The Madison City Council voted Monday night to approve a development agreement and annexation that will bring the Costco property along U.S. 72 officially into the city limits, a move city leaders say expands Madison’s commercial footprint and captures tax revenue the city does not currently receive.
The council first approved a development agreement with Clift Home Place, LLC, the owner of the property, followed by a separate vote to annex the site.
The commercial development includes the approximately 164,000-square-foot Costco warehouse, a gas station and adjacent right-of-way, totaling about 24.56 acres.
Costco is currently located on unincorporated Madison County land, meaning the City of Madison has not received sales tax or other direct revenue from the retailer despite its proximity to city neighborhoods.
Prior to Monday’s vote, the council had held a first reading on the proposed annexation and development agreement, which outlines how future tax revenue generated at the site would be distributed between the city and the property’s developer.
Under the development agreement approved by the City Council, Madison will receive property taxes, liquor taxes, gas taxes and a portion of sales taxes generated by the property.
The city’s sales tax would equal 0.5% of taxable sales, while Clift Home Place, LLC would receive an incentive payment equal to 3% of taxable sales for a period of 40 years, paid solely from the city’s sales and use taxes collected from the business operating on the property.
The agreement also ends an existing 2% development fee currently collected on the site, replacing it with the city sales tax once annexation becomes effective. According to city staff, the annexation is set to take effect February 18.
The agreement cites Section 94.01 of the Alabama Constitution, authorizing the city to grant public funds or incentives to promote economic development, and states the annexation will serve a valid public purpose despite benefits to the developer or tenants.
Before the council voted, Councilmember Kenneth Jackson said he appreciated the work of city staff and acknowledged the financial upside of annexing Costco, but raised concerns about the incentive structure outlined in the agreement.
“Annexing Costco … would add useful revenue to Madison’s budget,” Jackson said. “However, I object to assigning 3% of the taxable sales to the property’s developer for 40 years, leaving the city only 1/2 percent. As far as I understand, that’s unprecedented in recent history. Businesses already in city limits weren’t offered these terms. I’m also concerned that this agreement would disadvantage Madison when negotiating future opportunities.”
Mayor Ranae Bartlett responded to Jackson’s comments by emphasizing Costco’s unique role and the current lack of revenue from the site.
“Costco is a very different type of real retail property than your average grocery store, your average retail store. I don’t think that you’re comparing apples to apples,” Bartlett said.
Bartlett noted that Madison currently receives no tax revenue from the property, despite providing public safety services through mutual aid.
“We have Madison residents who go across the street and shop in Clift Farms, but we get zero and our schools get zero,” she said. “Today, you have an opportunity to increase the commercial footprint of this city.”
She added that the annexation would generate multiple revenue streams, including property tax, liquor tax, gas tax and sales tax.
“You’re going to get sales tax and .5% sales tax at Costco,” Bartlett said. “I’ll take it any day if somebody’s willing to offer that to us.”
Councilmember David Bier followed by pointing to the broader structure of the deal and infrastructure investment by the developer.
“Did the City of Madison spend a penny to develop that property? No, we did not,” Bier said. “Did the developer build the infrastructure to build that property? He did. … I don’t think it changes negotiation. I think every deal is individual on its own merit.”
Bier said the agreement aligns with the city’s strategic and comprehensive growth plans and called it “an incredibly good move for the city of Madison as a whole.”
The development agreement passed with all council members voting in favor except Jackson.
Following majority approval of the development agreement, the council unanimously voted to annex the Costco property and adjacent right-of-way into the City of Madison.
Mary Beth Broeren, director of Development Services, said the annexation is driven by both fiscal opportunity and statutory eligibility.
“It’s compatible and I would add that given the jurisdictional boundaries of Madison and being encircled by our neighbor next door, there are really very limited opportunities for annexing commercial property in particular into the city limits, especially along the Highway 72 corridor,” Broeren said. “And even though we may want a different term, we see this as a really logical choice for the city, an opportunity to capture revenue that we do not currently get and certainly that revenue will grow over time.”
The council also voted to set a public hearing on zoning the property B-3, scheduled for February 9.
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