Costco’s coming to Brea, but chummy texts between developer and city official raise questions

The developer working to bring a Costco to Brea was agreeable to a more generous sales tax split with the city — 50-50 — but a city staffer advised him to keep that impulse under wraps.

“Let me start with the 42.5 (percent)” for the city, Brea assistant city manager Jason Killebrew texted to developer Dwight Manley as the deal unfolded last year.

Once council members see numbers, “you need room to negotiate,” Killebrew explained. “I will share our analysis from our budget team I got today next time I see you.”

In December — after much push-and-pull between Costco and the developer — Brea’s city council accepted a 42.5% split. The deal will give the lion’s share — 57.5% — of an expected $133.7 million in total sales tax revenue to Manley’s company over the agreement’s half-century life.

In return, Manley promised to purchase the 34-acre property at 200 and 250 S. Kraemer St., which currently houses the Beckman Coulter headquarters, and to get Costco to sign a lease for that site by the end of the year. Both those tasks, Manley said, are done.

Councilmember Steven Vargas, who voted with the majority 3-1 to greenlight the sales tax split, said he did not recall more favorable percentages being shared.

A 42.5% cut seemed “the best deal we could expect,” and logical at the time, Vargas said. But “if there’s a text that says settle for 42.5 from city staff, that would be problematic.”

Text messages between Killebrew and Manley were contained in thousands of pages of documents obtained under the California Public Records Act by residents opposed to the Costco, and reviewed by the Southern California News Group.

“Wow!” said resident Mark Strom at a recent council meeting. “So the City’s point person helped Dwight, not the City, to negotiate a better deal….”

“The final agreement was precisely 42.5% for the city…. Dwight appreciates Jason’s work, lauding him in many text messages. He said the council is ‘smart about trusting you.’  After January’s property sale (where Manley bought the former Beckman Coulter property), he wrote, “Thank you, Jason. Wouldn’t have happened without you.’

“It’s not a stretch to say Jason seems like Dwight’s employee, not the city’s,” continued Strom. “The two of them played this council like a fiddle, and googly eyes for Costco made it easy.”

Negotiations

Killebrew did not return calls and emails about the matter. City officials asked SCNG to send questions to Brea’s spokesperson, Liz Pharis, who responded in writing.

The text messages between Killebrew and Manley are from an exchange in summer 2025, she said. Around that same time, talks between Manley and Costco stopped “due to all parties not agreeing on the deal points.”

“Jason did share multiple, non-refined ratios, individually to council members, including higher ratios than what was ultimately approved as part of the EDA (economic development agreement),” she said. “The agreement was a result of refining the numbers and negotiating terms between the property owner and Costco.”

Scores of cities in California have used sales-tax sharing agreements to attract business, she said. Brea has wanted to woo a Costco to town and has actively courted it, but those efforts were “unfruitful.” That’s why the city explored other strategies, such as the economic development agreement, she said.

Manley said that there are missing pieces in the record.

The texts between him and Killebrew were “related to a deal getting done with Costco that wasn’t done, and was changing, many times, based on Costco’s analysis and operations teams getting comfortable with this site and the lease terms. So that text of me being okay with 50% was when a proposed lease was higher than where it landed,” he said by email.

“The other missing part in this is the city gets a higher share in the future, which is when sales are higher due to inflation. If prices were to double over 30 years, 50% then is equal to 100% today, so the numbers you’re using aren’t accounting for any inflation, which means the city will collect much more than you’re talking about.”

Manley purchased the Beckman Coulter site for $140 million earlier this year, but he said that number doesn’t account for “costs for loans or development.”

“This endeavor is costing me well over $150 million, and where things ended up was not easy.”

Manley grew up in Brea and has developed properties around the city, including much of Brea downtown.

Front-loaded?

The bulk of the city’s cut won’t come for decades, with the first decades “front-loaded” for Manley, critics said. And with rising inflation, money would be worth less.

The agreement would give Manley 100% of sales taxes collected for the first two years, then 95% for the next two years, then 90% for the next two, decreasing by 5% every two years until it hits 40% for Manley and 60% for the city in year 41.

