Monday editorial: Clayton caves
For decades, Clayton held firm against the grand fleecing of taxpayers that is the business-incentives game. Now even Clayton has thrown in the towel. Clayton officials say they had no choice, that Centene Corp. is too big to lose.
The game goes like this: A company decides to expand operations, perhaps build a new headquarters or open a new plant. Government officials come calling, checkbooks in hand, eager for the new jobs in their city, county or state.
The corporate CEO then turns to officials in his company’s hometown (from which he really doesn’t want to move), and says, “Pay up, or we’ll put our jobs somewhere else.”
And the cities pay up. In St. Louis in recent years, local and state officials have doled out incentive packages to Pfizer in Chesterfield, Express Scripts in North County, Smurfit-Stone in Creve Coeur, KV Pharmaceuticals of Brentwood and Chrysler in Fenton, to say nothing of the St. Louis Cardinals.
St. Louis County officials still are smarting over the loss of MasterCard’s technology operation, which left for St. Charles County in 1999, lured by an incentive package.
The incentives game is unfair to older, established companies that end up paying more in taxes than their growing competitors. Local governments end up with millions of dollars less to pay for the services — schools, roads, public safety — their residents need and expect. To keep up, the bill may get passed on to companies and homeowners through higher sales taxes and property taxes.
The latest such game is playing out in Clayton. Centene Corp., a Medicaid management company, wants to build a 24-story headquarters building next to the building where it now is. The company hopes to add 800 new jobs at the site if its business grows as expected. A second 14-story office building is planned for later.
When Centene first proposed the project in 2005, the firm asked for incentives and for Clayton’s help in acquiring some of the property it wanted on the south side of Forsyth just west of Hanley Road. The city council declared the properties “blighted” and gave Centene the right to acquire them through eminent domain.
In June 2007, the Missouri Supreme Court said Clayton had erred in granting the use of eminent domain, so Centene began looking around. And, lo, it discovered just how much its new project was worth. It signed a deal to move to Ballpark Village in downtown St. Louis, lured by a $78 million incentives package of tax deferrals and exemptions and other goodies from the city.
Curiously enough, Centene pulled out of that deal just as the Clayton property Centene had coveted appeared on the market.
So Centene turned again to Clayton officials, again with its hand out. Clayton offered to abate 50 percent of the property taxes on the new project and construction sales taxes on the new building. The county would fix nearby roads, and the state would kick in up to $27 million.
Mayor Linda Goldstein notes that, even at a 50 percent discount, Clayton would collect more in taxes than if Centene moves elsewhere.
Still, for decades Clayton, the county seat, said no to incentives. It relied on its richly deserved reputation for safety, good municipal services, a prime location in mid-county and an abundance of the upscale neighborhoods in which top executives like to live. High-rises have sprouted like bean stalks as Clayton added 800,000 square feet of offices early in this decade.
Then Clayton lost a big Borders bookstore to a subsidized shopping center in Brentwood and Smurfit-Stone’s corporate headquarters to Creve Coeur. And Centene appeared, at least, to be prepared to to leave Clayton for downtown St. Louis.
So now even Clayton pays up. In December, the town granted tax breaks to a retail-hotel-condo development near the Ritz-Carlton Hotel. “Is it a wonderful situation? No. But we have to compete,” Ms. Goldstein said.
That may be true, but tax breaks and similar incentives rarely are the decisive factor in where companies choose to locate. Land costs, the availability of well-trained workers and access to customers count more.
The only real solution to this city-vs.-city fleecing would be regional, and that seems unlikely. Still, it would be great if companies located where it made the most business sense, not where they found the most freebies.
Here… in this one editorial lies buried two truths:
One is that no one on the Editorial Board knows a thing about business:
“Still, it would be great if companies located where it made the most business sense, not where they found the most freebies.”
That is WHERE it makes the most business sense! Could it be that this basic lack on understanding is why the Post continues to lose money? Or is it the socialism present in the Ed Board? No matter… the second truth is:
This Ed Board will never stop carrying water for Mayor Slay no matter how badly he messes up. Centene was Slay’s to lose and he did. They were gift wrapped and delivered, and still he lost them. All that time spent… likely over some family business issue like which cousin got to skim or some such.
Just once, after an editorial like this one, I’d like to see the company flayed to just come out and say; ‘well it seems we are not wanted, so we won’t locate out building and jobs there… we’ll go elsewhere!’
Oh wait… the worlds largest phone company did just that. Sorry I forgot.