Sacramento city leaders have signed a multimillion-dollar incentive package with a Fortune 500 health insurer that plans to establish its West Coast headquarters in North Natomas, bringing hundreds of jobs in the years to come.
Centene, a St. Louis-area company that manages Medicaid and other health insurance programs for more than 12 million people, signed the incentive deal on Friday and could employ “upwards of 5,000” workers at its Sacramento headquarters, Mayor Darrell Steinberg said. That number, at least initially, will likely include the 3,000 employees Centene already has in the region.
Steinberg said the agreement “will represent the single biggest private sector job recruitment in the city’s modern history.”
“This agreement is a major step towards historic achievements for our city and our region,” the mayor said.
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Steinberg cautioned that the incentive package “does not represent a final agreement” with Centene to locate its West Coast headquarters in Sacramento. Centene still needs to sign a lease for property it is exploring along Interstate 5 in North Natomas, and its board of directors must approve locating the new corporate center here – a vote that may not happen until early next year.
The City Council also must approve the incentive package and is scheduled to vote on the deal Nov. 28.
“We are evaluating the city of Sacramento as a possible location for a facility,” Centene spokeswoman Sandy McBride said in a written statement. “This is a positive first step.”
As part of the agreement, the city of Sacramento would give the company $9,000 for every job created at the headquarters that is new to the Sacramento area. To qualify for the incentive, the median salary for those positions must be at least $61,515 and the average salary must be above $64,078 a year. Most of the positions at the new headquarters would be in health care, accounting and information technology.
Centene would receive $2.7 million in city incentives every time it assigns 1,000 workers to the North Natomas campus, but only if 300 of those positions are new to the Sacramento region and are paid above the salary requirements. The incentive would be available for 12 years and would be capped at five payments, or $13.5 million. If Centene does not maintain the local workforce levels, the city can ask for its money back.
The incentives would come from the city’s Innovation and Growth fund, which includes the city’s share of tax revenues that used to go to redevelopment, as well as proceeds from selling city-owned property. That fund has a current balance of $8.8 million.
The city also plans to provide incentives toward up to 150 Centene jobs for people from disadvantaged backgrounds, including ex-felons, people with disabilities and former foster youths. Those jobs must also be new to the Sacramento region.
City officials would not say if Centene had a preferred site in North Natomas. Many of the parcels along I-5 – including a cluster of large empty lots just west of Sleep Train Arena, near Arena Boulevard – are already zoned for development of future employment centers.
Centene is not negotiating to locate its headquarters at the Sleep Train Arena site, according to two sources with knowledge of the deal.
David J. Bugatto, president and CEO of Alleghany Properties, which has owned land east of I-5 near Arena Boulevard for more than 20 years, said in an email he is “not at liberty to discuss the status of the property Alleghany Properties owns at I-5 and Arena Boulevard at this time due to our longstanding policy of not discussing business practices publicly.”
“(We) have been engaged with the community to identify uses that most benefit the Natomas area,” he wrote. “We remain committed to that mission in our ongoing search for the ideal users for our property.”
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Councilwoman Angelique Ashby, who represents North Natomas, said the headquarters would serve as a catalyst for an “employment zone” she and city officials have drawn out along the Interstate 5 corridor. Several large empty lots are included in that zone.
“(The Centene agreement) represents an extraordinary opportunity for North Natomas and really the entire region,” Ashby said.
The company plans to start developing its headquarters by 2020, but could begin construction as early as next year. The incentive agreement requires Centene to have employees working on the campus no later than 2022.
Centene has not finalized its development plans. Interim Assistant City Manager John Dangberg said a typical 5,000-employee campus could occupy up to 1.5 million square feet of office space. With clusters of four- and five-story buildings, that office park could fill around 80 acres, he said. Centene could also lease existing office space in North Natomas.
The company recently signed a lease for 230,000 square feet of office space on International Drive in Rancho Cordova and already occupies a 120,000 square-foot office in that city. Rancho Cordova Mayor Donald Terry said the recent office lease indicates the company has a long-term commitment to his city to keep thousands of jobs there. City Manager Cyrus Abhar said the company plans to maintain satellite offices in Rancho Cordova and called the Sacramento news “a major win for the region.”
“I’m not concerned about losing jobs in Rancho Cordova,” Terry said. “They’re going to build a new headquarters in Natomas, but none of us knows whether that’s enough to accommodate what they’re doing.”
Sacramento officials said if Centene had chosen another city for its western headquarters, roughly 3,000 jobs in the Sacramento region could have been relocated or lost.
Barry Broome, president and CEO of the Greater Sacramento Economic Council, said Sacramento beat out the likes of Austin, Texas, and Phoenix in attracting Centene. He said several corporate leaders in the region – including the owners of the Sacramento Kings – took part in the recruitment process.
Centene has already been awarded a $7 million tax credit from the Governor’s Office of Business and Economic Development, but the deal with the city could solidify its decision to locate in Sacramento. In March, Centene issued a national Request for Information from Western cities interested in hosting the company’s new corporate center. The negotiations intensified in recent weeks through a series of long conference calls between Centene officials, the mayor and other city leaders.
Centene ranks 66th on the Fortune 500 list of the nation’s largest companies, with annual revenues of more than $40 billion and 31,000 employees. The company manages health plans for more than 12 million people in 29 states. Last year, it purchased Los Angeles-based health insurer Health Net.
It was also recently ranked by Fortune as the 27th fastest-growing company in the nation. The company is building a $700 million campus expansion just outside St. Louis that includes a pair of office towers standing at nearly 30 stories, a civic center and hotel.