Corporate headquarters
Patrick Tuohey

In 2014, Cerner received “the largest economic development project in the history of the state” to build their new headquarters at the former site of Bannister Mall. In return, they promised taxpayers they’d create 16,000 new jobs in Kansas City. How are they doing?

At the time of the subsidy application in late 2014, Cerner claimed they had just over 10,000 employees in Kansas City alone. In Exhibit 4B of their application for tax-increment financing (TIF) they promised to create 15,659 “permanent jobs to be CREATED IN Kansas City” as a result of the new headquarters building [emphasis in original]. And Cerner claimed they would accomplish this in 10 years.

One of the unmet challenges with economic development incentives is that it is difficult to know whether any economic growth is due to the subsidies themselves. Growth, if there is any, may have happened for reasons other than incentives, such as an improving economy overall. As we have noted time and again, the economic literature makes clear that there is little evidence that economic development incentives themselves actually drive any growth.

Five years into Cerner’s promise, it seems they are struggling to meet it. Just this week, The Kansas City Star reported that Cerner had 14,000 employees in the Kansas City region (presumably including its Wyandotte County, Kansas location). This is 4,000 more employees than what they reported in 2014. That’s pretty good growth for any company in just a few short years. But it’s nowhere near the 26,000 (a baseline of 10,000 jobs plus the 16,000 additional promised) they should have by 2024.

Maybe Cerner will make a lot of new hires in the next five years, but they need to bring on at least 12,000 people in Kansas City to make good on their commitment.

If Cerner fails to live up to the promises that made it Missouri’s top recipient of taxpayer subsidies according to Good Jobs First, what are the consequences? Did the issuing agencies insist on clawbacks? Were subsidies issued on a performance basis? Or did taxpayers’ representatives just believe what they were told and not insist that Cerner actually deliver on their promises? If experience is any indication, it’s likely the latter.

 

About the Author

Patrick Tuohey
Patrick Tuohey
Director of Municipal Policy

Patrick Tuohey is the Director of Municipal Policy at the Show-Me Institute.