IKEA incentives 'in line'

Incentives Draper offered IKEA to build a 310,000-square-foot store in the city appear to be in line with or less than what other cities have offered the furniture retailer.

The development agreement between Draper and IKEA shows that the city will pay for nearly all infrastructure upgrades to the 40-acre site near 13800 South and I-15 that IKEA now owns. That includes upgrades to water, sewer, electric, communication and gas lines. Additionally, the city will pay all the developer's permit and impact fees. Draper expects the total cost to the city to be around $2.8 million, said David Dobbins, economic development director.

Yet, Draper may have found a bargain from the store. A similar development agreement between Tempe, Ariz., and IKEA shows the Phoenix suburb will pay $6.8 million to the site's developer for building its store there — $1.8 million of that money will go to IKEA as a performance award with the rest going to Tait Development company.

Tempe's development agreement with IKEA also shows that the city expects to recover nearly $48 million over 10 years from the development, and nearly $134 million over 20 years. Tempe also expects that IKEA and surrounding development will create between 2,000 and 8,000 jobs.

Since IKEA opened in Tempe on Nov. 10, 2004, business around the store has boomed.

Dobbins said such incentives are a minor investment for any city that lands an IKEA, which is considered a marquee anchor.

"Based on IKEA's decision to locate there, it becomes a far more attractive option for other retailers," Dobbins said. Draper has fielded phone calls from retailers throughout the country — hotels, restaurants, other retail chains — since IKEA announced on Nov. 29 plans to build there, he said.

Draper will primarily cover the cost of constructing a road one-third of a mile long that will connect the store to existing roads.

"By putting in the road, we are actually going to spur additional economic development other than just IKEA," Dobbins said. "Our investment's going to benefit us in a greater degree than if we were to give money directly to a developer."

By Draper's analysis, IKEA will bring in around $1.4 million in revenue each year and could create around 300 jobs.

"The national reputation of this retailer is anticipated to increase Draper's visibility and competitiveness as a regional shopping destination," according to a report from Galena Consulting, the Boise firm that Draper contracted. "This is likely to bring continued interest in development throughout the city."