Tucson offers tax incentives to bring Costco to southeast side

TUCSON, Ariz. (KGUN) — A new Costco could be coming to Tucson’s southeast side, with the city offering millions in incentives to help bring the project to life.

The new Costco plans to be built at 9748 E Old Vail Road. It's expected to generate about $22.7 million in sales and property tax revenue during its first five years. Over the long term, the project could bring in about $47.3 million annually to the local economy and create more roughly 320 jobs.

To help make the development happen, Tucson is using its Site-Specific Tax Incentive Program, which allows qualifying retail projects to receive a portion of the sales taxes they generate. The funds are meant to reimburse developers for costs like permits, fees and public infrastructure improvements.

Athena Kehoe

The incentive tied to the Costco project was initially estimated at about $7.3 million. However, the company agreed to reduce that amount to $4 million. The remaining $3.3 million will go toward road improvements along Old Vail Road, including repaving and other upgrades between Rita and Houghton roads.

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Because projects like this require a traffic study, the city found about $3 million in upgrades are needed, including a new traffic signal and a turn lane.

City officials say the timing of those upgrades could affect how the store opens.

“If the traffic signal is not done but they are done with building the building and the landscaping and all of the parking, there's a possibility that they could open,” said Mike Czechowski with the City of Tucson’s economic development team. “We would just have to deal with some traffic issues during the first week, month, whatever time frame if the traffic signal is not ready to go.”

Under the agreement, the city will reimburse Costco over time using a portion of the sales tax revenue generated at the store, capped at $4 million. Additional tax revenue will be set aside to help fund the Old Vail Road improvements, with any remaining funds eventually going into the city’s general fund.

City leaders say the incentive program is designed to expand Tucson’s tax base while improving quality of life through new retail options and infrastructure investment.

Costco aims to complete construction by mid-summer 2027.

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Athena Kehoe is a reporter for KGUN 9, she joined the KGUN 9 team in July of 2024 after graduating from Arizona State University. Share your story ideas with Athena by emailing athena.kehoe@kgun9.com or by connecting on X/Twitter.