This 2015 file photo shows the building housing Centene Corporation headquarters in Clayton, Mo. The Fortune 500 company has reached a deal on an incentive package that would lead to establishing the insurer’s West Coast headquarters in Sacramento. Jeff Roberson Associated Press file
This 2015 file photo shows the building housing Centene Corporation headquarters in Clayton, Mo. The Fortune 500 company has reached a deal on an incentive package that would lead to establishing the insurer’s West Coast headquarters in Sacramento. Jeff Roberson Associated Press file

Marcos Bretón

Connecting the dots on issues, people and news in the Sacramento region

Marcos Bretón

Should Sacramento be paying a Fortune 500 company millions to bring jobs here?

By Marcos Bretón

mbreton@sacbee.com

November 20, 2017 04:00 AM

UPDATED November 21, 2017 08:25 AM

Sacramento being Sacramento, there undoubtedly will be criticism of a new city plan to essentially pay a large employer to bring jobs to the state capital.

 
Opinion

It’s in the city’s DNA to oppose even that which it desperately needs. We saw that when multiple lawsuits slowed down the eventual construction of Golden 1 Center in a formerly dying downtown mall.

But few can argue the new arena hasn’t had a positive effect on downtown. Concerts of all kinds are routinely sold out there, nightlife has returned to the urban core and new businesses keep arriving there.

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Moreover, the Kings didn’t relocate to Seattle, and Sacramento still controls the 180 acres of land in Natomas where the Kings used to play. (If the Kings had been sold to the Seattle group, led by billionaire Steve Ballmer, it would have claimed that land.)

No, the city should never rubber stamp deals that involve private businesses and our tax dollars. There should be discussion and debate around these decisions. But there should be acknowledgment that cities like Sacramento have to find new and innovative ways to move forward.

That’s what happened with Golden 1 Center, a deal in which civic self-determination was preserved. And yet there are voices in Sacramento that continue to decry the arena because, well, that’s what we do. It’s a function of being the state capital, a political town where officials, lobbyists, nonprofits, unions and activists fight over resources and loudly broadcast displeasure about anything that doesn’t further their goals.

Which brings us back to city leaders paying for jobs to come to Sacramento. To even contemplate such a thing here requires someone with the ability to envision a plan that transcends past business practices.

As part of his jobs agenda, Mayor Darrell Steinberg has been working with others to persuade St. Louis-based health insurance provider Centene, a Fortune 500 company, to move its western region headquarters to North Natomas. With them would come the potential of thousands of good-paying jobs relocating to Sacramento.

As The Bee’s Ryan Lillis reported: “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.”

While Sacramento and Centene signed the multimillion-dollar incentive package Friday, it’s not yet a done deal. It still requires City Council approval on Nov. 28. And Centene’s board of directors would have to approve locating the new corporate center here, a vote that may not happen until early 2018.

But if this idea sounds crazy to you, you are not paying attention.

By almost any metric, Sacramento is a jobs-poor city. It took us longer to recover from the Great Recession than other larger California cities. Why? Because, in part, we still have relatively few large private employers.

Wallethub, the consumer financial website, ranked American cities recovering from the recession by 18 key economic indicators, such as: “inflow of college educated workers,” “share of households receiving public assistance,” “home ownership rate,” and “employment and earning opportunities.”

Sacramento clocked in at 239th overall, down with rust belt cities and southern towns such as Lakeland, Fla., and Lafayette, La.

Moreover, some analysts see economic headwinds in the near future. Earlier this year, University of Pacific economic analysts found that Sacramento’s unemployment could start to tick upward in 2019 because of a sluggish jobs base.

The Centene deal, if consummated, could bring what Sacramento lacks: More college educated workers; more good-paying jobs in an already established health sector; more notoriety and prestige; more tax revenue to the city and county; more momentum.

Steinberg has said the agreement “will represent the single biggest private sector job recruitment in the city’s modern history.”

If the Centene deal results in more than 5,000 jobs over a dozen years, Steinberg estimates that could bring $4 billion in new economic activity. Clearly, such numbers should be viewed as more of a goal than a certainty, but they are worth noting.

Also worth noting is that like the deal to build Golden 1 Center, the Centene deal involves public investment. And like the arena deal, this is a long-view play.

The Golden 1 deal wasn’t just about building an arena. It was about replacing the old Downtown Plaza, which had been abandoned by many of its tenants and was eroding. It was about preserving a civic amenity in the Kings. It was about maintaining control of land in and around Sleep Train Arena.

Many Golden 1 critics refused to acknowledge a bigger picture for Sacramento and instead harped on the “subsidies for basketball billionaires” line that misstated a larger civic interest and benefit.

Centene employs 31,000 people and already has 3,000 workers in Rancho Cordova. The deal only provides incentives for new jobs brought here from outside of the area. And it enhances the possibility those already existing jobs will stay here and not be moved to another city.

That Centene could move its West Coast headquarters to Natomas is also significant in that this is a section of town that once had been subjected to a building moratorium until flood levees were shored up. And now, instead of being known as the part of the city that lost the Kings, it could become a key jobs hub of Sacramento. Angelique Ashby, the councilwoman who represents Natomas, said she envisions employees living in nearby neighborhoods and walking or biking to work.

But why should the city have to provide incentives to a company with $40 billion in annual revenues? Because Sacramento is competing against cities like Austin, Denver and Phoenix – places that can and will offer much bigger incentives than what Sacramento is offering.

If other cities are offering incentives, why would Centene choose Sacramento? “Because we have talent,” said Barry Broome, executive director of the Greater Sacramento Economic Council. Broome said Sacramento is already known as health care hub, which is attractive to companies like Centene.

California also is attractive to Centene because the state embraces the Affordable Care Act and expansions in Medicaid, their primary customer base. In Natomas, Centene executives would be a short car ride from the state Capitol. Sacramento remains a more affordable option over other big cities in the state.

Sacramento has been able to lure Centene by tapping money from an innovation fund established to promote a local business climate. By using money from the fund to incentivize jobs instead of physical development, Sacramento is moving towards a new paradigm for economic development, said John Dangberg, a former assistant city manager and key player in the Golden 1 deal.

In years past, Sacramento, like most California cities, focused solely on providing incentives for physical development. The city would contribute favorable financing or land to induce developers to build.

Centene is known for its philanthropy, which means that local nonprofits benefit from having a new economic player eager to fund local good works. And if one Fortune 500 company invests in Sacramento, others could follow. If that happens, Sacramento’s long-shot bid to land Amazon’s second headquarters suddenly seems like less of a long shot.

Either way, the play for Centene demonstrates that Sacramento is open for business. It’s a message that needs to be embraced.

Marcos Bretón: 916-321-1096, @MarcosBreton