Lagging promises, Peapod agrees to terminate 7-year tax break from Indianapolis

The Indianapolis Metropolitan Development Commission is set on Wednesday afternoon to rescind a tax abatement that Peapod LLC received four year ago in exchange for investing millions of dollars in a distribution operation that would create 238 jobs by 2018.

Peapod, an online grocery delivery service, received the incentives in June 2014 to help it lease 50,000 square feet of distribution space on the city's east side to serve customers in central Indiana.

The Chicago-based company said it would invest $6.5 million in refrigeration, racking, technology and logistics equipment for the facility at 9222 E. 33rd St.

But due to changes in Peapod’s corporate leadership and its business model, the project has been delayed to the point that the company has agreed to the termination of the tax abatement, according to a city document.

“The termination is voluntary, based on the fact that Peapod never initiated or completed the distribution center proposed in the abatement agreement,” city spokeswoman Taylor Schaffer said in an email.

Peapod still operates in the Indianapolis market and distributes via a “cross-dock facility,” Schaffer said. Cross-docking involves unloading materials from an incoming semi-truck or rail car directly into outbound trucks with little or no storage in between.  

Peapod invested $587,353 in equipment and received just $6,928 in tax savings due to the abatement, according to the city document. Peapod is expected to pay $6,928 to the city in damages by March 7, if the MDC goes through with the termination.

The company received from MDC in 2014 a seven-year tax abatement that would have saved the company an estimated $313,587, or 62 percent, on personal property taxes over the abatement period.

Department of Metropolitan Development staff said Peapod would have paid about $191,384 in personal property taxes over that period and an estimated $58,266 annually after the abatement ended.

Peapod voluntarily agreed to terminate the abatement to continue to be in “good standing” with the city when, or if, it is ready to establish its own distribution facility, Schaffer said.

It was not immediately clear whether Peapod hired additional employees despite not going ahead with the project. Peapod had said the new workers would be paid about $15 per hour.

A statement from the company released to IBJ said: "Peapod has elected to rescind a property tax abatement agreement with the city of Indianapolis. The abatement was tied to the creation of approximately 200 jobs by 2018. Peapod is thoughtfully reviewing all local facility expansions and remains committed to future growth in Indianapolis."

Founded in 1989, Peapod delivers online grocery orders in 23 U.S. markets.

Peapod also had an incentive deal with the Indiana Economic Development Corp. that would have given the firm $1.4 million in conditional tax credits if it satisfied its plans of investing $9.7 million and creating 238 jobs by the end of 2018.

According to state records, Peapod so far has only received tax credits worth $8,978.

Peapod’s incentive contract with the state remains active and compliant, according to an IEDC spokeswoman. The tax credits are tied to the firm’s progress in job creation, and Peapod’s contract stipulates that it has until Dec. 31, 2023, to claim any incentives for its hires.