A new public-private partnership charged with leading efforts to lure companies to North Carolina will be allowed to withhold more information about failed recruiting efforts – limiting what the public knows about how the state doles out tax breaks to corporations.
Lawmakers created the Economic Development Partnership of North Carolina last year to take over the job of marketing the state and recruiting companies. Funded mostly with tax dollars and a slice of private contributions, the partnership was intended to be a more nimble economic development group than the N.C. Department of Commerce, which had that role before.
The partnership, an idea pushed by Gov. Pat McCrory, has been up and running for just under six months. Its enabling legislation and changes to the state’s public records laws create broader exceptions that allow more documents to be withheld.
John Lassiter of Charlotte, chairman of the group’s board, said he’s asked the partnership’s general counsel and CEO to study how they will handle public records.
“I do understand there is some potential that if in fact a company is not relocating here, those records are not public,” Lassiter told the Observer. He said disclosing such records can hurt recruiters by revealing their “secrets” and making executives fear their communications with the state will become public.
The changes don’t affect how records are handled during the recruiting process. All records are confidential while the effort to recruit a company is underway. That’s important for companies that are negotiating in secret, often with multiple states, trying to get the best incentives offer they can.
The changes affect what happens after recruiting effort ends. Under the old system, all state records – such as emails between officials, detailed proposals for incentives, and potential sites the company considered – became public whether the company decided to relocate or not.
Now, if the company decides not to relocate to North Carolina, only a very limited slice of information would be made public. Just the specific request for incentives and information submitted to the state government by the partnership would be disclosed.
That could potentially shield communications between partnership officials and the company, making it difficult for the public to judge whether the agency is doing its job effectively.
The change unsettles some open government advocates.
“A cornerstone of open government and transparency in government is we can see how our government is operating and draw our own conclusions about whether it’s operating well,” said Amanda Martin, general counsel for the N.C. Press Association. “By taking these records out of public view, you eliminate that entirely.”
Jobs, dollars at stake
At stake are millions of dollars worth of tax breaks and other incentives such as grants for job training, as well as thousands of jobs. North Carolina is competing with other states, such as South Carolina and Alabama, that have typically been more generous with incentives.
In the past, public records have shed light on the state’s failed efforts to attract companies such as Boeing, Lash Group, LPL Financial, Toyota, Giti Tire and Keer, a Chinese yarn-spinning company:
▪ In the wake of Giti and Keer choosing South Carolina, the Observer used public records to report that North Carolina had been outgunned in the incentives fight. The records revealed that lack of a suitable site and North Carolina’s corporate tax structure played a role in the companies’ decisions.
▪ After Boeing chose not to locate a new jet factory in North Carolina, public records showed the frantic behind-the-scenes recruiting effort by McCrory’s administration, including a meeting between the governor and Boeing officials, possible sites for the factory and the state’s $683 million incentives offer.
▪ When LPL Financial and Lash Group decided to move their headquarters – along with thousands of jobs – from Charlotte to Fort Mill, S.C., public records shed light on the fierce competition between the two Carolinas, and how South Carolina’s bigger incentives packages ultimately helped seal the deal.
▪ After Toyota chose to move its North American headquarters from California to Texas, the Observer reported that North Carolina had been prepared to offer the company $107 million worth of incentives. That was more than Texas offered, but Toyota was swayed by factors such as nonstop flights to Asia, the cost of living and central geographic location.
Now, the partnership would no longer be required to release most of the records behind such stories.
“That seems to be the intent,” said Tyler Mulligan, a professor at the UNC Chapel Hill School of Government.
He pointed to the Toyota recruiting effort as an example of records that wouldn’t be public under the new law.
“Had the new public records rule been operative, the size and composition of North Carolina’s incentive offer to Toyota would not have been revealed,” Mulligan wrote in a blog post.
Martin said such secrecy could keep important information from the public. Suppose a company considered moving to North Carolina, but ultimately decided not to, because it perceived the state’s schools as substandard. Under the old system, the public would be able to find that out. Under the new system, those records would be shielded.
“Wouldn’t that be important information not just for the office of economic development, but for the people of the state and the school systems?” said Martin.
‘Very competitive market’
Lassiter said that if a company chooses to move to North Carolina and receives incentives, all the records would still be public.
“We are using significant amounts of public money in what we do,” said Lassiter. “There’s an obligation that runs with that.”
But if a company moves to North Carolina and neither requests nor receives incentives, no records related to the company would be released, according to the state’s amended public records law.
Lassiter said revealing too much when a job recruiting effort fails can harm the state’s efforts.
“You don’t want to give away all your secrets, all your tools,” said Lassiter. “It’s a very, very competitive market, trying to recruit companies large and small.”
And he said company officials might be discouraged from contacting the state if they know all of their communications will be subject to public records laws when the talks are over.
“I think there’s a reasonable concern. Those conversations can be very critical. They go to the highest level of how companies make decisions,” said Lassiter. “It’s important to respect that. It’s also important to comply with the letter and spirit of the law.”
What is the Economic Development Partnership of North Carolina?
The partnership is a nonprofit organization that has a contract with the state to oversee and carry out efforts in economic development and international trade, including jobs recruiting, as well as tourism, film and sports development. The group has a $17 million annual budget from the state and a requirement to raise $5.75 million from private sources over the next five years.
The partnership has supplanted the N.C. Department of Commerce as the state’s main job recruiting agency, responsible for luring companies considering a move to the state. Dozens of former Commerce employees have been transferred to the new partnership, which started operating in October.
When they created the partnership, legislators said the group would be more nimble than a state agency, and more effective since it is able to use both public and private money. Ely Portillo
This is Sunshine Week, when journalists, librarians and other advocates of open government celebrate freedom of information. Look for more coverage in print and on charlotteobserver.com this week.