IKEA Pressures Tennessee For Tax Rebates

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Peter Fricke Contributor
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IKEA is planning to open a new location in Tennessee, but the state needs to sweeten the deal before IKEA hauls in the plywood furniture.

The Swedish furniture retailer wants state lawmakers to approve a $9.5 million package of tax incentives.

In its application for the subsidy, IKEA noted that neither Tennessee nor most of its neighboring states currently have an IKEA store, and implied that, “the company picks communities based on where it can get the most generous tax incentives.”

According to Watchdog, the Economic Development Growth Engine, an unelected and taxpayer unaccountable 11-member board, will hold a hearing on Jan. 21 to evaluate the request. The request would reduce property taxes on the new store over an 11-year period. Local mayors and county officials appoint The EDGE committee’s members, and it’s job is to expand economic development programs in Memphis and Shelby County.

The Columbia Daily Herald reports that IKEA’s EDGE application not only lists three tax-related incentives it has received since 2011, but also states that, “this is a required category of consideration for IKEA corporate approval of proposed locations.”

In recent years, IKEA has received almost $70 million in tax incentives for three stores: one in Denver, another near Kansas City and a store in St. Louis scheduled to open this fall. (RELATED: States May Have to Disclose Business Subsidy Costs)

Although the planned Memphis location would be the smallest of IKEA’s 40 U.S. stores, the company promises it will create 175 full-time jobs and projects $55 million in sales in its first full year. (RELATED: $4.2 Million in Tax Incentives Brings Whole Foods to Depressed Downtown Detroit)

The incentive package IKEA is pursuing in Tennessee would use a program called payment-in-lieu-of-taxes (PILOT), which would significantly reduce its property tax obligation.

However, some critics point out that under state law, the EDGE board is prohibited from considering PILOT incentives for “General Commercial Projects, Housing Projects, Retail Centers, and Entertainment and Recreation Facilities” — a category the IKEA project would clearly fall under.

Despite that restriction, Watchdog notes that, “Memphis officials have already given away plenty in incentive packages to other companies,” and could presumably find other ways to subsidize the IKEA development. (RELATED: McAuliffe Sets Record for Business Incentive Deals)

In 2011, Shelby County and Memphis each agreed to pay appliance-maker Electrolux $20 million to build a new factory in Memphis, on top of the $100 million in incentives that the company received from the state.

Another project, which is still ongoing, involves a $30 million subsidy that Memphis awarded for the construction of a Bass Pro Shops megastore.

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