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DULUTH – Construction on northeast Minnesota's first Costco warehouse club will likely start in the fall, according to a St. Louis County Board letter.

The wholesale retailer is preparing to build a store with 725 parking spaces on approximately 160,000 square feet at the intersection of W. Arrowhead and Haines Roads. The city of Duluth is working with Costco on a deal that entails more than $2 million in improvements to public infrastructure, according to the letter.

Construction on the long-rumored store would be expected to be finished in fall 2021. This month, the city and St. Louis County will consider providing a combined $2 million in tax abatement financing for the public upgrades, which would include work on roads, sewers and water mains.

'Without these improvements the development cannot proceed,' the letter said.

A Duluth resident e-mailed the City Council on Friday criticizing the potential abatement for the company, which had a net profit of $3.66 billion last fiscal year: 'Let Costco compete like everyone else and pay their own way!'

Costco filed plans to build on the Duluth plot, which is near the city's airport, but terminated an agreement in March, when a site selector for the company cited 'extraordinarily high project bids which far exceeded others we've seen recently throughout the Midwest region.'

The company put out a new request for bids in May that allowed contractors more time to complete the project in an economy with a sudden supply of workers because of projects delayed by the COVID-19 pandemic.

The coronavirus outbreak caused Duluth's unemployment to jump to a record 11.6% in May. Mayor Emily Larson said she's excited about the prospect of job growth that the project promises. The city will require a project labor agreement, prevailing wage rates and community benefits agreement for the development.

The store is to be built on mostly undeveloped land that now is home to the New Life Lutheran Church, which has discussed plans to move or build elsewhere.

Adam Fulton, Duluth's deputy director of planning and economic development, said Costco still has to get a building permit and earn approval from the planning commission. But the project, which he estimates would cost in excess of $20 million, is nearing the final steps of the planning process.

Larson emphasized the recognition Duluth is receiving from 'a national retailer who sees us as an opportunity for growth.' She's never been in a Costco, she said, so she's eager to check out the members-only retailer with a loyal following across the country.

'I think Costco comes in with a lot of intention,' Larson said. 'For Duluth to be at an economic turning point and a growth point for their market says a lot about who Duluth is becoming.'

Duluth's grocery market is largely dominated by Super One Foods, though the city is also home to other chains like Cub, Aldi and Target. Neighboring Hermantown has a Sam's Club, a Walmart-owned bulk retailer rival of Costco.

If built, Duluth's Costco would be the company's 13th store in Minnesota. Nine sites are located in the Twin Cities metro area, but outstate stores have operated for several years in Baxter and Rochester.

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Costco opened a store in St. Cloud a year ago.

Construction on a 354,000-square-foot distribution center in Owatonna began in 2019, giving the Seattle-based retailer an easy path up Interstate Hwy. 35 to Duluth.

Katie Galioto • 612-673-4478

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©2020 the Star Tribune (Minneapolis)

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