Opinion: CoverMyMeds Abatement Not Worth the Cost
In total, Columbus schools will lose an estimated $35.5 million over 15 years due to a generous tax abatement package the city is awarding to software company, CoverMyMeds, according to a new report by Policy Matters Ohio.
Tax abatements, a central part of state and local economic development strategy, eliminate all or part of an entity’s tax liability for a period of time in exchange for something that will purportedly benefit the community, such as job creation or more payroll tax revenue. Ohio schools depend on local property taxes for funding. Incentive packages that zero out property taxes for 10 or 15 years, like the CoverMyMeds deal, can damage public schools’ ability to keep up with changing needs of students.
The Columbus school district will lose an estimated $55.5 million over the full term of the agreement, but as part of the deal, schools will receive a maximum of $20 million in income tax revenue. The CoverMyMeds abatement will contribute to the growing revenue Columbus gives away to corporations.
Policy Matters found that in 2017, three common types of tax abatements cost Ohio schools at least $125 million. According to new data obtained from the Franklin County Auditor’s office, Columbus schools lose about $26.6 million to those abatements. This does not include all types of available abatements. In Franklin County the taxable value of abated property was over $3.2 billion that year, more than any Ohio county.
Due to inconsistent transparency and reporting standards, our estimates of what tax abatements actually cost are low – perhaps very low. Even still, it’s clear that schools are big losers when corporations pit state against state, city against city and in the case of CoverMyMeds, neighborhood against neighborhood.
CoverMyMeds was a billion-dollar startup acquired by Ohio-based drug distribution company, McKesson Corporation. McKesson, which reported revenues of $208 billion in 2018, has paid more than $150 million in fines for failing to monitor and detect suspicious orders of oxycodone. The City of Columbus sued McKesson and other opioid distributors and manufacturers, claiming their actions increased drug abuse, overdose deaths and medical costs.
As part of the abatement, CoverMyMeds pledged to retain the existing 592 full-time jobs and create 1,032 new full-time positions at the new campus. The city expects to receive $1.8 million in new income tax revenue each year, totaling more than $28 million over the abatement’s 15-year term. The company also promises to support Columbus public school students with paid apprenticeships, computer workshops, scholarships to TechCorps summer camp and more.
While it’s great that CoverMyMeds wants to support Columbus students, these programs are hardly worth $35 million. At every level of government we should reevaluate the use of abatements in economic development. The goal of tax incentive packages and tax policy in general should not be to appease corporate interests, but to advance the public’s interest in creating shared prosperity, quality jobs, and livable communities for everyone.