Santa Clarita / Antelope Valley : Lancaster OKs $7.3-Million Deal to Assist Price/Costco Project : Economy: The city will buy the existing store and provide land for a new one to stop a move to Palmdale.

Despite criticism from residents who said the city should not subsidize retail stores, the Lancaster City Council has unanimously approved a $7.3-million deal to aid construction of a new Price/Costco store.

At their meeting Monday, council members said they feared that without the financial help, the warehouse chain might build another store in Palmdale and drain off sales tax dollars that are needed to support city services in Lancaster.

Costco, a membership warehouse store, has been the city’s leading producer of sales tax dollars for several years. The chain recently merged with Price Club and now operates as Price/Costco.

“They are a terrific enterprise, and we want to keep them here,” said Councilman George Root.

Under the complex agreement, the city’s redevelopment agency will pay Price/Costco $7.3 million for its current store in Lancaster’s Valley Central Shopping Center and the 11.5-acre parcel it sits on, said Steven H. Dukett, the city’s redevelopment director.

The agency will pay part of this by giving Price/Costco 15 acres of vacant land that the agency owns nearby at Lancaster Boulevard and 25th Street West. Price/Costco will build a new 156,000-square-foot store, larger than its present one, on the vacant land.

The redevelopment agency will reduce its obligation to Price/Costco by building public improvements, such as streets and sewer lines, and by paying city fees--all of which are Price/Costco’s responsibility.

The agency will have 15 years to pay the remaining $3.5 million obligation, plus interest. Dukett said the agency will try to pay off the debt sooner.

At Monday’s City Council meeting, Michael Singer, a candidate for the council in next month’s election, objected to using tax dollars to help a large retail store that may drive smaller local shops out of business. “People don’t want the city involved in retail subsidies,” he said.

Tim Harris, owner of a small pet shop, said his business is being hurt by a large new PetsMart store, which also received financial aid from the city. “My business has been destroyed by you gentlemen,” he told the council.

But council members said they must offer incentives to attract large retail stores that will generate the sales tax dollars that pay for law enforcement and other services. In recent years, Lancaster has lost sales tax money to Palmdale, which has developed a regional shopping mall and other busy retail centers.

“We have people who leave this community to buy things,” said Councilman George Runner. “We have to protect our retail base.”

Lancaster officials estimate that over its first 10 years, the new Price/Costco store will generate $1.6 million in sales tax money and redevelopment funds for the city.

Under a related plan approved earlier by the council, after Price/Costco moves into its new store, the city will renovate the vacated building and lease it to Burlington Coat Factory Warehouse. That outlet is also expected to generate new jobs and sales tax revenue.