Centene Says the Quiet Part Out Loud

There are numerous flaws in the ongoing subsidy-driven economic development strategy employed in Missouri. In this post, I want to focus on one of those flaws. Businesses often overstate the importance of subsidies in their decision-making process. After all, it costs nothing to make such a claim, and if the tax subsidies, credits, and abatements are there for the taking, why not ask for them? All a company has to do is say that “but for” the subsidy, it wouldn’t invest in the area. Easy enough, right?

Analysis of what companies actually do, as opposed to what they say they require, tells a different story. Shockingly—I know this is going to stun many of you—those same companies often don’t need the subsidies as much as they claim. Here is an article that discusses one study out of Texas:

Nathan Jensen, a University of Texas at Austin professor, analyzed businesses’ applications for school property tax relief. His findings suggest that just 15 percent of participating firms needed the incentives in order to make an investment in Texas. Furthermore, many of the other firms were uncharacteristically open that incentives were not a necessity.

Just fifteen percent. And sure, Amazon received substantial subsidies when it decided to build its sought-after second headquarters in Virginia, but it received far fewer subsidies there than had been offered by other states.

Which brings us to Clayton, Missouri and Centene. Several years ago, the City of Clayton passed an enormous incentive package for Centene as part of its major expansion plans within the city. From a St. Louis Post-Dispatch story on the topic:

Clayton and state officials signed off on a sizeable incentives package: $75 million worth of property and personal tax abatement over 20 years in Clayton and tens of millions more in state incentives, most of which would be dependent on the number of jobs Centene would add in the region.

Not surprisingly, “ . . . Centene said then that it could not build the project without public subsidies.”

But that was 2016, when it was time for asking. Now it’s 2022, and it’s time for doing. And Centene has changed its mind. The company is not going to build many of the parts of the proposal that justified the tax incentives, including a civic auditorium in downtown Clayton (emphasis added):

“A civic auditorium is no longer in Centene’s plans regardless of any incentives to proceed,” the company said in a statement to the Post-Dispatch.

Centene almost certainly didn’t need the tax subsidies in the first place, and it threw in the civic auditorium promise as a political victory for the local politicians who like to delude themselves as to their own importance in creating downtown Clayton.

As long as Clayton holds firm and takes back the subsidies now, fairness demands we give the city some credit here. But the precedent has been moved further along by the subsidies Clayton gave out in 2016, and that part of the damage has already been done—all over tax subsidies that were likely not needed in the first place.