Incentives key for IKEA

Roughly $2.8 million in incentives helped Draper land home furnishings store IKEA, a contract between the city and company shows.

The incentives, detailed in a development agreement, show that Draper will build a one-third of a mile road and pay for all infrastructure upgrades to the surrounding roads, water, sewer, electrical, gas and communication lines to 40 acres IKEA purchased. Draper also will pay all of IKEA's impact and permit fees, including — among others — the first year's business license, fire and police impact fees, and building permits.

It adds up to $1.2 million for the infrastructure and $1.6 million for the fees — icing that helped coax the Swedish retailer to the 33,000-resident suburb, said David Baird, the city's economic development director.

Baird was not certain which city fund would pay the $2.8 million, and Michael Sears, Draper's finance director, could not be reached for comment.

Draper is still a bit dazzled to be chosen for an IKEA site, Baird said, given that it competed with sites throughout Utah, the country and the rest of the world.

"Without the city helping to facilitate this infrastructure, we probably would not have landed IKEA," Baird said. "If I were to rank the wish list of every economic development official in this region in landing a retail tenant, I think IKEA would be first. It is a super regional draw. It's not meant to just steal a retail dollar out of a cash register in Murray. This is, instead, drawing people in from adjoining states."

In looking at sites around Utah, IKEA settled on Draper before the incentives were finalized, said Joseph Roth, a spokesman for the company. But since the Draper store will have a population base of about 1.8 million, and since IKEA likes to have a minimum base of 2 million people, the company wanted "financial assistance" before settling on the site.

"In order to make our numbers work just to get over the hump initially, we needed some financial assistance," Roth said. The store will take up 22.5 acres of the 40-acre site at 13490 S. Pony Express Road just west of I-15, and the company didn't want to pay infrastructure costs for all 40 acres. "When we approached the city as discussions had progressed about the need for a potential partnership, they evaluated the options and agreed that this would be something that would be mutually beneficial to both parties."

Typically developers shoulder the costs of city infrastructure upgrades and impact fees — money that pays for the increased demand on city services that developments bring. It's also not uncommon for cities to cover those fees and costs to attract large projects like IKEA.