The city would start getting half the sales taxes for its hungry general fund in year 30, or around 2057, assuming the Costco is up and running next year. The agreement would end in 2077, after 50 years, with no more sales taxes for the developer. The aforementioned 42.5% will be the city’s average annual sales tax cut over the entire half-century term of the agreement.

Critics have called this a “whack-a-doodle” deal. Over the first decade, Manley gets some $23 million, while the city’s general fund gets about $2.3 million, according to projections. Manley has also committed to giving 5% of sales tax revenue to Brea senior programs each year through the life of the agreement. That’s about $134,000 a year.

Over the first 20 years, the deal pencils out to about $41.5 million for Manley, $9.4 million for the city’s general fund, and $2.7 million for Brea seniors.

Over the half-century, Manley’s share of sales tax revenue would be some $76.9 million, while the city’s would be some $50.2 million, with some $6.7 million for senior programs, according to averaged projections.

Critic Strom, who holds an MBA from Stanford University and obtained the records, fears that Brea is taking a risk by agreeing to delay most of the money it gets until later in the deal.

Who expects retail to look the same in 2047, or 2057, or 2067, as it looks now? Will there even be a Costco in 40 years when it’s time for the city to start collecting the bulk of those sales taxes?

Three of California’s biggest retailers in 1996 were Robinson’s-May, Sears and Kmart, which have either shrunk dramatically or gone out of business. No one expected Amazon back then, and it might be naive to expect business models to retain their current shape 30 years from now.

Risk?

Officials do not believe there’s risk in the agreement’s structure, especially since no upfront city funds were used, spokesperson Pharis said.

“Moreover, the city is not currently receiving sales tax revenue from a retailer at the site of the proposed Costco, so even in a sharing scenario, it is a new, additional source of revenue,” she said.

Manley doesn’t expect the future to look like the past any more than Strom does, and thinks that’s why this agreement is a good idea.

“Doing something like this is how long term planning takes place,” he said. “And in that landscape, smaller-sized businesses may not exist, and having a Costco for lowest pricing is a huge community benefit. Assuming Costco stays for more than 50 years, the city far surpasses the math shown with a zero analysis.”

In the past, Brea has given large sums to Brea Mall/Nordstrom and Target/Regency, and the city does look decades into the future when making decisions, Manley said.

On the chummy text messages between Manley and Killebrew, Brea defended its assistant city manager.

Killebrew has worked for the city since 2020 and serves in two capacities — as assistant city manager and as community development director, Pharis said. His job is to organize, plan, coordinate and direct planning, zoning, development, environmental review, building inspection and economic activities for the city.

He also represents Brea in negotiations related to land use and development, and is responsible for maintaining professional relationships with all major property and business owners, she said. Before this agreement, Killebrew worked with Manley as the city’s representative on other land use and economic development efforts.

“Dwight was the managing partner for a large portion of the Brea Downtown properties, including Gaslight Square. In addition, Dwight purchased the former Mercury Insurance headquarters in the city of Brea that is in the process of being redeveloped into a residential development,” she said.

Killebrew’s relationships with major property and business owners — “including but not limited to Manley” — have contributed to Brea’s success and helped further the city council’s goals and priorities over the past five years, she said.

Other city councilmembers did not respond to requests for comment.

Vargas said he was, at first, “completely against this whole thing.”

“But I talked to Dwight and he actually set up a meeting for me to talk to people about it and showed me the numbers and I imagine he shared it with the others,” he said.

“Then once I got the numbers — I’m not an expert on retail sales — I took their word for it and that’s where it ended up at the council with me agreeing to it.”

Vargas added that part of the appeal stemmed from his favoring a Costco over a new residential community. Maintenance costs, including police and fire, for a residential block, he said, would “be a drain on the city, not a potential million dollar windfall.”

And after much consideration and anticipating a steep budget shortfall on the horizon, Vargas cast his vote in favor of the deal that promised to bring to the city’s general fund about $50.1 million in sales tax revenue over 50 years.

“We need sales tax money. Of course, I would like 100%,” Vargas said at the Dec. 16 meeting where the agreement was approved, “but with all of these large corporations going out, we see even getting 40% is better than nothing.”