Illustration by Danny Elchert
St. Louis got some great news from one of its most prominent large companies in November.
Express Scripts, a $22 billion pharmacy-benefits manager, had decided to build a $60 million drug-distribution plant near its headquarters in North County. St. Louis County and the state of Missouri had outlobbied a Philadelphia suburb and the state of Pennsylvania for the prize.
Our team reportedly came up with $7 million in public assistance, $3 million in something called BUILD Missouri Bonds, and an estimated $4 million from the county in forgiveness of half of the facility’s real-estate and personal-property taxes over the next 10 years. That must have trumped the 10-year elimination of state and local property taxes offered in Pennsylvania.
As a result, some 300 “next-generation jobs” would significantly boost Missouri’s economy, Gov. Jay Nixon proclaimed.
County Executive Charles Dooley said he was “extremely grateful” to Express Scripts for its decision. Nixon praised the company’s “continued commitment to the St. Louis community.”
I had a slightly different reaction. I wondered why a company that netted $810 million in after-tax profits in the past year would need any public help in expanding its business.
Strike that. Actually, I wondered why such a company would want public assistance.
So I decided to write the following letter to the business leaders of St. Louis.
Ladies and Gentlemen,
The St. Louis area is facing a crisis, and it needs your inaction.
It doesn’t need major new financial commitments from you. It doesn’t need you to fund new studies. It doesn’t need you to convene a summit. It doesn’t need you to do anything.
Instead, St. Louis needs your inaction in one simple way: It needs you to stop taking money from the taxpayers in the form of corporate welfare.
It’s time for you to live up to the ideals of the free-enterprise system. And it’s time for you to act like civic leaders.
Not a week goes by in our community without an announcement of some governmental initiative to transfer wealth from the public sector to private hands. That’s not the language that’s used, but it’s precisely what takes place beyond the spin.
The language of the spin is soothing to the souls of elites. It’s all about economic development and job creation and incentives and abatements and tax-increment financing and initiatives and special programs and stimulus.
But it’s really only about resources and hands. Public resources. Private hands.
It’s almost unthinkable for a major new investment to be contemplated by a business without negotiation with the government as to how much public assistance will be provided, and in what form. Sometimes—as in the case of at least four large law firms and a stock brokerage in downtown St. Louis in recent years—the “investment” is prompted by nothing more than relocation of office space.
Worse yet, savvy companies have discovered that the same competitive bidding processes used in their own procurements works just as well with regard to the acquisition of public assistance. Thus we have come to see—and maybe even expect—ferocious battles between competing government entities through which business investment is essentially auctioned to taxpayers.
This is out of control. And you, the business leaders of St. Louis, are the only ones who can stop it, with leadership.
Instead of seeing the politicians’ obvious lack of leverage and exploiting it, you need to make a stand for free-enterprise principles.
You need to say: We don’t need the government’s help to run or build our businesses, and more important, we don’t want the government’s help.
You, the business leaders of St. Louis, need to refrain from allowing taxpayers to be pitted against one another in St. Louis–area bidding wars for your favor. And working through Civic Progress, the RCGA, and other local business associations, you should establish this as a St. Louis principle to be followed, voluntarily, by your peers.
I’m not suggesting an extraordinary sacrifice here. Just stop using your position to obtain benefits that smaller companies could never receive. It’s counterproductive to our region, and it’s unfair.
To the extent that our region has millions in economic-development funds to invest, let them be used for their intended purpose, which is to attract new investment from other regions and other states. In my view, such funds shouldn’t exist anywhere—the country did survive without such programs at the municipal level for nearly two centuries of its history—but St. Louis doesn’t have to disarm unilaterally in competition with other metropolitan areas.
But that’s a different matter than having desperate local governments bullied into bidding wars over the region’s existing businesses. And it’s a different matter than diverting funds intended to attract outside businesses and handing those funds to existing local businesses for their natural growth.
