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BIG BOX, BIG QUESTIONS: Costco is coming to Downey, but so are millions in public subsidies, future tax-sharing agreements and unanswered financial questions. The shopping carts may arrive before taxpayers know exactly what’s in the deal.
By Brian Hews
Editor and Publisher | Follow X
July 6, 2026
DOWNEY — What began as an announcement of a highly anticipated Costco warehouse quickly evolved into a discussion over millions in public funding, future sales tax sharing agreements, and unanswered questions surrounding one of the largest economic development projects in Downey’s recent history.
At its June 23 meeting, the Downey City Council approved a Master Development Funding Agreement that city officials say will open the door for a two-phase redevelopment of the Firestone Boulevard corridor anchored by a new Costco warehouse and gas station.
Mayor Claudia Frometa set the mood before the meeting’s business even began, describing Costco as a game-changing investment that would create quality jobs, generate more than $3 million annually in new city revenue, strengthen the City’s finances, and help sustain public services while reinforcing Downey’s commitment to balanced budgets.
During the City’s budget presentation, finance officials acknowledged the agreement would reduce General Fund reserves from approximately $33.5 million to about $22.9 million. Staff emphasized that reserves would remain above the Government Finance Officers Association’s recommended minimum and projected that Costco-generated sales tax revenue would replenish the reserves over time.
Under the agreement, Downey will contribute approximately $10.5 million toward the project, consisting of a $10 million lease cancellation payment to Downey Nissan and $500,000 for environmental review and CEQA compliance.
While major redevelopment projects often involve complex financial arrangements, the public documents provide little explanation of how the proposed $10 million lease cancellation payment was calculated or whether it was supported by an independent appraisal, leasehold valuation or other financial analysis. Likewise, while City officials estimate the Costco development will generate more than $3 million annually in new sales tax revenue, the staff report does not explain how much of that revenue will ultimately remain with the City after the contemplated sales tax sharing agreements with Costco and Downey Nissan are negotiated.
Despite broad support for the project, several crucial questions remain unanswered.
The agreement references future $3 million and $2 million sales tax-sharing agreements with Costco and Downey Nissan, but does not specify the percentage of future sales tax revenue to be rebated, the duration of those agreements, or the formula for determining the payments. Those agreements are expected to return to the City Council for separate approval.
The City has agreed to provide a $10 million lease cancellation payment to Downey Nissan, but neither the staff report nor the Master Development Funding Agreement explains how that figure was calculated, whether it was supported by an independent appraisal, a leasehold valuation, or an economic analysis, or whether alternative relocation costs were evaluated.
The City’s proposed $10 million lease cancellation payment would extinguish BCH Holdings’ leasehold interest, which currently serves as collateral for a $7.426 million Wells Fargo leasehold loan recorded in 2023. The public documents do not explain how the lease cancellation payment was calculated or how the proceeds would be distributed among BCH Holdings, its lender, or other parties.
City officials estimate the Costco development will generate more than $3 million annually in new sales tax revenue, but the agreement does not identify how much of that revenue will ultimately remain with the City after the future sales tax sharing agreements with Costco and Downey Nissan are executed.
Property records reviewed by Los Cerritos Community News also reveal that Downey Nissan does not own the land. Instead, the dealership operates under a long-term ground lease with Andrews Rancho Del Norte. A recorded 2023 leasehold deed of trust shows BCH Holdings LLC, the dealership entity, borrowed approximately $7.4 million from Wells Fargo using its leasehold interest as collateral under a Construction and Lease Agreement dated Dec. 1, 2015. That discovery raises additional questions regarding the City’s proposed $10 million lease cancellation payment, including the remaining lease term, whether the lease contains a negotiated buyout provision, and whether the City relied upon an independent valuation before agreeing to fund the payment.
Under the redevelopment plan, the project will be carried out in two phases.
First, Downey Nissan will relocate across Firestone Boulevard to a newly constructed dealership on approximately 5.1 acres. The project also includes the acquisition of additional parking through the adjacent Nova property and, if available, parking rights from the Los Angeles Department of Water and Power.
Once Nissan relocates, the existing dealership will be demolished and replaced by a new Costco warehouse and fueling station on approximately 13.6 acres encompassing the current dealership site and the former All American Home Center property.
The financial structure extends well beyond the City’s contribution.
Property owner Andrews Rancho Del Norte will contribute approximately $1.6 million through cash, site improvements, the Nova parking property, and efforts to secure additional parking rights.
Costco will invest up to $20.8 million to construct the new Nissan dealership, including construction costs, permits, fees, and related improvements necessary to relocate the dealership.
Public comment overwhelmingly favored the project.
Representatives from the Carpenters Union and Western States Carpenters Local 91 praised Costco’s labor practices while urging the City to require prevailing wages, skilled union labor, apprenticeship opportunities, worker safety protections and local hiring requirements.
Only one speaker, resident Lee Squire, questioned the financial structure.
Squire argued the public discussion focused primarily on the City’s $10.5 million contribution while giving comparatively little attention to two additional future financial commitments referenced in the staff report: a proposed $3 million sales tax sharing agreement with Costco and a separate $2 million sales tax sharing agreement with Downey Nissan.
Following Squire’s comments, City Manager Roger Bradley responded that those agreements had not yet been negotiated and would return to the City Council for separate public consideration.
The staff report confirms that both future agreements remain subject to future Council approval and are not included within the $10.5 million appropriation approved as part of the Master Development Funding Agreement.
City officials contend the public investment will ultimately pay for itself through new sales tax revenue generated by Costco, which staff estimates will exceed $3 million annually once the warehouse opens.
The project schedule anticipates approximately 10 to 12 months for environmental review and entitlements, roughly one year to construct the new Nissan dealership and relocate Nissan operations, followed by another year to construct the Costco warehouse and fuel station. Under that schedule, Costco would likely open in approximately three years.
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