Freethought San Marcos: A column
by LAMAR HANKINS
For nearly 25 years, my family has shopped at HEB. Except for the little experiment with reorganizing aisles into a confusing array of cart-clogging shelf designs at the big HEB store a few years ago, we have been pleased with the way the two HEB stores in San Marcos have been run. We believe they have provided good value at reasonable costs. We like HEB.
It is no small thing that HEB has been a good corporate citizen for San Marcos, giving money for city park development, contributing to the San Marcos Area Food Bank, supporting United Way campaigns, helping with disaster relief efforts, following good environmental practices, supporting local schools, assisting a “support our troops” effort, and participating in other charitable endeavors over the years. Some of this could be due to the presence in San Marcos of a scion of the family that owns HEB, Eleanor Butt Crook. She has made many charitable contributions, both personally and through the corporation, to help those in need in San Marcos. Mrs. Crook has demonstrated the charitable impulses that have helped America become a more compassionate and caring nation.
My positive opinions about HEB and the family that owns it make it hard to criticize the company, but I find myself flabbergasted that it would seek and accept economic incentives for an expansion of its distribution center in San Marcos. What is more puzzling is that the incentives are relatively small by the standards used recently by the San Marcos City Council. HEB will receive less than $30,000 a year in property tax abatements in the beginning, reaching nearly $50,000 per year by the end of the tax abatements, for expanding the distribution center, adding as many as 320 new jobs to the area economy over the next 20 years.
I understand, whether I approve or not, when a publicly-owned company seeks economic incentives from local and state governments. Their fiduciary duty to their stockholders is to increase profits by any legal means to benefit those stockholders. They have a legal duty to be greedy. But with a privately-owned company, such as HEB, only the private owners benefit from receiving development incentives, and there is no legal duty to enrich stockholders.
I can’t imagine that the family owners of HEB really need $30,000 to $50,000 a year to expand its San Marcos distribution center. The company has over $12 billion a year in sales. Even at a modest return for the grocery business, its profits are at least $500 million a year. In 2004, Charles Butt, the company’s CEO, was listed by Forbes as the 222nd richest person in the world, with a net worth over $2.3 billion.
The San Marcos distribution center has a lot going for it. It is located just off the IH-35 corridor midway between Austin and north San Antonio. It has access from the interstate via a recently-built overpass, reducing delays by trains. There were 47 acres adjacent to the present location available for expansion. The enlargement of this distribution center was a good corporate move, less costly than building a new facility or relocating into a larger distribution center elsewhere. In short, the economic incentives could not have been much of a factor in its decision. So, why did HEB seek them? Why should San Marcos taxpayers subsidize a business decision that would have been made without the incentives? Why did a charity-supporting, community-oriented, fabulously-successful business gobble up a pittance from the city council’s incentives trough and take badly needed tax money from the city?
In theory, I don’t have more problems with socialism than I do with capitalism. However, corporate socialism as practiced by the San Marcos City Council and governments large and small all around the country is a disgusting phenomenon. Corporations and businesses of all sizes play governments against one another to see which one will cough up the most money for their faux-capitalist ventures.
Capitalism is supposed to foster competitiveness through which businesses either sink or swim. The businesses are supposed to operate on the same playing field, without one being benefited by government to the exclusion of another. Whenever businesses go to government looking for a handout, they expect that (at least to the extent of the handout) their risks will be socialized while their profit remains privatized. Maybe its time for the City Council to start sharing in the profits of these businesses. After all, the jobs they create are just a by-product of their business. They are not creating the jobs in order to get the handout. In the case of HEB, it is expanding its distribution center to increase profits through greater efficiency. To do so requires more employees.
It is a bit like an owner of a stable of horses making the argument that since his horses eat hay, the alfalfa seed producers should give it some money to build a new barn. In the capitalist system, the seed producers may conclude that this is a good idea, but they will do so only if they get a percentage of the business’s profits or are paid interest on the funds provided to the horse owner and the funds must be repaid after a period of time.
In the present economic incentive system, the businesses seeking handouts game the politicians into giving them money for nothing that would not have occurred anyway. We no longer have capitalists. We have corporate socialists.
HEB intends to create 114 mostly low-paying jobs until it reaches Phase 4 of the expansion in 2021. Of the 114 jobs suggested in Phases 1, 2, and 3, only seven of them are living-wage jobs; i.e., they pay at least $17 an hour, the amount needed for a parent and child to live adequately in this area. So 94% of the jobs that may be created by the HEB expansion in the next 12 years pay below a living wage, and the agreement with the city requires HEB to create only 80% of the 114 jobs to receive the tax rebate.
Why should tax rebates be paid for such meager improvements in the San Marcos economy? The most straight-forward answer is because Economic Development San Marcos, the two chambers of commerce, and the City Council believe in corporate socialism. They won’t offer individual San Marcos citizens the money needed to further their education and improve their job prospects, but they will give money to a private corporation that made half a billion dollars last year in profits. And this deal also bails out the land speculators who own the 47+ acres adjacent to the HEB Distribution Center. They had hoped to sell the land to Hays County for its proposed county office complex, but when the county decided to go elsewhere, an HEB expansion was just what the owners needed to realize a profit off their speculation.
If the City Council wants to keep promoting corporate socialism, why doesn’t it at least require that all of the construction for the project be done by local contractors so that there is some real benefit to more of our citizens. And why doesn’t it make requirements of HEB that will give San Marcos residents a greater opportunity to secure the jobs HEB intends to create and that make the jobs more attractive for local residents. Such requirements could include offering job training to San Marcos residents that would qualify them for the jobs to be created; or requiring on-site child care as part of HEB’s operations; or arranging for the San Marcos bus system to make possible low-cost, energy-conserving transportation for workers living in San Marcos. The city could create a health care system that all businesses receiving development incentives must contribute to so that their employees will have medical care. I’m sure that creative minds focused on San Marcos citizens could think of many more ways that such an incentive contract could help San Marcos families, rather than merely providing corporate socialism to the wealthiest among us.Email | Print