Residents ringing alarm bells over ‘secretly negotiated’ tax-sharing agreement that would bring Costco and gas station to OC city

A plan to bring Costco to an Orange County city has sparked a bitter backlash.

Residents in Brea say city officials approved a decades-long tax-sharing deal that favors a developer, and the dispute is now moving toward a potential lawsuit.

The controversy centers on a proposed Costco and gas station planned for the former 34-acre Beckman Coulter campus. City leaders approved a 50-year tax-sharing agreement with developer Dwight Manley last December, according to Voice of OC.

Under the agreement, Brea’s general fund would receive none of the project’s discretionary sales tax revenue for the first two years after Costco opens.

The city’s share would then start at 5% and gradually increase, reaching a 50-50 split about 30 years into the 50-year deal. Another 5% of the annual sales tax generated after the rebate begins would be set aside each year for the city’s senior center programs.

Over the agreement’s span, Manley is projected to receive roughly $77 million, while the city is expected to collect just over $50 million and about $7 million will go toward senior programs. The developer would also receive 40% of any additional sales tax revenue if Brea raises its sales tax during the agreement.

City officials say the incentive is necessary to lure Costco to Brea, arguing the project would generate new tax revenue, create jobs and boost property tax collections that otherwise would not exist.

Manley said the agreement reflects the enormous cost of acquiring and developing the property, citing the site’s roughly $140 million purchase price and additional development costs. He argued the project offers only a modest return by industry standards and pursued it because city leaders had spent decades trying to attract Costco.

But not everyone’s buying it.

Mark Strom, who lives about a quarter-mile from the proposed site and is part of the Brea4All group, said both the agreement’s structure and how it was negotiated have raised serious concerns.

“No one does this front loading,” Strom told the outlet.

“It absolutely raises eyebrows.”

“It’s the complete lack of transparency, the sneaking around [and] making key decisions in private.”

The resident group has also accused city officials of violating California’s Brown Act, alleging council members reached a consensus on the tax-sharing agreement outside public view before formally approving it.

Last month, attorneys representing Brea4All sent city officials a cease-and-desist letter demanding they stop making decisions in private and properly schedule future discussions about the Costco proposal.

The allegations center on text messages obtained through public records requests that appear to show Assistant City Manager and Community Development Director Jason Killebrew discussing council members’ support while advising Manley on the proposal before the public hearing.

In one October text reviewed by Voice of OC, Killebrew wrote, “Everybody gave the thumbs up to move forward.”

Another message stated, “It has to be a public hearing because it’s tax dollars. I have verbal support from city council.”

Killebrew denied violating the Brown Act, saying the messages have been taken out of context and insisting council members did not see the specific tax-sharing agreement until just days before voting on it.

“The city continues to follow the Brown Act and will continue to honor and respect the Brown Act,” he said.

He also described his communications with Manley as routine talks between city staff and developers.

Manley likewise rejected suggestions that the exchanges were improper, calling the allegations “character assassination.”

The agreement passed in a 3-1 vote last December despite concerns from Councilmember Christine Marick, who questioned whether the city had enough financial protection if the development failed.

“I actually would love to have a Costco in the City of Brea,” Marick said during the meeting. “That is not a secret.”

Former Fountain Valley Finance Director David Cain also blasted the agreement, calling it “the worst sales tax sharing agreement I’ve ever seen in my history.”

The debate comes as Brea has projected a roughly $14 million budget shortfall for the 2027-28 fiscal year and city departments have been looking for ways to temporarily reduce spending.

As the threat of legal action grows, Mayor Cecilia Hupp and the remaining city council members have largely declined to discuss the controversy publicly.

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