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Localities Dodging Open Records Laws to Avoid Disclosure of Amazon HQ2 Proposals

POSTED ON Jan. 9, 2018
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Localities vying for Amazon’s second headquarters project used various methods to avoid public disclosure of incentives offered to the company, including narrow interpretations of state open record laws and bids submitted through entities not subject to those laws, according to data obtained by Tax Analysts through public records requests.

“It’s always the case that no one has much information on successful bids,” according to Tim Bartik, a senior economist with the W.E. Upjohn Institute for Employment Research and an expert on state and local economic development. “That’s almost never out there, because general economic development agencies prefer not to release much information on what they’re doing and . . . in most cases, the press, the media, and the public don't ask for it.”

The Amazon.com Inc. HQ2 project, however, has generated more buzz than the typical economic development project: The company said it has received proposals from more than 230 localities. Reporters have filed public records requests to learn what the localities have offered to win the project, and although some jurisdictions have been transparent, many have used clever methods to shield the bids from disclosure.

Tax Analysts sought records related to the proposals submitted by 10 localities, including those with a reasonable chance of landing the project like Austin, Texas, and others like Gary, Indiana, which doesn't meet the qualifications in Amazon's request for proposals (RFP).

Of the 10, Toledo, Ohio, was the only jurisdiction that provided a copy of its proposal without redacted incentive information. The city offered Amazon an incentive package of at least $780 million, which includes a $469.7 million performance-based grant, a $126.5 million property tax exemption, and a $181.2 million capital lease transaction subsidy, in addition to an unspecified number of tax credits. The proposal also would allow Amazon to purchase a piece of land — formerly the site of a shopping mall — valued at $2.7 million for $1. 

When the project was announced in September, Amazon’s wish list included “metropolitan areas with more than one million people, a stable and business-friendly environment, urban or suburban locations with the potential to attract and retain strong technical talent,” and “communities that think big and creatively when considering locations and real estate options."

The company also listed incentives as one factor that would drive its decision, sparking a bidding war -- the likes of which have not been seen since 2013, when the Boeing Co. received bids from 22 states for a facility to build its new 777X jetliner. Washington state won by offering Boeing the largest tax subsidy ever granted to a private company in the U.S., and the company expanded its operations in the state rather than moving the project elsewhere.

The Washington deal proved lucrative for Boeing but wasn't as helpful to the state. Not long after the agreement had been finalized, the company announced it was moving about 20,000 jobs to other cities. State lawmakers have since tried unsuccessfully to claw back some of the incentives through legislation.  

Washington, home to Amazon's first headquarters, in Seattle, is also bidding for the company's second. In its proposal, released by the Washington Department of Commerce, the state offered to work with the company to "identify existing tax incentives . . . including business and occupation tax credits or other incentives that can help you offset the cost of setting up another headquarters in Washington State."

Like Boeing, Amazon has been known to take advantage of corporate tax breaks. Between 2000 and 2017, Amazon received more than $1 billion in subsidies for its fulfillment and sorting centers, data centers, and film productions, according to Good Jobs First.

However, it’s unclear how much of an emphasis Amazon will place on incentives when choosing a location for its second headquarters, because the criteria are not weighted.

"I think [Amazon] would be crazy to go to the other city [just] because they offered double the incentives, but maybe that’s the way they look at it,” Bartik said. He added that incentives could be a deciding factor among cities that have the amenities Amazon is asking for.

District of Columbia

The District of Columbia seems to have a shot at winning the HQ2 project. Amazon CEO Jeff Bezos, who also owns The Washington Post, spent $23 million in 2017 on two mansions in the city, according to news reports. And the District spared no expense for its proposal.

According to documents obtained by Tax Analysts, the Office of the Deputy Mayor for Planning and Economic Development spent at least $130,000 to pay production company Mars on Gravity Productions LLC to create a marketing and outreach plan, including a website. The total cost is unclear because the information was redacted. The city also paid the production company $3,800 to prepare a version of the proposal with the chapters on incentives and references to incentives redacted.

The deputy mayor's office, in a December 13 letter, told Tax Analysts that some records were withheld because “they contain trade secrets and commercial or financial information whose disclosure would result in substantial harm to the competitive position of the person from whom the information was obtained,” citing D.C. Official Code section 2-534(a)(1). The letter also referenced the deliberative process privilege under section 2-534(a)(4). 

