Item No. 14.
TO:HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM:OFFICE OF THE CITY MANAGER
BY:ROGER BRADLEY, CITY MANAGER
VANIAH DE ROJAS, ASSISTANT CITY MANAGER
DATE:JUNE 23, 2026
SUBJECT:
APPROVAL OF THE MASTER DEVELOPMENT FUNDING AGREEMENT BETWEEN THE
CITY OF DOWNEY, ANDREWS RANCHO DEL NORTE, ANDREWS RANCHO DEL SUR,
BCH HOLDINGS LLC (DOWNEY NISSAN), AND COSTCO WHOLESALE CORPORATION
EXECUTIVE SUMMARY
The City Council will approve a Master Development Funding Agreement between the City of Downey, Andrews Rancho Del Norte, Andrews Rancho Del Sur, BCH Holdings LLC (Downey Nissan), and Costco Wholesale Corporation. This Agreement outlines responsibilities, financial commitments, and development sequencing necessary to advance a two‑phase development project along Firestone Boulevard.
RECOMMENDATION
That the City Council:
1. Approve the Master Development Funding Agreement between the City of Downey, Andrews Rancho del Norte, Andrews Rancho del Sur, BCH Holdings, LLC (Downey Nissan), and Costco Wholesale Corporation;
2. Appropriate $10,500,000 from the General Fund Reserve per the Agreement; and,
3. Authorize the City Manager to execute the Agreement and all related documents necessary to implement its provisions.
BACKGROUND
In late 2022, the City was notified of Costco's interest in operating a Costco wholesale warehouse and gas station in the City of Downey. More specifically, to operate on the vacant former All American Home Center lot and the current Downey Nissan Dealership location, both parcels are owned by Andrews Rancho Del Norte. To allow for Costco to operate on this site, it will require Downey Nissan to move from its current location to across the street on a southern vacant parcel owned by Andrews Rancho Del Sur.
To facilitate this transaction, City staff began working with Costco, Andrews Rancho del Norte, Andrews Rancho del Sur (together noted as "Andrews"), and Downey Nissan to explore possible relocation options.
Following these discussions, the above mentioned parties jointly developed a non-binding Master Development Funding Agreement (Attachment A) outlining responsibilities, financial commitments, and development sequencing necessary to advance a two‑phase development project: 1. Relocation and Construction of a new Downey Nissan Dealership and 2. Construction of a new Costco warehouse and gas station.
ANALYSIS
Involved Properties
The following notates the properties involved and the relocation plans for Downey Nissan and construction of a Costco warehouse and gas station:
• The North Property (approx. 13.59 acres), partially occupied by the existing Downey Nissan dealership and proposed for redevelopment as a new Costco warehouse and gas station (owned by Andrews Rancho del Norte); • The South Property (approx. 5.1 acres), proposed as the future site of a new Downey Nissan dealership (owned by Andrews Rancho del Sur);
• The Nova Property (approx. 1.38 acres), to serve as additional dealership parking for Downey Nissan (owned by Andrews Rancho del Norte);
• The Los Angeles Department of Water and Power (LADWP) property, containing high‑voltage transmission lines but anticipated for future parking rights, if approved, for Downey Nissan Project Timeline
Following approval of the Agreement, City staff will be working with the Parties to begin the CEQA/Entitlement process, which will be expedited to a 10-12 month process. During this period, each party will be developing various transaction documents to formalize the financial obligations as outlined in this Agreement. Following completion of the CEQA/Entitlement process, the 1st phase of the project (Construction of the new Downey Nissan Dealership) will begin and take approximately 12 months. Following construction and full operation of the new Dealership, the 2nd phase of the project will begin (Construction of the Costco warehouse and gas station) and anticipating to take approximately 12 months.
Financial Framework
1. Andrews (Property Owners)
Contribute up to $1.6 million in site materials and cash toward South Property improvements needed for the Future Downey Nissan Dealership.
Provide the Nova Property for dealership parking.
Pursue parking rights on the LADWP Property for Downey Nissan.
2. Downey Nissan
Enter into a New Nissan Lease for the South Property.
3. Costco Wholesale
Enter into a ground lease for the North Property.
Provide up to $20.8 million to fund construction of the Future Downey Nissan Dealership as a tenant improvement (permitting, fees, and all hard/soft costs included).
4. City of Downey
Enter into a $3 million sales tax sharing agreement with Costco Wholesale, effective upon issuance of a Certificate of Occupancy for the new Costco warehouse to support the construction of the Future Downey Nissan Dealership. The agreement will be brought forth to the City Council at a future meeting.
