"We are leaking sales tax to other cities," Perrins said, referring to Costco's store in Orem and a Sam's Club in Provo.
Issaquah, Wash.-based Costco will build a store at the intersection of 200 East and 1000 North in Spanish Fork. City crews have already done grading work on the site.
Perrins said Costco asked the city what kind of incentive package it could offer, but did not specify any details.
Attempts to contact Costco were unsuccessful.
The incentives include waiving all building permit fees, connection charges and impact fees for the project. For the first 18 months, the city will pay back Costco its portion of the sales tax paid by shoppers there, capping it at $1,025,000.
The city will also pay back Costco the $225,000 it paid for the land grading, as well as waive utility fees for the first four years of operation.
Perrins said the utility bills water, sewer, irrigation could total $250,000 a year.
For its part of the agreement, Costco has to build the store and open it. An opening date has not been announced.
Perrins said the move will not only keep Spanish Fork shoppers in town, but he also hopes it will capture Costco customers coming from Price or Nephi.
Cary Hanks, director of the city's Chamber of Commerce, said there is general excitement about Costco coming to the city.
"Increasing our tax base helps us all," Hanks said, "because it keeps our bills down."
She said some business people were concerned about Costco moving in, but she doesn't see it as a threat to local businesses since it is a different kind of store.