Some states have public records laws that prevent all economic development projects from public scrutiny until the project is completed.

Atlanta, listed by Bloomberg and CNN Money as a top contender for the project, declined to make public the incentives it offered Amazon. “As a standard practice, we don’t comment on active business development opportunities,” Matt Fogt, spokesman for the city's economic development authority, Invest Atlanta, said December 15. 

In a December 18 letter, Invest Atlanta cited Georgia code section 50-18-72(a)(46), which exempts active economic development projects from disclosure. A separate records request filed with the Georgia Department of Economic Development was denied November 17 on the same grounds. 

Quasi-Private Entities

Six competing localities — Austin; Baltimore; Denver; Birmingham, Alabama; Gary; and Tulsa, Oklahoma — submitted proposals through quasi-private or private entities.

Experts say it’s common for state and local economic development agencies to be run as quasi-private entities, in which the government contracts with a private group.

This is “precisely so they can avoid Freedom of Information Act requests,” said University of Missouri political science professor Kenneth Thomas.

Bartik said an argument can also be made “that some of these groups can get around civil service hiring rules to have more flexibility” if they organize as a private or quasi-private entity, but he agreed that agencies should be required to disclose the tax breaks and other incentives that involve taxpayer money.

“The notion that an economic development agency might be private or quasi-private, [and] therefore shouldn’t disclose incentives, I just think is wrong,” Bartik said.

Tulsa is one locality that shielded its proposal from public view.

The city's proposal was submitted by the Tulsa Regional Chamber, according to Michelle Brooks, spokeswoman for Mayor G.T. Bynum (R). Brooks declined to provide a copy of the proposal or information regarding the offered incentives.

The Tulsa World reported in December that the city told it to submit its public records request to the chamber, which in turn denied the request because it is not subject to the state Open Records Act.

The chamber did not respond to requests for the proposal by press time.

The Oklahoma Department of Commerce in a December 15 letter denied a public records request by Tax Analyst for documents related to the Tulsa proposal, on the grounds that the department and other state agencies are authorized to keep confidential “business plans, feasibility studies, financing proposals, marketing plans, financial statements, or trade secrets submitted by a person or entity seeking economic advice,” as well as “proprietary information of the business submitted to the department” or other entities, and information the agencies have compiled in response to those submissions.

In a December 15 letter to Tax Analysts, Donald Hackler Jr., general counsel for the Oklahoma Department of Commerce, said the proposal documents can be kept confidential because Amazon did not consent to the release of the information.

Austin, which was ranked by Moody's Analytics as the top contender for the HQ2 project, submitted its bid through the Greater Austin Chamber of Commerce. The chamber, which as a private organization is exempt from open records requests, declined to provide a copy of the proposal. “The information contained in the proposal, including incentives, is confidential,” chamber spokesman Mike Berman told Tax Analysts November 14. 

Mona Sanchez, a senior research analyst for the Austin Department of Economic Development, told Tax Analysts November 16 that the department does not have a copy of the proposal. 

As of press time, the Austin mayor’s office had not sent documents in response to Tax Analysts’ November 27 public records request.

Meanwhile, Denver's bid was organized and submitted by the Metro Denver Economic Development Corp., Jenna Espinosa, spokeswoman for the mayor's office, told Tax Analysts November 17. The city has been listed as a top option for the project because of its high quality of life, and The New York Times picked the city as the best choice, using the criteria outlined in Amazon's RFP.

Metro Denver Economic Development Corporation spokesman J.J. Ament told Tax Analysts January 3 the organization is a “privately funded, privately governed organization and therefore isn’t subject to the open records statutes that apply to state government in Colorado.” Ament added that the organization doesn’t have the authority to offer incentives because only the state's Economic Development Commission is authorized to do so.

A redacted hard copy of the proposal was available to local media, the development corporation told Tax Analysts November 11. The Denver Post obtained a copy, reporting November 16 that information regarding the total amount of incentives offered and the sites being proposed were redacted.

A Colorado Open Records Act request submitted to the Denver mayor's office turned up dozens of emails, including internal correspondence and messages from the public encouraging the city to go after the project, but none included details of the incentives being offered or the proposal itself.

The mayor's office explained that "records were withheld and/or redacted as elected official work product pursuant to CRS 24‐72‐202(6)(b)(2), or based on the deliberative process privilege pursuant to CRS 24-72-204(2)(a)(XIII)."

