The deal finally landing IKEA in South Philadelphia is more complicated than the instructions for the Swedish retailer’s assemble-it-yourself furniture.
It took teams of lawyers, millions of dollars and a visit from state Sen. Vince Fumo to City Council chambers, but an agreement has been reached between IKEA, the Philadelphia Regional Port Authority and CSX.
Last Thursday, Councilman Frank DiCicco added an amendment to a bill he had introduced last month. The original bill would have rezoned half of the 45-acre property at the northwest corner of Columbus Boulevard and Snyder Avenue, currently owned by CSX Corp., to allow construction of a 300,000-square-foot IKEA store.
With the changes, DiCicco’s legislation will rezone the entire lot. This will allow developer Kenneth Goldenberg, of the Goldenberg Group, to continue with plans to open an additional 300,000 square feet of retail space on the site.
Lawyers representing all the parties were still negotiating the terms of the deal well after last Thursday’s City Council session commenced. As late as 1:15 p.m., DiCicco said he was concerned it would all fall apart.
DiCicco insisted he wanted IKEA in South Philly all along and he denied the issue ever got entangled in the ongoing rivalry between himself and Fumo against Mayor John Street.
During the negotiations, a rumor had circulated that the councilman was balking at the deal because Goldenberg was a Street contributor. DiCicco suspects his opponents floated the story to the press to "embarrass me or frighten me into doing it," he said.
"The last thing that anybody wants," DiCicco said, "is to say Frank DiCicco turned his back on a $100-million business with 500 jobs because he doesn’t like John Street."
The councilman could not comment at the time because of the ongoing negotiations, he said. Now he is talking.
The deal boils down to an elaborate land swap. Goldenberg and IKEA buy the property at Columbus and Snyder; the Philadelphia Regional Port Authority obtains additional waterfront land; CSX makes millions.
DiCicco called it a "win-win-win situation."
The exact cost of the Goldenberg site was not announced, but the appraisers set the value of the land at $20-25 million. In addition to IKEA, Lowe’s Home Improvement Center, Best Buy, Pier 1 Imports, Babies ‘R’ Us, and several national restaurant chains are reportedly interested in opening in the adjoining shopping center.
The PRPA, a state agency created by legislation introduced by Fumo in 1989, made the deal possible by agreeing not to stake a claim to the Columbus and Snyder site. Throughout this process, the port authority had maintained that the commercialization of the waterfront would impact jobs and prevent the expansion of the port.
They had a legitimate gripe. The port had recently been named a strategic military port by the federal government, and DiCicco said the agency is in the midst of negotiations with Volvo and Volkswagen to make Philadelphia the automakers’ main distribution point in the Northeast.
To accommodate the car companies, the port would need 100 acres to park the vehicles unloaded from the ships. The IKEA property combined with the existing lot Volkswagen uses at Columbus Boulevard and Oregon Avenue would have been sufficient.
The PRPA could have killed the IKEA deal by flexing its muscles and taking the land through eminent domain, DiCicco said. But the agency agreed not to as long as it could acquire other waterfront property CSX owns.
Included in the exchange will be two piers south of the Walt Whitman Bridge that have not been used in 22 years and three parcels of land totaling 50 acres.
The PRPA will purchase the land using $5 million from the city’s Port Development Fund established in 1997 and earmarked for marine industry-related projects. Another $2.5 million will be contributed by Goldenberg.
The resolution of the negotiations pleased everyone. IKEA’s director of real estate, Patrick Smith, thanked city officials and the port authority and said the store would remain on schedule to open in spring 2004.
"Despite some public concern about uncertainty and timing, we remained hopeful that the situation would be resolved," Smith said.
PRPA Executive Director James T. McDermott Jr. said the newly acquired site provides adequate space for the port to grow.
"Acquiring land for future port-industrial use is something that active, busy ports do all the time as part of their strategic plans," McDermott said. "Therefore, I am certainly pleased that PRPA can now, in good conscience, withdraw our objection to the rezoning of the entire 44-acre site favored by IKEA."
Even the surrounding neighborhood will benefit from this deal, in ways beyond additional shopping options. IKEA is committed to investing $500,000 in the surrounding community.
In the end, $200,000 will go to DiCicco’s Jefferson Square Development Project, $100,000 to Whitman Council, $100,000 to Pennsport Civic Association and the Our Lady of Mount Carmel and Sacred Heart of Jesus schools each will receive $50,000.
Council members vote on the final draft of this bill today.
Mayor has last word on property tax
Council members had seen this scenario play out before:
Members unanimously pass a piece of legislation they know Mayor Street opposes. Street predictably vetoes the bill. Enough members then flip-flop their votes to prevent the body from overriding the veto. The legislation dies.
That is what happened a week ago when some members tried to force a bill into law that would cap property-tax increases for the coming year at 10 percent.
The legislation, introduced by Councilman Michael Nutter and sponsored by Council President Anna Verna and Councilmen James Kenney and DiCicco, passed by a 17-0 vote late last month.
Twelve votes were needed to overturn Street’s veto, but last Thursday, the bill’s supporters could only muster 10.
"It was somewhat expected but still disappointing," said Verna’s spokesperson Bob Previdi on the outcome of the vote.
Kenney, who has seen some of his own bills once unanimously supported by his Council mates later nixed by the same politicians, expressed similar feelings.
"It is very disappointing to see Council members make a vote one way two or three weeks ago and then change it the next," Kenney said. "It’s not pretty."
Switching sides to support the mayor were Republicans Thacher Longstreth, Brian O’Neill and Frank Rizzo Jr. and Democrats Rick Mariano, Joan Krajewski, Blondell Reynolds Brown and Jannie Blackwell.
"What they did in effect was let some of the mayor’s people off the hook by [switching their votes]," DiCicco said. "The Republicans basically fell on the sword for the mayor."
The administration had expressed concerns about the long-term financial damage such legislation would do to the city’s budget, yet not even a last-minute amendment by Verna and Nutter that would limit the property-tax cap limit to one year convinced Street to get behind the bill.
The legislation’s supporters hoped that a year would be enough time for the new tax-reform commission — which begins work tomorrow — to review Philadelphia’s property tariffs and recommend ways to change the system.
"It was a perfect solution," DiCicco said. "There was really no loss to the city for that year. They would have had the same amount of money to run the government."
Street explained his position in a three-page letter to Council two weeks ago.
"I am sensitive to the concerns of Philadelphians who are struggling in this hard economy, just as their governments are," Street wrote. "But we cannot help Philadelphians solve their problems by creating new ones."
In statements similar to those Street made during the wage-tax debate in the spring, the mayor called the tax-cut legislation reckless, claiming it would jeopardize the city’s ability to provide services that residents depend on.
He also wrote that capping the tax rate would not be fair to those homeowners paying the full value of their tax bill.
"Our budget is already stretched thin," Street said, "and it would be irresponsible for me to allow those who experienced a substantial increase in the value of their homes to avoid their proportionate share of responsibility for paying for critical city services."
Street did sign Rizzo’s property-tax measure that would allow people to defer increases to their annual bill. Legislation introduced by O’Neill that would cap annual increases at 4 percent became law by default after Street chose not to sign or veto the bill. However, before the law can take effect, the state must pass enabling legislation.
