Taxpayers get no voice in billions for businesses

Governments side with companies seeking economic assistance in secrecy, with some officials not knowing what they're voting on.

October 13, 1999|By Jay Hancock | Jay Hancock,Sun Staff

It's Tuesday night in Papillion, Neb., time for a public hearing on ADT Security Services' plan for a 700-job telephone center in America's heartland.

ADT has many demands. It wants a 25 percent, $125,000 discount on the land, which is owned by Papillion, an Omaha suburb. It wants the site rezoned -- the subject of that night's hearing. It wants taxpayers to cover $1 million in street and utilities expenses. It expects millions more from the state in tax credits.

And one more thing. ADT wants to stay anonymous. Even though the home security company seeks millions in public dollars, it doesn't want taxpayers to know anything about its project until it's too late to stop it.

FOR THE RECORD - In a series published Oct. 10-13 about government incentives to recruit and retain businesses, The Sun erroneously included F&G Life of Baltimore in a list of firms that violated the terms of their agreements with state and local officials. A review of the record shows F&G did not break its promise.
The Sun regrets the errors.

Papillion officials go along, and the result is an amazing spectacle, a "public hearing" in April in which residents were invited to comment but weren't told just what it was they were supposed to comment on. Even the Papillion planning commissioners didn't know ADT's identity, but that didn't stop them from approving the rezoning, and it didn't stop ADT from getting the other incentives, too.

"There were a lot of people with big grins on their faces, playing 'I've Got a Secret,' and the public is supposed to be making an informed comment," said Mike Riddle, a commissioner who voted for the rezoning but was disturbed by the process. "We don't really think that's a good way of doing business."

Maybe not. But the kind of secrecy surrounding the ADT case is typical when state and local governments give economic development incentives to corporations, and it ranks among the most compelling reasons for the federal government to step in and ban state and local handouts, many analysts believe.

As special, narrowly targeted incentives to private companies have swollen to more than $3 billion a year from states alone, public disclosure and discussion of specific deals is scant and shrinking.

A week ago in Maryland, economic development secretary Richard C. "Mike" Lewin proposed scrapping legislative oversight for all but the biggest business-incentive giveaways, a move criticized as "a step backward" by Senate Republican leader Martin G. Madden.

"The taxpayer who foots the bill very rarely gets a place at the table when these negotiations are going on," said Paul McMasters, First Amendment ombudsman for the Freedom Forum media foundation in Arlington, Va. "Public officials routinely cite the need for secrecy as a precursor to closing the deal. And then after the deal is already closed, the need for secrecy is cited again as a way of negotiating the next deal."

How many jobs are created by an incentive package? Would an employer create jobs without incentives? Is a subsidy fair to other companies in the same industry?

Taxpayers and policy-makers need honest answers and free debate to make smart decisions. What they usually get -- from politicians eager to cut ribbons and corporations interested in special handouts -- is much less. And several states besides Maryland are moving to block public inquiry into incentives deals even further.

Economic development officials argue that it's unrealistic to expect sensitive incentives deals to be aired in open legislature. But as giveaways have increased, so have the public dollars changing hands under wraps.

"There are lots of reasons to believe we need a lot more sunshine," said Greg LeRoy, director of Good Jobs First, a Washington nonprofit group doing incentives research. "A number of state auditors and comptrollers have done studies on various economic development programs and have had very critical findings on wasted money and outcomes not being monitored and political favoritism tied to giveaways."

Uninformed votes

Confidentiality shrouds every step of the incentives process.

Corporate giveaways are crafted in secret by a few professionals reporting to a governor or mayor. They're generally approved with little or no debate by small committees of legislators or appointed officials -- often after a company has already started construction on its project.

In many states, incentive deals are exempt from public disclosure laws. But it's not just the public who's kept in the dark.

Lawmakers themselves are often grossly uninformed about the grants and subsidies they're voting on.

Commissioners in Colorado's Jefferson County approved a $3 million tax cut last year for Nike Inc. without a public hearing and without even knowing the company's identity.

Maryland's economic development department routinely forbids, in writing, "any public communication" by the incentives candidates, including "letters to legislators," without the department's approval. Why? "Erroneous or premature publicity could affect the composition and approval of the incentives under discussion."

In other words, the less public debate, the better.

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