Birmingham, considered a long-shot candidate, announced its campaign to attract the project in September. Lauren Cooper, spokeswoman for the Birmingham Business Alliance, told Tax Analysts December 11 that the city's economic development organization had submitted the proposal in partnership with the city, but declined to divulge details, including incentives.

“That’s not normally anything we would hand out,” Cooper said.

City spokeswoman Kamilah Lewis on December 12 acknowledged receipt of an open records request submitted December 1 by Tax Analysts, but the city had not yet responded as of press time.

Baltimore

Baltimore’s proposal drew the attention of the American Civil Liberties Union of Maryland when the city denied a public records request filed by The Baltimore Sun. The ACLU said November 8 that it also submitted public information requests “to ensure government transparency in the disbursement of subsidies.”

Hannah Marr, spokeswoman for Gov. Larry Hogan (R), told Tax Analysts October 17 that the incentive package for a site in Baltimore would be the largest in state history, and that “we are confident that it will be extremely competitive.” However, Marr did not disclose the tax incentives offered.

The office of Mayor Catherine Pugh (D) rejected Tax Analysts' public records request for its proposal, referring in its December 6 response to a state statute that requires public record requests to be submitted to "an agency's custodian of public records." The mayor's office is not the "custodian of the proposal itself," the letter continued. 

“In fact, it was submitted and retained by the developer of Port Covington, the land being proposed as the location for Amazon in the city,” Benjamin Bor, special assistant solicitor, said in the letter.

The city chose the Port Covington development — owned by Under Armour Inc. CEO Kevin Plank's real estate company, and recipient of a $660 million tax increment financing subsidy in 2016 — as its proposed site.

Baltimore disclosed the proposal's cover letter, which was written by the mayor, along with related emails and documents, but withheld records “protected from disclosure under the attorney-client privilege.”

According to the emails, Pugh was scheduled to travel to Seattle to submit the bid, but city officials reconsidered that when they heard Amazon did not want the proposals submitted in person. The mayor instead signed postcards to go with the proposal during a public ceremony, the documents showed.

The state Department of Commerce provided department emails in response to Tax Analysts' Maryland Public Information Act request, including emails discussing articles about the project, correspondence on choosing a Baltimore site for the proposal, and suggestions from employees and industry representatives on how to win the project, including one that discouraged the governor from calling Bezos personally.

In a December 22 letter accompanying the emails, however, the department cited three exemptions under the public information act to exclude the contents of the city's proposal, including any incentives offered. According to the letter, section 4-335 of the act allows the department to deny inspection of emails with information on bid proposals that contain "confidential financial information," and section 4-301 exempts interagency communications from disclosure under the deliberative process privilege.

Proprietary Claims

Gary, Indiana, doesn't meet the criteria in Amazon's RFP for the project, but that didn't stop the city from submitting a bid and writing a love letter to Bezos in an ad published in The New York Times that said, “I know locating to me may seem far-fetched . . . but ‘far-fetched’ is what we do in America.” The city rejected a request for a copy of its proposal.

The city's law department in a December 6 letter denied Tax Analysts’ request for related documents, citing Indiana Code section 5-14-3-4(b)(5), which gives state agencies discretion over whether to disclose records “relating to negotiations with industrial, research, or commercial prospects so long as the records are created while negotiations are in progress.”

City Attorney Steven Jenkins said December 18 that the bid was submitted by the city's economic development corporation, which operates as a nonprofit. 

Greg LeRoy of Good Jobs First said that some states have interpreted their open records laws to say, “If the deal is in progress and it’s being negotiated, it’s shielded.”

LeRoy said he’s seen few states with open records laws that allow an incentive deal to be reviewed while it’s still being negotiated. “That being said, the city responding to a public RFP isn’t the same as negotiating,” LeRoy said. “It isn’t as if Amazon called any of these cities and said, ‘You’re on the short list, let’s talk turkey.’”

Tax Analysts also filed a request for all records related to Philadelphia’s bid under Pennsylvania’s Right to Know Law. The city on December 20 provided a redacted version of its proposal, which excludes details of the incentives offered.

Philadelphia cited several statutes supporting the redactions, including one that shields records that constitute or reveal a trade secret or confidential proprietary information. City spokeswoman Lauren Hitt told Tax Analysts December 15 that the city is “not disclosing the proposed incentives in the bid at this time, in part because of their confidential proprietary nature.”