by Mona Mahadevan The New Haven independent
Acting Assessor Pullen: “[T]ax appeal losses are something which are part of the cost of doing business and are budgeted for each year.” Credit: Thomas Breen photo
After a three-year legal battle, IKEA has succeeded in convincing the Elicker administration to cut nearly $13 million off of its Sargent Drive property’s tax appraisal — decreasing the furniture retail giant’s local tax bill by a combined roughly $1.7 million across five years.
That’s the outcome of a proposed agreement newly struck between the city and IKEA in the state court case Ikea Property Inc. v. City of New Haven. The appeal dates back to May 2022.
The proposed settlement — which still needs to be approved by a judge before taking effect — is included in a Sept. 16 motion for judgment submitted by lawyers representing IKEA and the city and signed by Mayor Justin Elicker.
If approved, the settlement would reduce the “fair market value” of 450 Sargent Dr. for Grand List Years 2021-2025 from $38,066,700 to $25,250,000, or by a total of about $13 million. (While a Grand List Year begins Oct. 1, its first tax bill comes on July 1 of the following calendar year. So, for example, the first tax bill for Grand List Year 2021 was due on July 1, 2022.)
The city calculates taxes based on a property’s “assessed value,” which, per state law, is 70 percent of its “fair market value.” By that metric, the IKEA store’s taxable value — or assessment — would decrease from $26,646,690 to $17,675,000 under this agreement. (That’s true for every year except Grand List Year 2021, in which the property’s taxable value was $24,934,035 because of the two-year phase-in process for higher property values from the October 2021 revaluation).
What does that mean for how much IKEA actually owes the city in local real estate tax bills?
Essentially, in Grand List Years 2021 through 2025 — which covers tax bills owed between July 1, 2022 and Jan. 1, 2027 — IKEA will get an estimated $1.7 million tax cut.
Year by year, the tax changes break down as follows:
• In Grand List Year (GY) 2021, IKEA paid $991,127.89 in taxes. Under the settlement, they’d only owe $702,581.25, thereby giving the retailer a $288,546.64 credit to advance for future tax bills.
• In GY 2022, IKEA paid $991,256.87 in taxes. Under the settlement, they’d owe $657,510.00, resulting in a credit of $333,746.87.
• In GY 2023, IKEA paid $1,025,897.57 in taxes. Under the settlement, they’d owe $680,487.50, resulting in a credit of $345,410.07.
• In GY 2024, IKEA has paid the first half of their tax bill — or a total of $524,939.79 — for an annual bill that adds up $1,049,879.59. Under the settlement, they’d only owe $696,395 for the whole year, which means just $171,456 would be due come January 2026.
• In GY 2025, if the mill rate stays the same at 39.4, IKEA will again owe $696,395 spread across two bills, due on July 1, 2026 and Jan. 1, 2027. The retailer’s credits from Grand List Years 2021 – 2023, totaling $967,703.57, would be enough to fully cover the remainder of its GY 2024 tax bill and all of its GY 2025 tax bill.
This city-IKEA proposed settlement follows another multi-year dispute with the Elicker administration over the value of the 310,000-square-foot property. That earlier case saw $4 million chopped off of IKEA’s tax appraisal, resulting in $128,190.16 in savings for the retailer’s Grand List Year 2020 tax bill.
This new proposed settlement comes out of a case that began with a 2022 lawsuit in which IKEA alleged that the city’s tax appraisal for 450 Sargent Dr. — a 16.7‑acre property first acquired by the Swedish furniture company in 2003 — was “grossly excessive, disproportionate, and unlawful.” The complaint was written by attorney Gary Greene of Farmington-based Greene Law.
Dennis Eveleigh, a former Connecticut Supreme Court justice, is presiding over the case in state court. He has not yet signed off on the agreement.
Greene submitted an appraisal report prepared by New Hampshire-based Barry Cunningham to argue for a lower “fair market value” of the IKEA store. Drawing on cost, sales comparison, and income approaches, Cunningham valued the property at $23,650,000, implying a taxable value of $16,555,000. He noted that “[t]he market for large box retail softened through COVID,” especially consequential for 450 Sargent Dr. because it’s “must larger than typical furniture stores.”
Per the Sept. 16 proposed settlement, the city and IKEA have agreed to a valuation nearly $13 million lower than the city’s initial appraisal and just $1.6 million higher than Cunningham’s proposal. The agreed-upon value is also a discount to 450 Sargent Dr.‘s original Grand List Year 2020 appraisal of $33,173,400, which is based on a valuation date of October 1, 2016, and the revised appraisal of $29,000,000, which is based on an October 2024 settlement between IKEA and New Haven.
Acting City Assessor Alexzander Pullen told the Independent that the settlement wouldn’t affect the city’s budgeting. In an email sent Wednesday, he wrote, “[T]ax appeal losses are something which are part of the cost of doing business and are budgeted for each year.”
While he didn’t offer context specific to the IKEA case, he explained that the city’s reasoning for submitting or not submitting a counter-appraisal is based on “the culmination of many factors,” such as “the Assessor’s analysis of the actual income and expense forms and confidential tax documents filed by the taxpayer, the Judge’s comments at pre-trial, conversations with our own experts, careful analysis of the field card and income card developed during the revaluation, and the strength of the taypayer’s appraisal.”
Pullen continued, “Often it is advantageous and cost effective to simply analyze the plaintiff’s appraisal and make corrections where we see fit rather [than] pay thousands for our own appraisal and risk the courts splitting the appraisal values after a costly trial.” To ensure sufficient oversight, he added, all settlements are reviewed by a city committee before being submitted to the mayor.