governments are engaged in efforts to enforce the requirement to avoid environmental impacts, including infill of wetlands, unless it is proven to be necessary, the mayor’s letter states that “the City is prepared to offer Costco the project management expertise of our Planning and Public Works staffing addressing site specific questions and concerns that might arise from State and Federal agencies.  Obviously, questions and concerns about state and federal permits are best answered by state and federal employees. There is evidence that Costco’s consultant is contacting City staff after obtaining information and instruction from DOE and U.S. Army Corp., instead seeking advice on how to respond to state and federal mitigation requirements.  It is a conflict of interest to direct City staff, responsible for processing and approving Costco’s City permit application, to assist Costco with its state and federal permit applications.

By far the most disturbing part of this story is the administration’s refusal to respond to a Washington Public Records Act request filed with the Bellingham Herald.  The June 20, 2012 letter from the mayor to Costco was redacted based on asserted application of the “deliberative process exemption.”  The city is attempting to stretch the reach of the deliberative process exemption beyond established legal boundaries.  The authority for its position is less than clear and is the lengthy subject for another blog post.  This particular exemption expires after negotations are complete, although it is unclear how this is defined by the city in this situation or how the public will know. (Other cases involved union contracts and lease contracts.)   

However, the consequences of the city’s position are unequivocal. The mayor is setting precedent for hammering out secretive proposals with large developers before a development permit application is even submitted, essentially undercutting regulations that govern development proposals and public process.  Sure, these regulations will still be followed, but the outcome of city staff review is predetermined, and the city council will afford greater deference to a proposal personally negotiated by the mayor. This reduces citizen influence on a process that is supposed to be transparent. 

We all understand what is really going on.  The Mayor is trying to sweeten the pot to keep Costco from relocating.  None of this, however, justifies actions that whittle away our rights to an open and transparent government operating under fair and objective standards.

Larry Horowitz  //  Fri, Aug 17, 2012, 8:10 am

Thanks again, Wendy, for keeping a watchful eye.

I agree with your concerns but had a question about the $1.5 million in road construction offered by the city to Costco.

Will Costco be required to pay the standard transportation impact fees (TIF) or has the city offered to reduce the TIF?

If Costco is paying the standard TIF, then a substantial portion of the road construction is likely covered.  If not, then $1.5 million is a substantial gift.

Does anyone have the answer?


Wendy Harris  //  Fri, Aug 17, 2012, 9:01 am

Larry; The redacted letter is posted on the Herald Politics Blog but I am unable to post the hyperlink.  Just go to the Herald Politics Blog. Jared has also listed the other emails I reference.

The relevant portion of the Mayor’s letter reads:
We understand Costco needs to ensure the Bakerview site is a good long term investment. The City is currently planning and seeking funding to extend Horton Road, which we anticipate will result in some relief at Bakerview/I-5 interchange. In addition, the City will commit to building the Division Street connector within the next 5 to 10 years. This connection will provide direct access from Dover to Pacific Highway just north of the Bakerview site. We expect this important connection will provide Costco customers with a convenient route to the Slater/I-5 interchange.

The Mayor goes on to say the estimated cost of the road work is 1.5 million and that the City will take the lead on Dover Street. It looks like the City is leveraging road construction that was already being planned, which explains why this portion of the letter was NOT redacted. It is the things being offered that were redacted that are of concern.


Larry Horowitz  //  Fri, Aug 17, 2012, 9:16 am

Yes, Wendy, I read the redacted letter when the Herald published it.

The point of my comment is that we cannot accuse the city of making a $1.5 million gift for road construction until we know if the city is also waiving all or part of the transportation impact fee.  Yes, the city offered to improve the roads in the vicinity of the new Costco, but will the city be using funds provided by fees paid by Costco?

Perhaps that hasn’t yet been discussed with Costco or perhaps that’s part of what’s redacted.

I ask again, “Does anyone have the answer?”

Perhaps someone from the city will respond…


Wendy Harris  //  Fri, Aug 17, 2012, 9:34 am

Larry, I am not accusing the City of making an improper 1.5 million dollar gift. I will leave that for you to develop. I am concerned about the offer of staff assistance and the conflict of interest, the redaction and asserted exemption to disclosure and the failure to follow normal rules and procedures for a land use development application, providing special privileges.


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