Nearly $3 million in tax breaks used to recruit AutoZone to Washington

Washington taxpayers will invest nearly $3 million to bring AutoZone Inc. and its 200-job distribution warehouse to Pasco.

The state is offering $200,000 in cash and up to $2.6 million in tax breaks to Memphis, Tenn.-based AutoZone to build a 443,819-square-foot warehouse at 3733 Capitol Ave. near Pasco’s King City truck stop.

Government commonly woos businesses with cash and tax incentives on the expectation it will pay off in increased property taxes and employment.

Greg Olson, president of the Pasco Association of Educators, which represents the city’s 1,100-plus teachers, said it would be nice to have the state money for schools, but he applauded the effort that brought a Fortune 500 company to town.

“For Pasco, the big problem is we don’t have a big tax base,” he said.

Economic development officials refer to AutoZone as “Project Sunrise,” the code name assigned to the top secret economic development deal when it first surfaced in early 2015. AutoZone was linked to Project Sunrise in January after it purchased 93 acres in its own name the month before. The company has remained silent on its plans but people close to the deal confirm AutoZone is Project Sunrise. Calls Monday to AutoZone were not returned.

In response to a public records request, the Washington Department of Commerce said Monday it offered $200,000 for planning and technical assistance from the Governor’s Strategic Reserve Fund in February 2015. The discretionary fund is frequently used to promote economic development, including recruiting new business to Washington.

The money must be spent by June 30, 2017.

AutoZone also is eligible for a lucrative tax incentive, Washington’s sales tax remittance program for new industrial projects

The program exempts warehouse projects larger than 200,000 square feet from the state’s portion of the sales tax, 6.5 percent, on the cost of construction.

AutoZone’s warehouse will cost nearly $40 million to build. That presumes a construction cost of $90 per square foot. That’s below average for industrial warehouse buildings, according to quarterly construction cost estimates published by Rider Bucknall Levett, a global construction management firm with an office in Kennewick.

AutoZone will presumably be able to build for below-average costs because of its size and sophistication and because it costs less to build in rural areas such as Pasco than urban ones such as Seattle or Portland.

The sales tax on a $40 million project comes to nearly $2.6 million.

AutoZone will have to pay the sales tax as it or its partners develop the building. The money is returned to the company as it submits receipts for work completed, according to the Washington Department of Revenue, which administers the program.

Spokeswoman Kim Schmanke said the Department of Revenue can’t acknowledge any deal that is not yet public. However, she said the Tri-City Herald correctly calculated the sales tax impact on a theoretical project.

The Tri-City Development Council, working with the city of Pasco, began working on the AutoZone deal in early 2015 after being introduced to a project developer by state economic development partners.

AutoZone ranks No. 307 on the Fortune 500 list with more than $10 billion in annual revenue. AutoZone (NYSE: AZO) is in an expansion mode and will apparently build the Pasco warehouse to support its network of auto parts stores in the Northwest. It operated 5,141 stores in 49 U.S. states at the end of 2015.

The city of Pasco is supporting the project by resolving what an official called minor waste water issues and street improvements to aid traffic flow. The dollar value of the city’s investment was not immediately available.

This story was originally published February 8, 2016 at 4:21 PM with the headline "Nearly $3 million in tax breaks used to recruit AutoZone to Washington."