Some Memphis City Council members are concerned that the tax deal for Ikea could open the flood gates to other retailers seeking the same deal in the future.
A tax deal to help bring the Swedish furniture company to Memphis is before the Memphis and Shelby County Economic Development Growth Engine (EDGE) on Wednesday. That the company is up at all for a payment in lieu of taxes (PILOT) deal represents a “major shift in policy,” according to EDGE president Reid Dulberger.
PILOTs from EDGE are focused on industrial projects. If Ikea’s PILOT is approved, it will be the first tax deal approved by the EDGE board for a retail establishment.
That deal would allow Ikea to forgo $9.5 million in taxes over the next 11 years, according to EDGE documents. But the project will bring in $15.5 million in new tax revenues (above the $9.5 million abated) at the same time.
See the EDGE analysis of the Ikea PILOT here:
The project will add 175 new full times jobs here, jobs with an annual average salary of $41,000 and benefits.
Council members said if it is approved, seemingly nothing could stop other retailers like Wolfchase Galleria or Oak Court Mall from seeking similar deals. Also, some council members wonder why Ikea was chosen for a special deal when other projects, like improvements to the Southbrook Mall, were overlooked for years.
But Dulberger told council members Tuesday that Ikea is an “extraordinary opportunity” and that EDGE is not establishing a new policy to allow retailers to seek PILOTs. Instead, Dulberger said the EDGE board will consider changes to its policy Wednesday that should set firmer parameters on when or if PILOTs should be given to retailers.
Council members said such a shift in policy - including changing it one time for Ikea - should be approved by the council. Council members were concerned enough about the shift and being cut out of the process that they floated the idea of brining a resolution to delay the Ikea vote.
When council member Wanda Halbert asked council members to bring possible actions on the vote to the table, nothing was formally proposed.
“We can’t do anything. We can’t do anything,” said council member Harold Collins. If we put a resolution in executive session prohibiting (EDGE) form doing anything, guess what happens? Everyone the Mid-South are going to be sending us e-mails again.”
Dulberger explained the ramifications of a delay.
“Holding the decision on Ikea could mean losing Ikea,” Dulberger said.
The nearly hour-long discussion on the matter brought up concerns about PILOTs council members have repeated for years.
Halbert, chairwoman of the council’s tourism and economic development committee, said city and county residency requirements need to be applied for any jobs produced by giving PILOTs to companies.
“These projects are funded by Memphis. Let’s call a spade a spade,” Halbert said. “We spend our money and other people are getting those jobs. This is a real issue that EDGE needs to start talking about.
“Whether residency requirements are necessary, it’s an insult.”
Halbert also said that Ikea got a deal at all shows a racial bias on who gets these deals and who doesn’t. She said Southbrook Mall owners tried for two years to get city funds to renovate the property but were told they couldn’t until MEmphis Mayor A C Wharton granted them some funds last year.
“The elephant in the room is that African Americans don’t get a dime out of this city, but Ikea wants to come in and they get $9 million-$10 million in PILOTs,” Halbert said. “Southbrook Mall is going to help pay for that. We need a different kind of discussion (for EDGE).
But the bulk of the council member’s concerns about the Ikea deal is that, if it is approved, it will open the “barn doors” for other retailers.
“If tomorrow the news is that the PILOT has been approved for Ikea, we can’t run down Oak Court Mall and (Wolfchase) Galleria because the horses are out of the barn,” Collins said. “Then that opens us up to more scrutiny and then it opens ourselves up to a competitive disadvantage.”
Council member Shea Flinn said opening the door could create problems and nullify future gains.
“If we don’t have high hurdles there (on who gets a PILOT), then the taxes generated (by Ikea) will be eaten up by the opening of the barn door,” Flinn said. “That’s my fear.”
Furthermore, council members complained that they didn’t know about the Ikea deal ahead of the public or the news media.
The Ikea PILOT is before the EDGE board Wednesday at 3 p.m.