Costco, Petco and Hobby Lobby are expected to soon follow Stein Mart, which opened March 15, on the northeast corner of the intersection. At the southwest corner of the intersection, Cinemark Theatres is expected to open in November or December followed by approximately 150,000 square feet of retail, restaurant, fitness, entertainment, and medical or dental uses, according to city documents.
“In addition to the commercial property tax value, the sales tax coming [from Costco] alone is going to be massive, and so our sales tax numbers will definitely go up significantly,” Assistant City Manager Barry Shelton said. “It will help somewhat on the property tax side, but it’s going to be a big shot in the arm for our sales tax numbers.”
As construction at the northeast and southwest corners ramps up, additional retail space is expected to take shape at the other two corners of the intersection.
A request to rezone land at the northwest corner of the intersection was approved by McKinney City Council in February. This allows for the corner to offer additional retail instead of retail and office, as was zoned for previously.
Although dirt work is taking place at the southeast corner of the intersection, it will likely be the last to develop, Shelton said.
As businesses open, traffic may slightly increase in the area, said Gary Graham, director of engineering with the city of McKinney. However, the city has planned ahead by implementing several turn lanes and offering an incentive agreement to build Bois D’Arc Road from US 380 to Crowe Lane.
Adjusting for traffic
Between 44,937 and 50,373 cars drove daily along US 380 near Hardin in 2015, according to the city’s most recent traffic count. While drivers can expect traffic to increase as businesses open at the intersection, Graham said a lot of the traffic is already in the area from commuters stopping on their way home from work. However, if the developments have a variety of restaurants, more people will be attracted to the intersection, he said.
To alleviate some traffic, the city required developers to put in several new turn lanes. Currently there are dedicated left-turn lanes at all four corners.
“We are also identifying the need for additional capacity at the intersection, so we are currently designing a project to add a second southbound left-[turn lane] and a second northbound left-[turn lane from Hardin],” Graham said.
The goal is to have all additional turn lanes installed before the four corners are completely developed, Graham said.
The city has also entered into an economic development agreement to develop Bois D’Arc Road, which will run behind Cinemark Theatres.
According to terms of the agreement, the developer will construct a two-lane road and turn lanes to and from Bois D’Arc from US 380. In return for development and Bois D’Arc construction, the city will pay for the “verified, actual construction costs” of the road, not to exceed $1.35 million.
City revenue and incentives
Along with more traffic, the development also expects to generate more city sales tax revenue.
If Costco brings in $100 million-$150 million in sales per year and 40 percent of the sales are non-grocery sales—meaning they are taxable—the city could expect $400,000-$600,000 in annual sales tax revenue from Costco alone, Shelton said. This does not take into consideration the sales tax generated at other businesses located at the intersection.
McKinney approved an economic development agreement with Costco in May 2016. According to the agreement, the city will give Costco back 0.5 percent of the sales tax receipts received by the city from the state for taxable items for 10 years or until Costco receives $2.7 million. The city will also pay back to Costco $70,000 per year or 50 percent of real and business personal property ad valorem taxes received by the city for 10 years and pay a cash incentive of $250,000 per year for four years, according to the agreement.
In 2017, 72.5 percent of the city’s tax base was funded through residential property while 19.4 percent was from commercial properties and 8.1 percent from lot, land and farm properties, city spokesperson Denise Lessard said in an email.
According to City Manager Paul Grimes, the ideal tax base ratio is 40 percent commercial and 60 percent residential, a ratio Grimes said the city has a ways to go before reaching.
“The average home value that’s getting built is going up, so even when we bring in half a billion dollars in new commercial tax value, we’re bringing in $800 million in residential tax value, [for example],” Shelton said. “Even a really good year where we bring in a half a billion [dollars], we’re still falling further behind on the [property tax] ratio.”