May 18, 2024

The Nerve Archive

Where Government Gets Exposed

Secrecy Abounds in Incentives Deals

The NerveIf there’s a favorite color at the S.C. Department of Commerce, it might be black.

The agency, which is heavily involved in crafting incentives deals for companies wanting to locate or expand in South Carolina, has routinely blacked out information in incentives documents sought by The Nerve over the past year under the S.C. Freedom of Information Act.

In making its redactions, Commerce typically has cited an exemption in the Freedom of Information law that says, “Confidential proprietary information provided to a public body for economic development or contract negotiations purposes is not required to be disclosed.”

National organizations representing journalists say that’s wrong, even if allowed under state law. A soon-to-be-released national study of state Freedom of Information or “sunshine” laws found South Carolina’s to be among the most restrictive in the country in terms of incentives deals.

“If you’re spending public funds to lure companies in, then the public should have a right to know what they’re getting in return,” said Mark Caramanica, the Freedom of Information director with The Reporters Committee for Freedom of the Press in Arlington, Va., when contacted last week by The Nerve.

Under a bill (S. 206) prefiled in December by S.C. Sen. Tom Davis, R-Beaufort, the state Freedom of Information Act would be amended to require Commerce and other public agencies to disclose more details of incentives agreements.

The bill has been stuck since January in the Senate Finance Committee, chaired by Republican Hugh Leatherman of Florence. Leatherman was one of the key players in an incentives deal, estimated earlier by The Nerve to be at least $500 million in public costs, to bring a Boeing aircraft assembly plant to North Charleston.

In an effort to improve transparency in incentives deals, Davis filed another bill (S. 832) last month that would require Commerce to conduct an analysis through an outside economist and post the incentives review on its website. In addition, companies receiving incentives would have to submit annual compliance reports to the S.C. Department of Revenue for posting on that agency’s website, under the bill.

Blacked-Out Details

Commerce did not redact information in documents on the Boeing deal provided last year to The Nerve, though the agency declined to answer specific follow-up questions about it. But the agency has freely used its black marker in other recent incentives agreements.

Here’s a sampling of what was redacted in incentives agreements provided to The Nerve:

  • A breakdown of the estimated value of the building, machinery and equipment; the projected number of jobs by category (e.g., management, skilled and unskilled trades); and a breakdown of the average hourly wage by job category for the proposed Amazon retail distribution center in Lexington County.
  • The required minimum capital investment, including the estimated value of the land, building, machinery and equipment, for the proposed AQT Solar manufacturing plant in Richland County. The name, title and contact information of the person completing a state grant application, as well as contact information for AQT’s chief executive, also were blacked out.
  • A breakdown of the estimated value of the land, building, machinery and equipment for the proposed Proterra electric bus manufacturing plant in Greenville County and the First Quality Tissue manufacturing plant under construction in Anderson County.
  • A breakdown of the projected value of the building, machinery and equipment; the estimated number of jobs by category; and a breakdown of the average hourly wage by job category for the ZF Group automotive supply manufacturing plant under construction in Laurens County. The name, title and contact information of the person who completed a state grant application, as well as the names of the ZF officials who signed the grant agreement, also were blacked out.

In addition, in most of the cited examples, Commerce included at least one mostly blank page with a handwritten note that indicated information was withheld under the “confidential proprietary information” exemption of the state Freedom of Information Act.

That exemption, however, does not spell out what exactly is considered “confidential proprietary information.”

When The Nerve protested the redactions in the incentives agreement for AQT Solar, Commerce attorney Karen Manning in a written response said the Silicon Valley-based company “kept its investment confidential and considers this info proprietary.”

“There were no public announcements by the company of its investment,” Manning said. “There are other examples of companies that keep investments confidential for competitive reasons. As I’ve said before, every project can be different.”

Yet Commerce in its 2010 year-end activity report listed the projected investment for AQT Solar at $460 million and ranked it as the second-highest announced investment last year, behind the proposed $1 billion First Quality Tissue project.

The Nerve in an April 11 story first reported that three months after AQT announced it would create 1,000 jobs at the Richland County site, there were no signs that the company was moving into an already completed 184,000-square-foot building that officials said the company would occupy.

In addition, a review by The Nerve of a cost-benefit analysis included with the agreement found that the capital investment would be at least $100 million less than what was cited publicly by Commerce and Richland County officials.

Weak ‘Sunshine’ Laws

Nationally, South Carolina is among at 15 states, including North Carolina, Arkansas and Kentucky, that close certain incentives records to the public through exemptions in their respective “sunshine” laws, Aimee Edmondson, an Ohio University assistant journalism professor, told The Nerve last week.

Another dozen states, including Tennessee, Alabama, Florida, Mississippi and West Virginia, close various records under state economic development laws, she said.

“More and more states are looking at this because economic development negotiators are telling state legislators that this is the only way businesses like Boeing and Amazon are going to play,” Edmondson said.

Edmondson said she and University of Missouri associate journalism professor Charles Davis researched sunshine and economic development laws in every state, and that their findings will be published in July in the academic journal Communication Law and Policy.

Jeanette Doran, a senior staff attorney with the North Carolina Institute for Constitutional Law, a nonprofit, nonpartisan research organization in Raleigh that specializes in economic issues, told The Nerve last week that her state’s sunshine law on incentives agreements is “pretty dim.”

“No information is available until after a deal is done, and then very little meaningful information is available after the fact,” she said. “It frustrates me as an attorney, and it deeply insults me as a taxpayer.”

Doran said N.C. officials usually will publicly acknowledge that incentives were offered in announcing a big industrial project, though they usually don’t reveal that the incentives are tied to lower job-creation and investment targets than what was publicly announced.

The Nerve found a similar pattern in S.C. incentives agreements it has analyzed. For example, according to the AQT Solar agreement, the company would have to hire 500 employees to receive a $2 million taxpayer-funded state grant – half of the 1,000 jobs announced publicly by Commerce and the company.

Lack of Transparency

South Carolina recently was ranked at the bottom of the nation in terms of incentives transparency by a nonprofit economic development research organization in Washington, D.C., known as Good Jobs First. The organization gave South Carolina and 12 other states, including Georgia and Tennessee, an “F” on how well it discloses its incentives online.

Journalism groups contacted by The Nerve say there is too much secrecy in incentives deals.

“We should not be beholden to corporations to keep things secret,” said David Cuillier, chairman of the Freedom of Information Committee for the Society of Professional Journalists, based in Indianapolis, when contacted last week by The Nerve.

Cuillier, a University of Arizona associate journalism professor, questioned the motives behind secret incentives deals, noting, “There’s really not that much benefit to the community – that’s why they’re hiding it (details of incentives deals).”

Bill Rogers, executive director of the South Carolina Press Association, told The Nerve last week that he believes there are “certain things that can be proprietary” in incentives agreements, such as details on how a company’s product is manufactured.

The state Freedom of Information Act has a separate exemption for trade secrets, which are defined as “unpatented, secret, commercially valuable plans, appliances, formulas or processes” in the “making, preparing, compounding, treating or processing of articles which are trade commodities obtained from a person.”

But other information, such as the required job-creation and investment levels, should be made public, Rogers said.

“As a citizen, as a stakeholder in this, I think I would have the right to know details of whether they’re meeting the agreement,” he said.

The Nerve, through its parent organization, the South Carolina Policy Council, is an associate member of the South Carolina Press Association.

Reach Brundrett at (803) 254-4411 or

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