Amazon and Google use secret tactics to expand their headquarters such as HQ2 and reap millions in tax breaks



Last May, officials in Midlothian, Texas, a city near Dallas, approved tax breaks totaling more than $ 10 million for a vast and mysterious development across the street. a warehouse with shutters Toy R Us.

That day, it was the first time that officials were speaking publicly about an enigmatic developer's plan to build a sprawling data center. The developer, who had been incorporated into the state four months earlier, was calling Sharka LLC. City officials then refused to say who was behind Sharka.

The mystery society was Google – a fact that the city revealed two months later, after the official approval of the project. Larry Barnett, president of Midlothian Economic Development, one of the agencies that negotiated the data center agreement, said he knew at the time that the tech giant was the one looking for a decade of tax breaks for the project, but it was forbidden to disclose it because the company had asked for the secret.

"I'm convinced that if the community knew that this project was under the direction of Google, people would have spoken, but we never had the chance to talk," said Travis Smith, editor of Waxahachie Daily Light, paper. "We did not know it was Google before it was adopted."

After the agreement was reached, Sharka changed its primary address to Google's headquarters in Mountain View, California. Work began last fall.

Google – which has become one of the most valuable companies in the world by transforming the public's ability to access information – has significantly expanded its geographic footprint over the last decade by building more than 15 out of three data centers. continents and 70 offices worldwide. But this frenzy of development has often been surrounded by secrecy, making it almost impossible for some communities to know, let alone protest or debate, who use their lands, resources and taxes until after, according to Washington Post talks and documents newly published public obtained through an application under the Freedom of Information Act.

Facing the rise of the US economy and facing a thorough political review, tech giants such as Google and Amazon are about to grow – but communities are now seeing their arrival with more skepticism dealing with disruptions, the environmental impact and the higher cost of living often bring, as well as the incentives they seek, despite their deep pockets.

Local officials say they are eager to keep the secret to attract powerful technology companies, who want to avoid controversy and keep the details of their operations secret. On Thursday, this ability to play hard poker was fully highlighted after Amazon ended the project to build a sprawling campus in New York City rather than undergo further public criticism of the project.

The quest for a second seat in Amazon, which has lasted for a year, has been criticized for using so restrictive confidentiality agreements that officials could no longer say more about their existence, and for having played the cities the least. against each other in the quest for incentives from the government. Even after New York pulls out, Seattle-based company should receive hundreds of millions of dollars in tax relief when building its second headquarters in New York City Northern Virginia. (The founder and CEO of Amazon, Jeffrey P. Bezos, owns the Washington Post.)

Some New York lawmakers were so scandalized by the secrecy of the Amazon process that they introduced bills banning confidentiality agreements for development projects in the city and state.

Apple has also sought multi-million dollar tax giveaways to build a 5,000-strong campus in Austin, its largest facility by its number of employees after its headquarters in Cupertino, California. Facebook is expected to receive $ 150 million in tax incentives for the construction of a building of 970,000 people. Square-foot data center in Utah, the company and local officials announced last year.

Google CEO Sundar Pichai announced $ 13 billion in new investments in data centers and offices across the United States, bringing the company's physical footprint to 24 states and create 10,000 jobs in the construction sector. He said that 2019 would be the second year in a row, the company is growing faster outside of its home in the Bay Area than in the Bay Area.

Still, Google has widely used the confidentiality agreements in the negotiations of its second campus planned in San Jose, the largest after its headquarters in Mountain View, nearby. She plans to build a large campus in New York as well as several other development projects, including Virginia and Nevada, according to public announcements and company statements.

"We believe that public dialogue is essential to the process of building new sites and offices, so we are actively working with community members and elected officials in the places we live," said Google spokeswoman Katherine. Williams, in a statement. "In one year, our data centers generated $ 1.3 billion in economic activity, $ 750 million in labor income, and 11,000 jobs across the United States. Of course, when we enter new communities, we use common industry practices and work with municipalities to comply with the required procedures. "

Amazon declined to comment. Facebook and Apple have not responded to requests for comments.

Confidentiality agreements are commonplace in development negotiations – but the level of secrecy surrounding data center agreements is more extensive, experts say.

"Public transparency laws are designed to keep the public interest at the table of contracts and you do it with information," said Michelle Wilde Anderson, a professor at Stanford Law School, specializing in state and local governments. "If you look closely at winners and losers, you'll find that Google is the big winner. Google has a strategic interest in getting their name from these agreements so that they go down more silently without public debate. "

Google records were obtained by the pressure group Partnership for Working Families. His affiliate in San Jose sued the city of San Jose for his negotiations with Google, claiming that more than a dozen non-disclosure agreements signed with the search giant were illegal under the law California. Partnership for active families, which campaigns against issues such as income inequality, says that secret deals keep the public in the dark about the costs and benefits of business projects.

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The records date back to 2006, when Google launched its first wave of data center construction – server warehouses hosting an IT infrastructure – as the company fought to fight Microsoft and Yahoo in a war against research and new applications. such as Gmail. The documents continue until 2018, offering a rare glimpse of Google's efforts to hide these projects and their impact on surrounding communities for more than a decade.

Data centers, which can generate significant revenue for communities but use local resources such as energy and water, are sensitive sites for technology companies. If they are attacked, they could annihilate the company's operations. Everything, from the technology they use to where they are, is highly competitive.

