St. Charles County Executive Steve Ehlmann recently proposed that the East-West Gateway Council of Governments study whether local governments get their money’s worth when they give economic incentives to developers.

The council agreed, and as it happens, there’s a deal in the works that could provide a perfect case study: The $62.3 million incentive package offered by the city of Clayton and the state of Missouri to Centene Corp. to build a mixed-use development that includes a new office tower.

St. Louis Mayor Francis Slay wants to know whether the subsidy is being used — even if indirectly — to finance a package so tempting that it would lure a major law firm out of downtown. The mayor — and taxpayers across the state — deserve an answer.

Centene is a major player among businesses nationally that make their money administering Medicaid, various versions of the State Children’s Health Insurance Program (SCHIP), and other government health care programs that serve low-income and disabled people.

Centene wants to expand and hopes to add 500 more relatively high-paying jobs over the next three years to its current Missouri staff of 551.

To accommodate all this, Centene plans to build a spectacular new headquarters in downtown Clayton, the highest-end commercial district in the St. Louis region, situated in one of Missouri’s most affluent communities.

Right now, Centene corporate offices are housed in a modest office building in Clayton. The company shopped many possible locales for the project, famously at Ballpark Village in downtown St. Louis, but also in Denver, Detroit, a Virginia exurb of Washington, D.C., as well as in Belleville, East Alton, Godfrey and Swansea and Chesterfield, Creve Coeur and Richmond Heights.

But the new “Centene Plaza” will be situated in Clayton. It will occupy the better part of a city block. Plans call for the first phase to include a tower with 520,000 square feet of rentable office space. For comparison purposes, the 31-story Laclede Gas building downtown contains about 435,000 square feet. Also planned is a 1,340-car garage.

Centene estimates that the first phase will cost $211 million. Of this, the company seeks $62.3 million — or 29.5 percent of the total — in public subsidies. These include $22 million in tax abatement from Clayton, $9.6 million in state and local sales tax abatement for construction materials and other personal property used in the project, $19.2 million in state tax credits and benefits under the state “quality jobs” program, $1 million in special road improvements and $2.5 million raised through a local special taxing district.

The remaining $8 million would come through the “Missouri BUILD” program in the form of tax credits that support the construction project. Centene told state officials that, without this benefit, the company would leave Missouri.

Centene won’t occupy all 520,000 square feet of its new building, so it’s hunting for tenants. Armstrong Teasdale LLP, a 267-lawyer law firm that counts Centene among its clients, occupies about 120,000 square feet in the Metropolitan Square building downtown. The Post-Dispatch has reported that Armstrong Teasdale is considering moving to Centene Plaza.

Mr. Slay is furious at the possibility that “Missouri BUILD” tax credits could be underwriting attractive lease terms that might lure a major downtown employer to desert the city.

“If people see major law firms that have been downtown forever leaving for the suburbs, that does not bode well for the confidence level people have,” the mayor said at the July meeting of East-West Gateway’s board of directors. “It’s happening because of one reason and one reason only: they’re having so much money thrown at them.”

Greg Steinhoff, director of the state’s Department of Economic Development, says emphatically that this would not be a proper use of the Missouri BUILD credits.
Bob Miserez agrees. He’s executive director of the Missouri Development Finance Board, the state agency that tentatively approved the $8 million Missouri BUILD incentive for Centene. He expects his board will make specific inquiries before the deal is finalized.

Do such inter-city bidding wars promote or undermine local governments’ ability to deliver essential services? Do they widen or narrow economic and racial disparities in the region?

The results of the East-West Gateway study are expected by December. The answers can’t be pursued too vigorously or come too soon.

(Pictured: Detail of artist’s rendering of proposed Centene Plaza in Clayton)