The Google groundbreaking via WRKN February 2018.

On Dec. 22 2015, the Industrial Development Board of Montgomery County entered into a “Payment in Lieu of Tax Agreement” with Google “to induce” it to build and operate an information technology center near Clarksville.

It provided that:

  • Google, through its company Foxman LLC, would take over property (which the government had purchased with taxpayer funds) through a lease agreement;
  • The industrial development board would issue as much as $2 billion in industrial revenue bonds to help Google finance additional facilities and equipment on the property, and;
  • Google would be relieved from paying any taxes on the land for 20 years, and pay no taxes on its equipment and buildings for four years, and in subsequent years pay only portions.

In turn, Google would have a job target of 34 direct hires, an overall employee target of 70 full-time equivalent hires (which could include contract hires and part-time employees) and a target of $600 million in investment.

If it does not reach these targets, Google might lose some of its tax break, the amount of which would depend on how far off they are in meeting the goals.

It’s a deal worth examination by the public, both when members of the industrial development board considered and voted upon it and each year after as Google must report to the IDB certain information that would reveal whether it is living up to its agreement.

Non-disclosure agreement requires government to keep details secret

Knoxville News Sentinel Editor Jack McElroy shares the non-disclosure agreement with the Open Records Ad Hoc Committee on Sept. 13, 2018.

But in a startling non-disclosure agreement that Jack McElroy, editor of the Knoxville News Sentinel, shared with lawmakers earlier this month, the Montgomery County IDB agreed that much of the information in the PILOT and subsequent reports would be actively withheld from the public, with the IDB even agreeing that it would “use its best efforts legally permissible” to fight any court order to release such information.

The non-disclosure agreement within the PILOT is long. But to give you an idea of how strangling it is to public knowledge of how taxpayer money is being used, here are some highlights, which I quote directly and paraphrase:

  • The board agreed that “(a)ll information contained in this (PILOT) Agreement” and related documents are to be considered trade secrets under state law — including the number of employees projected to be hired or actually hired, the capital investment made by the company, and the assessed value of the land and equipment that Google is getting from the government in the agreement.
  • The board agreed that the information, as trade secrets, were “exempt by statute from disclosure by the Board under any public records law.”
  • The board agreed that reports that Google is required to give the IDB annually after Abatement Year 5 with respect to how many employees it has hired and how much it has invested are trade secrets and “shall not be released to a third party under any circumstances without the prior written approval of the Company.”
  • If a court orders the Montgomery County IDB to release information from Google’s required performance reporting to the IDB, the IDB “agrees to use its best efforts legally permissible in order to assist the Company in opposing…”
  • “The Board … agrees that the Trade Secrets Act shall be liberally construed in favor of non-disclosure….and agrees that the Public Records Act shall likewise be construed in favor of non-disclosure…”
  • The IDB board agrees that all information in the PILOT agreement is “privileged” and “the disclosure of this information would be detrimental to the Board and to the best interest of the public, in efforts to negotiate agreements regarding future economic development projects. For these reasons, the information contained in this Agreement…will be maintained by the Board in a confidential manner.”
  • Each officer of the board, director, employees or agents agrees “to treat as strictly confidential and to limit, to the fullest extent permitted by law, any release of information related to or pertaining to” the PILOT agreement.
  • “The Board agrees that it shall not attach a copy of this Agreement to any public notice or present this Agreement for review in any public forum or provide a copy or disclose the terms or conditions of this Agreement to any third party, except (i) as and when the same may be required by law or by the order of a court of competent jurisdiction (the Board agreeing to use its best efforts legally permissible in order to assist the Company in opposing the issuance of such as order), (ii) as may be necessary for the Board to perform its obligations under this Agreement, or (iii) as part of a press release or announcement issued as agreed upon by the Company and the Board in an advance writing, which agreement, the Company may in its absolute and sole discretion withhold.”
  • The IDB Board must provide Google, within 48 hours of receipt of any public records request for documents related to the PILOT or the project, “written notices of such public records request and shall indicate in such notice whether it intends or not to comply with such public records request.”
  • If the board intends to comply with a public records request, it must give Google 30 days to seek a judicial injunction or restraining order before the board delivers the documents. The board also agrees delete or redact any trade secrets — as defined by Google — before releasing document.

Indeed, a newspaper was able to get the PILOT agreement several months after it had been signed only by threatening a lawsuit. And even then, the cost-benefit analysis that would show the market value of the government-owned land, buildings and equipment that Google is getting in the deal was redacted.

Public had no chance to learn of agreement before it was signed

It is quite clear with this non-disclosure agreement that no one from the public who would have attended the industrial development board meeting in December 2015 when the PILOT was approved would have had much of a chance to see the agreement before the Montgomery County Industrial Board voted to approve it.

In fact, it appears that the Montgomery County IDB agreed to actively withhold it from the public.

Google is not required to start reporting to the IDB on its job or investment targets until after the fifth year. This agreement makes clear that reporting, however, will be secret unless Google wants to allow it to be public.

This type of non-disclosure agreement stretches the understanding that it is “the policy of this state that the formation of public policy and decisions is public business and shall not be conducted in secret,” as is stated in T.C.A. 8-44-101.

Public deserves accounting of economic development agreements

It should be opposed and undone with the full force that the public can bring to bear. The public deserves to know the totality of subsidies private companies are getting from the government in exchange for economic development incentives. It also deserves to know the performance measures that would show whether those incentives are working.

It is unconscionable that a public governing body, such as the Montgomery County IDB, would enter into an agreement that would actively seek to keep contract details secret and agree to use taxpayer money to fight any court order to the contrary. We should not trade government transparency for a cheery story about the prestige Google will bring to the Clarksville community.

TCOG has asked the Open Records Ad Hoc Committee to take action so that no separate agreements such as the one signed by the Montgomery County IDB be allowed under state law going forward. (McElroy shared the non-disclosure agreement with the Open Records Ad Committee at its Sept. 13 meeting.)

It should be clear that all details of economic development contracts entered into between the government and a private company are public, and that any performance measure reporting required by the company, also be public.