Google reaped millions of tax breaks as it secretly expanded its real estate footprint across the U.S.
By ELIZABETH DWOSKINThe Washington Post
Fri., Feb. 15, 2019
Last May, officials in Midlothian, Texas, a city near Dallas, approved more than $10 million (U.S.) in tax breaks for a huge, mysterious new development across from a shuttered Toys R’ Us warehouse.
That day was the first time officials had spoken publicly about an enigmatic developer’s plans to build a sprawling data centre. The developer, which incorporated with the state four months earlier, went by the name Sharka LLC. City officials declined at the time to say who was behind Sharka.
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The mystery company was
Google — a fact the city revealed two months later, after the project was formally approved. Larry Barnett, president of Midlothian Economic Development, one of the agencies that negotiated the data centre deal, said he knew at the time the tech giant was the one seeking a decade of tax giveaways for the project, but he was prohibited from disclosing it because the company had demanded secrecy.
“I’m confident that had the community known this project was under the direction of Google, people would have spoken out, but we were never given the chance to speak,” said Travis Smith, managing editor of the Waxahachie Daily Light, the local paper.
“We didn’t know that it was Google until after it passed.”
After the deal went through, Sharka changed its main address to that of Google’s headquarters in Mountain View, Calif. Site work began last fall.
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Some New York lawmakers were so outraged by the secrecy of Amazon’s process that they have introduced bills that would ban nondisclosure agreements for development projects in the city and state.
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Officials in eight of the cities signed nondisclosure agreements, or NDAs, in their real estate dealings with Google, according to the documents. The documents also show that the search giant used shell companies to negotiate to build data centres in five of the six localities with data centres that responded to the records requests, including Midlothian; Berkeley County, South Carolina; Council Bluffs, Iowa; Lenoir, North Carolina; and Clarksville, Tennessee. Google’s identity was eventually revealed, but often so late in the process that it precluded public debate.
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Sometimes Google formed multiple subsidiaries, with distinct names, to handle different aspects of negotiations for the same site, according to the documents. In Midlothian, for example, Google created Sharka to negotiate the tax-abatement and the site plans, and used a separate Delaware company, Jet Stream LLC, to negotiate the land purchase with a private owner. In Iowa, Google created Delaware-based Questa LLC for the land sale and Gable Corp. for the development deal.
When Google’s representatives first approached Midlothian in 2016, they used a code name that was not the same as either of the subsidiaries, Barnett said. (He declined to say what it was.) Google also asked Midlothian officials to sign a confidentiality agreement before they knew the developer’s identity, Barnett said. He said Google revealed its identity a year later, as the deal approached.
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The records also demonstrate how Google was able to keep publicly relevant information out of view. Lenoir, North Carolina, where Google announced in 2007 it would build a data centre, agreed to treat as a trade secret information about energy and water use, the number of workers to be employed by the data centre, and the amount of capital the company would invest, according to the documents. The Google subsidiary, Tapaha Dynamics LLC, then moved to exempt such trade secrets from transparency laws that allow citizens to make public information requests. At one point, according to the documents, Lenoir’s city attorney instructed city council members not to answer questions about the project during a public hearing.
Williams, the Google spokesperson, told The Post that it considers information such as water and energy usage to be trade secrets because competitors could use it to draw sensitive conclusions about the company’s technology.
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In Midlothian, a July article in the local newspaper, the Waxahachie Daily Light, announcing Google’s role in the new data centre elicited hundreds of comments and shares, with many residents complaining about the low number of jobs and the tax incentives. “There goes our small town living,” one local wrote.
“So Google comes in and pays no taxes for 10 years, and only brings in 40 jobs hmm sounds like a great idea,” wrote another.
Smith, the managing editor of the local paper, said, “I’m not going to say we’ve been lied to, but we’ve been strung along.”
