Memphis IKEA expects lower jobs, pay numbers; amends tax break incentive

Swedish furniture company IKEA will begin to pay its full property tax obligation sooner than expected after the company announced it would not be able to meet hiring and pay goals it set to qualify for government incentives.

In a required annual compliance report filed in January, IKEA told the Economic Growth Engine of Shelby County that it was already behind on its jobs and wages goals.

IKEA promised to create 175 full-time jobs and pay an average of $41,011 per year. In January, the company reported it had 147 workers earning less than $37,000 per year on average. But according to an April 4 letter from IKEA's attorneys, the company expects jobs and wages to fall even more and it wants its payment-in-lieu-of-taxes incentive to be recalculated based on the lower numbers.

"IKEA requests that EDGE rescore the PILOT using 125 jobs with an average annual wage of $34,000," IKEA attorney Chad Wilgenbusch wrote in the letter.

EDGE CEO Reid Dulberger informed the board of the changes at a Wednesday meeting. The board did not vote on the change because IKEA had already volunteered to reduce its PILOT by two years.

Under the 2015 incentive agreement, IKEA would not have to pay its full property tax burden for 11 years and 10 months. Voluntarily ending the incentive two years early will cost IKEA about $1.8 million in additional taxes to the city and county.

Sustainability goal

It's possible that IKEA could get one year added back onto its PILOT — worth about $910,000 — if the EDGE board agrees that the environmental sustainability efforts at the store are enough to warrant it.

According to the letter, the company could qualify for the tax savings if it managed to get at least 25 percent of its energy from renewable resources and reduce its water consumption by 25 percent in comparison to a similar store in Frisco, Texas.

Wilgenbusch said 45 percent of the store's energy now comes from its rooftop solar panels and the Memphis store is using about half as much water as the store in Frisco.

EDGE staff will review the information IKEA submitted to verify that the company has met the sustainability goal. If IKEA can prove its compliance, an extra year will be added back onto the PILOT. No board vote will be necessary for approval.

"If they’ve earned it, they’ve earned it," Dulberger said. "It’s separate and apart from the compliance issue."

EDGE stopped offering additional incentives for environmental sustainability in 2016 to streamline its PILOT system and focus on jobs, wages and capital investments, Dulberger said.

Other PILOTs 

Also at the Wednesday meeting, the board approved a request for a six-year PILOT for The J.M. Smucker Co., which has plans for an $8.8 million expansion of its Memphis factory to increase production of its Jif Creamy Clusters, and a seven-year PILOT for Cleveland Track Materials, which is planning a $6 million expansion.

Representatives for Smucker said the incentive was needed to help the plant compete against a larger plant in Lexington, Kentucky, and keep existing jobs in Memphis. The company also plans to create 25 new technician jobs paying an average of $40,227.20 per year.

Cleveland Track Materials, which manufactures railway materials, plans to create three management positions paying about $72,800 per year and 48 production positions paying about $39,220 each year. 

Desiree Stennett covers economic development and business at The Commercial Appeal. She can be reached at desiree.stennett@commercialappeal.com, 901-529-2738 or on Twitter: @desi_stennett.