Provide a $10 million Lease Cancellation Fee to Downey Nissan.
Enter into $2 million sales tax sharing agreement with Downey Nissan, effective upon issuance of a Certificate of Occupancy for the new Dealership to offset tax liability. The agreement will be brought forth to the City Council at a future meeting.
Full funding of all required CEQA environmental/entitlement review for the Project, an anticipated cost of $500,000.
A Costco warehouse and gas station will deliver strong financial benefits to Downey by expanding the City’s tax base and supporting long‑term economic growth. Beyond increased sales and property tax revenue, the project is expected to generate new jobs during both construction and ongoing operations, strengthening local employment opportunities while enhancing the City’s overall fiscal stability.
Additionally, Downey Nissan is a key economic anchor for the City, contributing significantly to local revenue and supporting long‑term redevelopment efforts along Firestone Boulevard. The dealership strengthens the City’s tax base, provides stable jobs, and helps drive high‑quality commercial activity, making it an essential partner in advancing Downey’s broader economic goals.
This Agreement provides a means for both major economic drivers to operate in the City, and ensure Downey's long-term financial stability.
CITY COUNCIL PRIORITIES
Financial Responsibility
Economic Vibrancy
Quality of Life, Safety & Infrastructure
FISCAL IMPACT
Approval of the recommended actions will result in an appropriation of $10,500,000 from General Fund Balance Reserves, which includes $10,000,000 to the City's Manager's 10-4-1210-0700 Contract Services Account, and $500,0000 to Community Development's 10-4-5110-0700 Contract Services Account. One of the uses of the General Fund reserve is to take advantage of economic opportunities when they arise, while maintaining reserves at a safe level should a recession or emergency arise. The recommendation for minimum reserve levels from the Government Finance Officers Association is 16.7% of annual operating revenues. The City uses 35% as a threshold measured against the most recent three year revenue history to determine the reserve target. Utilizing a more than double reserve amount allows the City to take advantage of economic opportunities like this one with Costco, while limiting the risk of emergency impacts by staying above the recommended minimum reserve threshold. The City's projected reserve position after the reserve loan to this effort at the end of Fiscal Year 2026- 2027 will be $22,972,965, or more than $5 million above the 16.7% threshold of $17,902,041. This allocation from the General Fund Economic Opportunities Reserve will be replenished with the new sales tax revenue generated by Costco. It is estimated that sales tax revenue will increase by more than $3 million annually as a result of this investment.
Attachments
Attachment A: Downey - Master Development Funding Agreement
Docusign Envelope ID: BE13F1DE-03CA-888C-8008-1223360A0F47
Docusign Envelope ID: BE13F1DE-03CA-888C-8008-1223360A0F47
Docusign Envelope ID: BE13F1DE-03CA-888C-8008-1223360A0F47
Docusign Envelope ID: BE13F1DE-03CA-888C-8008-1223360A0F47
Docusign Envelope ID: BE13F1DE-03CA-888C-8008-1223360A0F47
Docusign Envelope ID: BE13F1DE-03CA-888C-8008-1223360A0F47
Docusign Envelope ID: BE13F1DE-03CA-888C-8008-1223360A0F47
Docusign Envelope ID: BE13F1DE-03CA-888C-8008-1223360A0F47
Docusign Envelope ID: BE13F1DE-03CA-888C-8008-1223360A0F47
Docusign Envelope ID: BE13F1DE-03CA-888C-8008-1223360A0F47
Docusign Envelope ID: BE13F1DE-03CA-888C-8008-1223360A0F47 Dave Messner
SVP real estate
6/18/2026
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IN WITNESS WHEREOF the Parties have caused this Master Development Funding Agreement to be executed by their duly appointed representatives as of the Effective Date.
THE CITY OF DOWNEY, a California charter city and municipal corporation
By:
Name:
Its:
ANDREWS RANCHO DEL NORTE, a California corporation
By:
Name:
Its:
ANDREWS RANCHO DEL SUR, a California corporation
By:
Name:
Its:
BCH HOLDINGS, LLC, a California limited liability company
By:
Name:
Its:
COSTCO WHOLESALE CORPORATION, a Washington corporation
By:
Name:
Its:
Docusign Envelope ID: 68A7576D-8EBF-841A-80C3-C35C38237512 Tim Hutcherson
President
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EXHIBIT A
Docusign Envelope ID: BE13F1DE-03CA-888C-8008-1223360A0F47