Legislation that’s up for what could be a final vote in the General Assembly Thursday would close some records in Tennessee’s agency whose job is bringing jobs to the state. While the Department of Economic and Community Development’s push for privacy has raised some alarm bells, even open government advocates concede some need for confidentiality.
Big development deals around the country already get treated like state secrets. In 2008, then-CEO of VW America Stefan Jacoby shared the stage with former Governor Phil Bredesen. Grinning ear to ear, they let the cat out of the bag that the automaker’s plant would be built in Chattanooga.
“Doesn’t it feel good to finally be able to say that?” Jacoby asked the crowed.
The state’s top officials had agreed to what’s estimated as the largest incentive package ever given to a foreign automaker, possibly exceeding half a billion dollars over 30 years. The VW deal was negotiated in secret and remains hard to confirm because most of it involves tax credits, which have been the primary recruitment tool in Tennessee. They’re also a backdoor way to achieving secrecy.
“All tax filings are confidential,” says ECD Commissioner Bill Hagerty.
Hagerty wants to move away from tax credits, offering cash instead. He says when companies are shopping for potential sites they prefer money up front to pay for moving costs or new machinery. They like cash’s flexibility, but they don’t care for transparency rules in places like Tennessee. Business plans and balance sheets can become public record here. Hagerty says private firms call it a deal breaker.
“I don’t want that disclosed therefore I’ll go to a different state that doesn’t require that because I don’t want my competitors to know the depth of my finances,” he says.
Records Otherwise Unavailable
Hagerty says the documents he’s asking to keep confidential, no company will hand over right now, but contain information the state needs to see before opening its wallet.
“We’ll have much better insights into the validity of the company, its ability to stand behind its projections and deliver the jobs that it’s promising,” he says. “And it will help us reduce the risk of backing a company that’s not going to have the long term viability that we want in the state of Tennessee.”
A cash-based system can be more transparent, says Greg LeRoy, whose organization – Good Jobs First – tracks government incentives around the U.S. If the so-called “due diligence” materials reveal proprietary information, LeRoy says some redactions are appropriate.
“But that’s not the whole deal and it certainly shouldn’t obscure any other records associated with the transaction,” he says.
A few state lawmakers have raised concerns that investors could remain anonymous.
Even though names of the companies themselves and how much they’re getting would still be disclosed, State Sen. Roy Herron, a Democrat from Dresden, sees potential to conceal conflicts of interest.
“As between making secret the ownership of the companies to whom we’re giving away, or the administration, some future administration is giving away state tax dollars, or the public’s right to know, I have to side with the public,” Herron says.
It’s an invitation to corruption, says Ben Cunningham of Tennessee Tax Revolt. He’s opposed to government incentives anyway but says he’s especially leery of what else could be shielded by additional secrecy rules.
Always a Backroom Business
“If 20 years ago, some politician would stand up and say ‘I want to create a process by which politicians negotiate in secret with huge corporations to give away taxpayer money as bribes,’ everyone would have laughed them out of the state house,” Cunningham says. “But that’s precisely what’s going on.”
However, even transparency advocates make exceptions when it comes to economic development.
Kent Flanagan is executive director of Tennessee Coalition for Open Government. He says at some point, people have to trust their elected leaders to do what’s best for the state.
“How are we going to know?” Flanagan asks. “That’s really a big huge question and I really can’t answer that except that we have to rely on the good faith of those who are putting this information forward who are trying to help the economy rebound.”
Flanagan says like it or not, the public has allowed economic development to become a backroom business. He says that barn door has been open – or in this case, closed – for a long time.