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Amazon’s HQ2 search in 2018 was a circus, a national embarrassment of city and state leaders stumbling over themselves to offer subsidies and ridiculous favors to one of the world’s largest corporations for a “second headquarters.” And the insult to taxpayers hasn’t ended, because many cities refuse to divulge what they offered Amazon, even though construction on HQ2, such as it is, is underway in Northern Virginia.
Taxpayers in Indiana, in fact, may never know what their state offered up to Amazon in their name, as a long effort to wrench that information out of the government’s hands has come up short.
Here’s the background: Indiana’s state economic development agency refuses to say what it offered Amazon to put HQ2 in Indianapolis. The publication Tax Notes attempted to use Indiana’s public records law to access the offer. The agency refused to comply with the request, and multiple courts, including the state Supreme Court at the end of last week, have upheld the agency’s right to do so because negotiations with Amazon never reached the “final offer” stage that would require public disclosure.
Under Indiana law, only official final offers to a corporation, not the last stage of negotiations before bargaining peters out or the corporation chooses to head somewhere else, are subject to public records requests. The upshot is that soon-to-be former CEO Jeff Bezos and other Amazon executives know more about what Indiana offered for HQ2 than the taxpayers of that state, perhaps forever.
I’m not a lawyer, and can’t really assess the decision itself. But this seems like a pretty serious deficiency in Indiana’s public records law, if an offer from the state to a corporation simply never has to see the light of day.
Instead of fixing that pretty obvious problem, though, Indiana lawmakers advanced a bill last week — HB 1418 — that would give the state’s development agency carte blanche to make things worse. It was then quickly signed into law by Gov. Eric Holcomb.
The new law allows the state economic development agency to declare confidential any information that it sees fit when corporations apply for state giveaways, and also supposedly clarifies what “final offer” means, but in a way that has a loophole big enough to drive a truck through.
Now, if I had it my way, all negotiations between public bodies and corporate entities over tax breaks and other giveaways would happen as transparently as possible, with real-time posting of documents and video. More transparency equals more accountability and more democratic input into what are, at the end of the day, collective decisions about how to use public resources.
But to hear economic development officials tell it, keeping negotiations under wraps, as well as preventing unsuccessful offers from ever seeing the light of day, is key to bringing new businesses to a particular place and building up local economies. They say that if those negotiations occurred out in the open, other states would inevitably swoop in and make better offers, depriving their citizens of just economic rewards.
What these folks are really promoting is a blind auction, which gives corporate leaders all the leverage. We see it time and time again: Cities compete against each other, throwing bigger and bigger promises at a large corporation, and only those corporate leaders involved knows what the full playing field looks like, which gives them the ability to convince different leaders to up the ante by threatening to go somewhere else, whether those threats are real or fictional. So incentive packages get bigger and bigger (even as their ineffectiveness remains constant).
This isn’t just about economics and public resources, though. It’s also about democracy. Preventing voters from knowing what their representatives or appointed development officials are offering to a corporation prevents them from evaluating individual deals in enough time to actually affect them or to measure the sort of job their representatives are doing.
Access to real-time information gives residents a chance to make their voices heard, as well as answer critical questions about what’s being done in their name. Did those officials drive a hard bargain, adding concrete targets or community benefits that a corporation didn't want to concede? Were they cowed by fancy consultants and promises? Were the incentives they agreed to dole out in a final offer more or less than the corporation’s opening bid? Was an unsuccessful offer sufficiently outrageous that it merits someone losing office over it, even if it didn’t actually become law?
These are all pertinent questions for evaluating officeholders that are impossible to answer without the sort of access Indiana lawmakers are working hard to shut down.
Indiana’s new law could compound the problem by making it legal to withhold “final offer” documents until all negotiations are “terminated” — but there is no definition of terminated provided in the bill, so in theory talks could “continue” forever with the occasional email, preventing materials from ever becoming public.
And that’s exactly how dominant corporations want it.
A lot of state public records laws are inadequate, when they’re not simply ignored by state or local officials who don’t want to follow them. Instead of rectifying the deficiencies the Amazon HQ2 debacle laid bare, Indiana lawmakers are going the opposite direction, doubling down on a system that is already failing taxpayers.
Shameless Self-Promotion: I have a new American Economic Liberties Project explainer out on why Facebook and Google, contrary to their assertions, are harmful to small businesses. I went on the Rick Smith Show last week to have a chat about Foxconn, Apple, and the interstate compact against corporate tax giveaways. And I also talked with Citylab for this piece about Netflix taking over New Mexico.
Shoutout: If you like this newsletter, you’ll also like Subsidy Sheet from my friends over at Reinvent Albany. They do great work on New York’s shoddy corporate incentive policies, and pull together lots of other great stories and resources.
One More Thing: In March, the Massachusetts Tax Expenditure Review Commission — which, as it says on the tin, reviews the state’s tax break policies — released its big biennial analysis. The commission found that the state’s film tax credit program reaps just 14 cents on the dollar for the state, costs $100,000 per job created, and has many other problems. “We conclude that this is not the best use of the state’s money,” the commission found.
So of course, Massachusetts lawmakers are set to make program — which currently has an expiration date — permanent.
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— Pat Garofalo