Columbus' CoverMyMeds tax breaks challenged after layoffs. How much did they get?
A candidate for Columbus mayor is challenging the tax break received by CoverMyMeds for its new Franklinton headquarters, after the health technology firm announced major layoffs this week.
Joe Motil, who is taking on Columbus Mayor Andrew Ginther, reiterated his opposition to the 2018 tax break, which he called "unnecessary and excessive."
What was CoverMyMeds' tax deal?
Under the terms of the tax incentive, approved in July 2018, CoverMyMeds received a 15-year, 100% property-tax abatement worth up to $77.7 million for its new corporate campus along McKinley Avenue. The company opened the first of its two new buildings on the site in 2021 but has since sold both buildings.
As part of the deal, the city also agreed to return 30% of city income tax withholdings on new CoverMyMeds employees for up to eight years (35% for any new employee who lives in Columbus). That incentive is worth between $4.5 million and $5.3 million.
In exchange, CoverMyMeds promised to retain and relocate 592 jobs to the new headquarters and create 1,032 new jobs with payroll totaling $76.4 million within five years.
The Columbus Board of Education signed off on the deal, agreeing to forego $55.6 million in property-tax revenue in exchange for a portion of the income-tax revenue the new jobs would generate.
How many Columbus employees will CoverMyMeds retain?
Motil's news release suggests that CoverMyMeds' layoffs violate the terms of the agreement.
Motil's claim rests on the number of employees CoverMyMeds will retain in Columbus. Company spokesperson Angela Tavrell has declined this week to answer Dispatch questions on CoverMyMeds' current or post-layoff headcount in Columbus.
CoverMyMeds told employees that it is laying off 815 workers but did not say where those workers are located, or how many would be left. As part of the announcement, CoverMyMeds said it is closing its Arizona office and leasing out some of its Franklinton headquarters.
According to information provided to the city for its tax agreement, CoverMyMeds employed 1,334 workers in Columbus last year, including 742 new jobs.
Citing the employment website Zippia, Motil said CoverMyMeds employed 1,336 workers in Columbus in February, short of the 1,624 full-time employees required by its tax abatement agreement.
How are tax deals reviewed?
Ginther's spokesperson, Robin Davis, said “These are performance-based incentives. If you don’t perform, you don’t receive the incentive. Period. Companies are audited yearly to assure they are meeting performance commitments in their incentive agreements.”
Sheldon Goodrum, spokesperson for the city's Department of Development, said all tax incentive deals in the city are subject to review by the city's Tax Incentive Review Council. Tax deals throughout the county are also tracked by the Franklin County Tax Incentive Review Council (TIRC).
"This is why we have the tax review council," Goodrum said. "If an agreement needs to be amended or rescinded, we can do it. We can look at what the agreement calls for, and whether the terms of the agreement are being met."
The bulk of the city's tax deals are included in eight Community Reinvestment Act neighborhoods, 49 Enterprise Zones and 96 Tax Increment Finance districts, according to last year's county TIRC report. An estimated $16.5 million was foregone in taxes in the city deals last year, in addition to $45 million in diverted taxes for Tax Increment Finance districts.
The TIRC recommended last year that the city remind 25 companies with tax deals, including CoverMyMeds, of the importance of filing timely and complete reports with the city.
In addition to the city tax breaks, CoverMyMeds also received several state tax credits for its expansions, starting in 2010 with credits worth $546,055, in 2014 for credits worth $482,288; in 2018 for credits worth $19.4 million; and last year with credits worth an estimated $6.8 million.
What does CoverMyMeds do?
CoverMyMeds was founded in 2008 to provide physicians and pharmacists across the country an online service to get quick insurance approvals for new prescriptions. According to the company, the service has been used more than 200 million times.
CoverMyMeds is profitable part of McKesson
Motil notes that CoverMyMeds is a profitable part of the $50 billion Texas healthcare company McKesson Corp., which bought CoverMyMeds in 2017 for $1.4 billion.
For the nine months ending Dec. 31, CoverMyMeds had revenue of $3.2 billion and profits of $400 million.
In his note announcing the layoffs to employees, however, CoverMyMeds President Kevin Kettler said the company needed to make changes "to continue on a path of long-term sustainable growth."
jweiker@dispatch.com
@JimWeiker
This article originally appeared on The Columbus Dispatch: Columbus' CoverMyMeds tax breaks challenged after layoffs.
