Ikea received a tax deal worth $9.5 million over the next 11 years in a Wednesday decision by the Memphis and Shelby County Economic Development Growth Engine. The decision marked the first time that board had ever approved such a tax deal for a retailer.
The Swedish home goods retailer announced last month it planned to open a 269,000 square-foot shopping center close to the corner of I-40 and Germantown Parkway. The project would represent a total investment of $64 million from the company.
The project will bring in $15.5 million in new tax revenues to the city and county during the 11-year term of the payment -in-lieu-of-taxes (PILOT) deal. The city and the county will get a $1.64 return on the project for every $1 abated in taxes, according to EDGE president Reid Dulberger.
The project will add 175 new full times jobs here, according to the company. Those jobs will have annual average salaries of $41,000 and benefit packages worth at least 40 percent of those salaries.
The Ikea PILOT deal could be extended by one additional year if the company sticks to the environmental commitments it made to the EDGE board in its application. That plan includes efforts in renewable energy, ride sharing programs for employees, and water conservation efforts.
The project drew fire from Memphis City Council members Tuesday. Some worried that the Ikea PILOT deal would open the gates to other retailers - like malls and strip shopping centers - asking for tax breaks to open or keep their stores in Memphis.
Dulberger told council members that Ikea represented an "extraordinary opportunity" and one that should not be passed by.
EDGE members echoed Dulberger on Wednesday saying they had all received numerous calls on the project in support of the project. But many said they received questions about the first-time retail PILOT, calling the decision "Pandora's Box" and a "slippery slope."
But most said the risk was worth the prospect.
"If we don't do this, Memphis and Shelby County will get about $17,000 in taxes (from the property) over the next 11 years," said EDGE board member Charles Goforth, president of Goforth Planning and Management. "If we do it, we'll get about $15.5 million over the next 11 years. My math says that is about a 890 percent increase."
EDGE treasurer and Patriot Bank president Larry Jackson cast the only vote against the Ikea PILOT.
EDGE board members later approved the creation of more stringent rules on any future retail PILOTs. Members said they wanted to ensure that any future retail PILOTs would only be granted to retailers that fit the Ikea model, that made Memphis a shopping destination and paid their employees well.
The EDGE staff will bring new policies for retail PILOTs back to the EDGE board after collaborating on the new policies with the city of Memphis and Shelby County government officials.