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Costco Backs Out of Proposed Duluth Store Due to Cost and City Issues

The news that Costco was pulling out of a long-planned store in Duluth was disappointing enough in the midst of the economic fallout from Covid-19. But word that the sought-after retail giant backed out of moving ahead with construction due to apparent difficulties in dealing with city hall makes it that much harder for residents to stomach.

Costco’s site selector told the Star Tribune the deal went south “due primarily to extraordinarily high project bids which far exceeded others we’ve seen recently throughout the Midwest region.”

The city evidently played a key role in crafting the so-called “project labor agreement” that sets the terms and working conditions for union tradesmen on the construction of  the huge warehouse. Somewhere along the line, Dave Holappa of Holappa Commercial Real Estate told the Duluth News Tribune that Costco got fed up and canceled the huge project.

As for the obstacles to the sale, Holappa commented: “They had issues working through the city. There’s no question about that. There were some other issues but they weren’t totally insurmountable.”

One apparent sticking point was the prospect of being required to enter into a project labor agreement.

“They’d been objecting to that for a number of months. There may have been a work-around on that. But I guess in the end, they chose not to pursue it,” Holappa said.

“They didn’t have any problem using union labor and that type of thing. But some of the requirements that the PLA includes — large corporations like that just don’t want to give up control of their own developments,” he said.

City officials tried to put a positive spin on the abrupt end to the anticipation of the superstore’s arrival in Duluth. Organized labor representatives also came to the city’s defense.

Craig Olson, president of the Duluth Building and Construction Trades Council, said he was “floored” by the news that Costco was pulling out of the deal.

“We are very disappointed by their decision. We hope that they think this out a little bit further,” he said.

“The mayor, city staff and even the attorneys were working diligently and hard. The trades made it very clear. We were not going to be any barrier for this development. So, I am completely shocked by what we’re hearing today. If they didn’t like something in the PLA, I sure don’t know what they’re talking about. We were prepared to do what it took,” Olson said.

Whoever’s to blame, Costco appears to have moved on. Speculation has already begun that the chain may be checking out building sites in nearby locations outside of Duluth.

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