Spare us the rhetoric of the great new entitlement theory of today’s “capitalism.” You know, that a company making a large new investment is entitled to have its financing paid, its costs lowered, or its risk cushioned out of the “future” tax revenues to be generated by the investment.
Companies don’t make major capital investments out of the goodness of their hearts, nor out of a desire to lower the employment rate or help the tax rolls. Nor should they. You make your investments to get a return on those investments, and if they’re successful, more tax revenues will follow.
Tax revenues are tax revenues. Your fair share of those revenues is unaffected by the fact that your most recent investment helped create them.
Small businesses take risks every day—much greater risks proportionately—and they don’t receive loans, funding, or guarantees from the government in exchange for producing more tax revenues through their investments.
I know. I’ve been an entrepreneur in this town for almost 33 years, and I’m currently a principal in four small businesses, including the one that publishes this magazine.
None of my companies has ever asked for—or received—a dime from any government. I’m not a hero for that.
I’m a capitalist.
Why should it be different for you?
Behaving as a responsible taxpayer is an essential part of citizenship, corporate or otherwise. None of us loves paying taxes, but it is simply not responsible to use leverage and clout to receive special treatment, in terms of taxation, that is not available to those without the same influence.
Every tax dollar “saved” or “avoided” by a corporate taxpayer is a dollar that didn’t get spent on a public purpose in the community you purport to lead. Every dollar you avoid through tax incentives is one that comes out of a child’s education or the street department or the pay of a policeman, a fireman, a sanitation worker, or someone else whose work supports the community.
You fashion yourselves to be the guardians of the community. Your companies’ public-relations archives are packed with evidence of your good works, your community involvement, your philanthropy, and all the rest. It’s all there on the plaques on your walls.
But you’ll let governments bid against one another in your metropolitan area—with your taxpayers’ dollars—to save a little on the margins? Is that leadership?
As many of you are fond of saying in other contexts, government is not the solution here. Our political system absolutely demands short-run results and gratification. Elections are won by what has been done for the electorate lately. Politically, long-term planning is for losers.
The mayor of St. Louis, as just one example, appears to believe he has no choice but to adopt a bunker mentality. His challenge is to do whatever it takes to save whatever is left of an eroding corporate base.
In recent years, the city has felt compelled to make one special deal after another, and it finds itself sliding down the slippery slope of large-company entitlement. Every deal is a precedent for the next one of you.
The stagnant county government is now following suit.
In St. Louis, “too big to lose” is a cousin of “too big to fail” on a national level.
It’s no way to run a city, a region, or a country.
Perhaps elected officials in the St. Louis region could ease the pressure by calling a truce among competing local governments. Perhaps they could agree to refrain from using their respective taxpayers’ coffers to steal businesses from one another.
But as long as you, the business leaders of St. Louis, are willing to use your obvious leverage to acquire tax breaks and other forms of public assistance, the political class has no choice but to follow. A truce among the governments will only last until it’s broken.
For the better part of two decades, I was a vocal critic of your leadership—especially as manifested by Civic Progress—because too much civic power was centralized among a small, unaccountable group of chief executives who lacked diversity and empathy for ordinary citizens.
I have no apologies for my rants against “28 rich white guys calling all the shots behind closed doors” or for suggesting that we change the motto of St. Louis from “Gateway to the West” to “Father Knows Best.”
The patriarchy didn’t get such great results for St. Louis, and as predicted, its failure to encourage diversity in real decision-making—in terms of race, gender, age, and social status—has exacted a long-term toll.
But those old arguments are as moot today as the need to preserve the historic downtown structures you helped tear down in favor of gleaming new skyscrapers that already teeter on bankruptcy.
Today, the issue isn’t that you’re too overbearing about what you can do for St. Louis.
It’s that you’re obsessed with what St. Louis can do for you.
SLM co-owner Ray Hartmann is a panelist on KETC Channel 9’s Donnybrook, which airs Thursdays at 7 p.m.