Cerner’s appetite for new construction projects, adding jobs and — yes — huge tax breaks knows no bounds in the Kansas City area.
However, the latest Cerner request is greedy and indefensible.
The media have reported that the multi-billion-dollar health company wants to spend $35 million to build what it’s calling a “demonstration center” facility on a parking lot near its North Kansas City home.
(UPDATE: The North Kansas City Council approved the request Tuesday night.)
In a perfect world, the politicians would tell Cerner not to ask taxpayers to help pay for this project, relatively small for that company. (However, we don’t live in a perfect world.)
Here are the details buried in the company’s application, details that deserve public attention.
A Sept. 22 memo from Scott Siemers, assistant treasurer for Cerner, to the city of North Kansas City contained these facts to back up the company’s request for public assistance:
— The project will lead to “6 new jobs,” with an anticipated total payroll of $300,000 a year.
That’s not a misprint: A $35 million, taxpayer-subsidized project will create six jobs averaging $50,000 in pay a year, according to the company’s current estimates.
— Cerner wants an abatement of an estimated $5.633 million for the project.
The company would get 100 percent real estate tax abatement for the first 15 years and 50 percent real estate tax abatement for the next 10 years.
That’s an approximate cost of $940,000 in tax breaks for each of the six new jobs.
— The growing North Kansas City School District — essential to the future success of the Northland — would be the biggest loser because of the Cerner abatement.
The district would not receive $4.63 million in property taxes created by the project over 25 years. That’s an average diversion of $185,000 a year.
Instead, the schools would get payments in lieu of taxes of just over $994,000, or about $40,000 a year.
UPDATE: The NKC School District does not oppose Cerner’s request, a top district official told me Tuesday. The project still will create some extra property tax money for the district plus sales tax money for the state. It will keep the project north of the river and not on Cerner’s other properties. And the district is able to apply for and receive old computer equipment that the company disposes of.
My response: Cerner still will be taking more than $3.6 million in future tax revenues that could be better spent helping the more than 19,000 students in the school district.
— The city of North Kansas City would be the second biggest loser, not receiving a total of $658,000 because of the abatement.
In its cost-benefit analysis, Cerner said it was requesting the $5.6 million in tax breaks to help cover construction costs.
“The type of soil under the proposed location is loess, which will require us to take piers down to bedrock in order to create a structurally sound foundation for the building addition. Further, the site selected has a high volume of fill dirt located on it which will require additional piers.”
Cerner also made it clear what could happen if the North Kansas City Council said “no” to the subsidy request.
“Our alternative is to construct this office building at our new campus in Kansas City, Missouri, where these foundation issues do not exist and incentives are already in place,” the company’s application stated.
So there you go: Mess with Cerner and it will take its project elsewhere.
On Monday, I contacted Victoria (Guerra) Rosengarten with Cerner public relations and asked three questions.
Here they are, with Rosengarten’s responses on behalf of the company:
- The application says this project will create or retain 6 new jobs for Cerner. This was on a document signed by Cerner assistant treasurer Scott Siemers on Sept. 22, 2016. Is that correct?
This is an initial estimate and we are still evaluating positions.
- The application says the project will use $35 million in bonds for construction and $15 million for personal equipment, and calls it a $50 million project. That’s higher than The Star and Business Journal reported. So is this truly a $50 million expansion project?
Broken down the investment is a $35 million construction project. When finished, we plan to invest an estimated $15 million for equipment and personal property.
- The application says the company is seeking the tax incentives largely because of special construction needed because of the soil under the parking lot. Could Cerner absorb most or all those costs and NOT divert $3.632 million from the North Kansas City School District in the future, as well as smaller amounts from other taxing jurisdictions?
We requested an abatement to cover the incremental cost of the property’s soil condition. Under Chapter 100, companies can apply for tax abatement on the personal property and sales taxes, which Cerner did not request. We feel this is a balance with the needs of Cerner and that of the community.
These answers do not change my initial impression of this proposal.
A company the size of Cerner — and as financially successful as Cerner — should not be taking advantage of North Kansas City officials.
The company should not be able to divert $5.6 million in public funds from the North Kansas City School District and other taxing jurisdictions for this project.