The Working Families Partnership sent access to information requests to local governments involved in negotiating Google's eight data centers in the United States, as well as Midlothian, and sent seven more requests to local governments. cities in which Google has offices.

According to the documents, officials from eight cities have signed confidentiality agreements, or NDAs, as part of their real estate transactions with Google. The documents also show that the search giant used front companies to negotiate the construction of data centers in five of the six localities, with data centers responding to registration requests, including Midlothian; Berkeley County, S.C .; Council Bluffs, Iowa; Lenoir, N.C .; and Clarksville, Tennessee. Google's identity was finally revealed, but often so late in the process that it prevented public debate.

Sometimes Google has created several subsidiaries, with separate names, to handle different aspects of the negotiations for the same site, according to the documents. In Midlothian, for example, Google created Sharka to negotiate the tax rebate and site plans, and it used a separate Delaware company, Jet Stream LLC, to negotiate the purchase of land with an owner. private. In Iowa, Google created Questa LLC, a Delaware corporation, for the sale of land, and Gable Corp., for the development transaction.

When Google's representatives first contacted Midlothian in 2016, they used a different code name than one of their affiliates, Barnett said. (He declined to say what it was about.) Google also asked Midlothian officials to sign a confidentiality agreement before knowing the developer's identity, Barnett said. He said that Google had revealed its identity a year later, with the approach of the transaction.

Barnett said that some confidentiality is still needed when negotiating competitive development agreements. "When I try to win a project, as all economic developers do, we respect the wishes of society. It would be detrimental for us not to follow the initiative of society, "he said. "I've been doing it for 20 years and my job is to make my city get the best deal possible. When a company asks for the secret, I say yes. You must build trust. "

Barnett said that he did not believe the residents had the hand to the end. Google 's $ 500 million development would support local businesses, schools and the 40 jobs that Google had promised to create five years from now. "The community wins with this agreement," he said.

The records also show how Google managed to keep relevant information publicly out of sight. Lenoir, NC, where Google had announced in 2007 the construction of a data center, agreed to treat as trade secret information relating to energy and water consumption, the number of workers to be employed by the data center and the amount of capital invested by the enterprise. would invest, according to the documents. Tapaha Dynamics LLC, a subsidiary of Google, then decided to exempt these trade secrets from the transparency laws that allow citizens to make requests for public information. According to the documents, a lawyer from the city of Lenoir asked council members not to answer questions about the project at a public hearing.

Google spokeswoman Williams told The Post that she views information such as the use of water and energy as trade secrets, because competitors could use them to draw sensible conclusions. about the technology of the company.

Wilde Anderson said Google's non-disclosure agreements seemed one-sided, protecting Google's interests above those of the city or the public. Barnett, of Midlothian, stated that his wording was so general that he even feared that the disclosure of the existence of an agreement would violate the NDA, echoing similar statements by law enforcement officials. ;other places.

Small towns, in particular, are facing a considerable power imbalance when they will negotiate with some of the world's richest companies, added Wilde Anderson. Some are short of money and do not even have a single full – time lawyer, she said. Breaking the rules could mean engaging a costly lawsuit with an apparently seemingly endless opponent.

"Google's huge, resource-rich legal team puts a NDA at the table and it's a lack of resources," she said. "Like in many areas of life, you get what you pay for."

In Midlothian, Google's subsidiary had the power to determine which documents would be disclosed, even if the state attorney general said they were subject to the transparency law, according to the archives.

Google's secret negotiations also appeared to lead to favorable land prices for the company. In 2008, Google purchased 850 acres of land for one dollar from the Council Bluffs Industrial Foundation, a non-profit organization that works with the City of Council Bluffs, depending on the deeds of sale.

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In a few cases, Google's secret measures provoked a public outcry.

Last year, an unknown company filed a water license application in South Carolina, which would make it the third largest aquifer user in the region, has said Emily Cedzo, director of air, water and public health projects at the Coastal Conservation League, an environmental defense agency. group in the Carolinas, who spotted the request.

Thanks to a quick search on Google, she discovered that Maguro Enterprises, the company that had applied for the license, shared an address with the Google data center built a few years ago in Berkeley County, S.C.

After his group announced Google's license application, the agency had been inundated with so much public comment that it had led to a stormy hearing. Dozens of county residents, and even the local public service official, protested against the request because they thought it could become a threat to the community's water supply. Nobody seemed to know how much water had been used by Maguro, a Google, who had negotiated a confidentiality agreement with the county's sanitation department, Cedzo said.

"I can imagine that people were initially excited by the idea that Google wants to call the county," said Cedzo. "But when you start digging a little deeper, it looks different."

Today, Google's Maguro is the only company in the top 10 of the country's water users whose volume of use is not publicly disclosed. Its application for more water is blocked and it works with the water that was previously assigned to it.

In Midlothian, an article in the Waxahachie Daily Light in July announcing Google's role in the new data center sparked hundreds of comments and actions, with many residents complaining about the low number of jobs and tax benefits. "We live in our small town," wrote one resident.

"So Google comes in and does not pay taxes for 10 years, and only creates 40 jobs, and that sounds like a great idea," wrote another.

Smith, the newspaper's editor, said, "I'm not going to say we've been lying, but we've been trained."


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