Google has earned millions of tax breaks by secretly expanding its real estate footprint across the United States.



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Last May, officials in Midlothian, Texas, a city near Dallas, approved more than $ 10 million in tax breaks for a vast and mysterious development in front of a closed Toys R warehouse. & # 39; Us.

That day was the first time that officials spoke publicly about the project of an enigmatic developer 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."


Once the deal closed, Sharka changed the main address to become that of Google's head office in Mountain View, California. On-site 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 past decade by building more than 15 centers data on three continents and 70 offices around the world. 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 new sprawling campus in New York City rather than suffering further criticism of the project.

The quest for a second year-long Amazon headquarters was criticized for using so restrictive privacy agreements that officials could not say more about their existence, and for playing cities against each other. others in order to find government incentives. : Even after its withdrawal from New York, the Seattle-based company is expected to benefit from hundreds of millions of dollars in tax claims when it builds its second headquarters in northern Virginia. (Jeff Bezos, co-founder of Amazon, owns the Washington Post.) Some New York lawmakers were so outraged by the secret of the Amazon process that they introduced bills banning agreements confidentiality for development projects in the city and in the state.

Apple has also sought multi-million dollar tax giveaways to build a 5,000-strong campus in Austin, Texas, 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 970,000 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 in the United States, which would take the company's physical footprint to 24 states and create 10 000 new jobs in the construction sector. He said that 2019 would be the second year in a row that the company is growing faster outside 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, California, the largest after its headquarters located in Mountain View. She plans to build a new large campus in New York, as well as several other development projects, including Virginia and Nevada, according to public announcements and company statements.

"We are convinced that public dialogue is essential to the process of building new sites and offices, so we are actively working with community members and local officials in the places where 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 follow their goals. 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 unusual, experts say.

"Public transparency laws are designed to maintain the public interest at the contract table, and the information is done in this way," said Michelle Wilde Anderson, a professor at Stanford Law School, specializing in in state and local law. "If you look closely at the winners and losers, you'll find that Google is the overwhelming winner, and Google has a strategic interest in removing their name from these offers to make it more discreet without public debate."

Google's registrations were obtained by the advocacy group Partnership for Working Families, which sued the city of San Jose for its negotiations with Google, claiming that more than a dozen non-profit agreements disclosure during the search was unlawful under California law. 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 Active Families Partnership sent requests for access to information to local governments involved in reaching agreements with Google's eight data centers in the United States, as well as Midlothian, and seven additional applications in cities where Google has operations.

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, South Carolina; Council Bluffs, Iowa; Lenoir, North Carolina; 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 abatement and site plans, and used a separate Delaware company, Jet Stream LLC, to negotiate the purchase of land with a private owner. 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 conform to what society wants, and it would be detrimental not to follow his example," he said. "I've been doing it for 20 years and my job is to get my city to get the best deal." When a company asks for the secret, I say yes, you need to 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 a trade secret the information relating to the use of energy and energy. Water, the number of workers to be employed by the data center and the amount of capital of the company. 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. At one point, according to the documents, Lenoir's lawyer ordered council members not to answer questions about the project at a public hearing.

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

Wilde Anderson said that Google's non-disclosure agreements, which he believes are more stringent than those of other companies, have appeared unilateral, protecting Google's interests ahead of those of the city or the public. Barnett, of Midlothian, said his wording was so general that he even feared that the disclosure of the existence of an agreement would not respect the NDA, echoing similar statements by officials of 39 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 bargaining table – it's just 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 though the state attorney general stated that they were subject to the transparency law, according to the records.

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, according to deeds of sale.

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In some cases, the secret measures taken by Google have caused 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, South Carolina.

After his group had 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 the demand, saying it was likely to become a threat to the community's drink supply. Nobody seemed to know how much water Maguro, of Google, who had negotiated a confidentiality agreement with the county's sanitation department, had used in the first place, said Cedzo.

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

In an article published in July in the local newspaper Waxahachie Daily Light in Midlothian, Google 's role in the new data center sparked hundreds of comments and actions, with many residents complaining about the low number of people in the community. jobs and tax incentives. "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 editor of the local newspaper, said, "I'm not going to say that we were lied to, but that we were trained."

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