5 things to know about the HCA Midwest Health's tax subsidy deal
The state of Kansas is giving HCA Midwest Health about $3 million in tax breaks to move its headquarters four miles from Kansas City to Overland Park.
The Star reported last week that the Kansas Department of Commerce announced a relocation deal with HCA Midwest. Gov. Jeff Colyer, a plastic surgeon, works for the hospital chain.
After the Kansas Department of Commerce declined the Star’s request for information on HCA Midwest’s tax deal — saying the contracts weren’t signed yet — Colyer’s office took the rare step of releasing the information to the Star anyway.
The information released by Colyer’s office shows that Kansas agreed to give HCA Midwest about $1.5 million in tax breaks that the company is entitled to “by right of law” and another $1.5 million in “discretionary” tax breaks. The discretionary incentives come almost entirely from the Promoting Employment Across Kansas, or PEAK, program, which will allow HCA Midwest to keep nearly all of the state income tax withholding for five years for the employees that make the move.
His spokesman, Kendall Marr, reiterated that the deal was done before Colyer replaced Sam Brownback and Colyer didn’t know it was in the works.
“This HCA deal was marked in Commerce’s system as a ‘success’ on June 15, 2017,” Marr said via email. “Gov. Colyer had zero involvement with this deal.”
The deal has reignited criticism of the economic border war that has seen Kansas and Missouri dole out millions of dollars to dozens of companies to move a few miles across the state line. It’s also raised questions about how the state could do a deal with the lieutenant governor’s company without his knowledge.
“If he didn’t know what was going on in economic development in Kansas, he should have,” said Kansas Rep. John Carmichael, a Democrat from Wichita.
“What was he doing the last seven years? Was he so far out of the loop he had no idea what the Department of Commerce was doing?”
Ryan Silvey, a former Missouri state senator who was heavily critical of the border war while in office, said if that’s the case it means corporate tax incentive deals in Kansas aren’t getting much scrutiny.
“If these deals are going on and being brokered and the second-highest ranking official in Kansas is not aware of it, that sounds like another problem the state should probably deal with as far as transparency goes,” Silvey said.
Kansas has one of the country’s least open methods for handing out corporate tax incentives, the Star reported last year as part of the Secret Kansas series about government transparency.
Colyer has said his administration will make increasing transparency a top priority and he signed four executive orders in that vein last week.
The Colyer connection aside, Bill Hall, the president of the Hall Family Foundation, said there was something else that vexed him about the HCA Midwest tax deal.
Hall has long been a critic of the border war, arguing that trying to lure companies across the state line drains the tax base of both states while creating no new net jobs.
An occasional argument for such deals has been that without them, a company might decide to move out of the region entirely. But in the case of HCA Midwest, which owns hospitals and medical clinics throughout the Kansas City area, Hall said even that argument wouldn’t hold water.
“They weren’t going anywhere,” Hall said. “There was no threat they were leaving Kansas City. This is the most egregious example of the misuse of tax incentives.”
For years, Hall and the Greater Kansas City Chamber of Commerce have tried to get Kansas and Missouri to declare a truce.
The closest they came was in 2015, when Missouri lawmakers passed a bill to stop giving relocation incentives to border businesses.
But that bill was contingent on Kansas also passing one. Brownback, who was governor at the time, said he was open to ending the border war, but he and his fellow Republicans who controlled the state legislature never agreed to do so.
Brownback later offered a partial olive branch that would have ended the use of PEAK to lure border businesses if Missouri did the same with a similar tax break. Missouri lawmakers declined.
Silvey, who pushed hard to get the Missouri bill passed, said it was disappointing it never took effect, but the blame lies with Kansas.
“You can’t unilaterally disarm in a battle of incentives,” said Silvey, a Republican. “If Missouri decides to quit playing and Kansas is still throwing money around, that’s not good for Missouri. But I still contend the whole process is not good for either state.”
There’s evidence that it will likely continue.
During his first year in office, Missouri Gov. Eric Greitens touted reinsurance company Swiss Re’s move from Overland Park to downtown Kansas City, which could net the company almost $20 million in tax breaks.
Colyer, in his first month on the job after taking over for Brownback, was similarly bullish last week about the HCA Midwest deal.
“Gov. Colyer is always willing to listen to ideas others may have on how we can improve the way our government operates,” Marr said. “But as governor, Dr. Colyer will continue to work hard to boost economic development and bring high-quality jobs to Kansas.”
Kansas Rep. Ken Corbet, a Republican from Topeka, said he supports more transparency and accountability for economic development deals, but not ending the border war.
Kansas has to do something to curb out-state migration, he said, and economic development deals are one way to do that.
“When the dust settles, if Kansas gets the jobs and Kansas gets the property tax and Kansas gets the net gain, I think that’s good for Kansas,” said Corbet, the vice chairman of the House Commerce, Labor and Economic Development Committee.
But Silvey said the reality is that border war deals rarely create any new jobs or bring in new residents.
Mostly, he said, the states are paying companies to change the commutes of employees they already have.
“If your job moves four miles down the road you’re not going to buy a new house, right?” Silvey said. “You’re just going to take another route to work.”
HCA Midwest is a subsidiary of Hospital Corporation of America, one of the nation’s largest for-profit hospital chains.
Christine Hamele, a spokeswoman for HCA Midwest, said the headquarters move will affect only about 60 employees and the company remains committed to its Missouri hospitals. She said the new headquarters will also house employees for HCA’s Louisiana and Mississippi operations, but there was no discussion of moving it outside of the Kansas City area.
Silvey said that means there was no reason to offer tax breaks.
“When you’re talking about moving a regional company’s headquarters four miles down the road, that seems like another poster child for why this is a bad idea,” Silvey said, “and why it continues to waste tax dollars in both states.”