If You Give a Developer a Subsidy
One of my favorite books as a child was If You Give a Mouse a Cookie. “If you give a mouse a cookie,” the story begins, “he’s going to ask for a glass of milk.” Before long the mouse receives a haircut, a nap complete with a bedtime story, and more. The lesson I took away was to be wary of open-ended gift giving.
A similar story has been taking place in the St. Louis area during recent years. After threatening to locate its headquarters in downtown St. Louis back in 2008, Centene was given a $22 million cookie from Clayton. Now it’s back for a $100 million glass of milk.
Currently headquartered in downtown Clayton, the healthcare giant is proposing a $772 million expansion along Forsyth Blvd. Construction would include office space that Centene could use for its own employees or lease out to other businesses. The expansion may benefit the city, but between Centene’s success, their reasons for expanding, and Clayton’s thriving downtown, it’s hard to justify asking taxpayers to contribute.
Centene is a rapidly growing enterprise. In 2015 the company added 4,800 jobs nationwide and revenue grew 35% from $15.7 billion to $21.3 billion. This fact alone shouldn’t deter incentives, but when we combine this fact with Clayton’s developmental success there isn’t much of an argument for the proposed property tax abatement. Supporters of tax breaks argue they should be used if an area would otherwise lack investment, but in an area as affluent as Clayton potential investors have not been hard to come by.
But if subsidies aren’t offered to the Fortune 500 company, isn’t it possible that it will pack its bags and move somewhere else? It’s possible, but not probable. Centene has spent millions acquiring land parcels along Forsyth over the past four years, so expansion has been on the horizon for a while. What is much more likely is that without subsidies the expansion will not be quite as large, and perhaps it shouldn’t be.
Centene houses around 1,000 employees in Clayton and leases roughly half its office space to other companies. The new plan is modeled on the same structure and would be large enough for 2,000 Centene employees and office space that the company could then lease out to increase its revenue. There’s nothing wrong with a business diversifying its income portfolio, but the red flag should go up when this opportunity is only available with the help of taxpayer money.
Tax breaks have become ingrained in our development culture, and they have created an unfair environment where some companies gain competitive advantages over others. It does our community little good to continue this trend, and Clayton should decide if giving away a full glass of milk would benefit anyone.