Researching a Subsidy Deal
Researching A Proposed or Existing Subsidy Deal
This section addresses how to research the subsidies going to a particular company for its commitment to build or expand in a certain location. The tips are relevant to current projects as well as past ones, though for the latter your first step should be to check Good Jobs First’s Subsidy Tracker.
The key information you’ll typically be seeking will consist of the amount and type of subsidies the company received. The details of subsidized development projects may not be spelled out to the public, but that doesn’t mean that those details aren’t public information. Many of the key documents are public records, and amounts that are not in the public record can often be estimated by using a variety of sources that are.
A subsidized development deal, particularly a large one, may involve more than a dozen subsidies from several levels of government – city, county, regional, state, and federal. The checklist below lays out the main categories of subsidies to look for.
- Property tax abatements
- Corporate and personal income tax credits for capital investment, research and development, job creation, or other activities
- Sales tax waivers on materials for new construction or equipment
- Utility tax breaks
- Enterprise zone-associated tax breaks such as inventory tax exemptions and employment tax credits
- Capital gains tax breaks in Opportunity Zones
- Rebates to employers of workers’ withholding taxes or rebates based on annual payrolls
- Road and traffic improvements, sewer lines, water-treatment plants, utility hook-ups, and other infrastructure
- Land price subsidies (discounts) or virtually free land
- Use of eminent domain
- Brownfield remediation assistance or legal liability avoidance
- Tax increment financing or other site assistance for infrastructure
- Training grants to pay for instructors, curriculum, or other customized training, either on site or at a community college or other public facility
- Wage subsidies paid to the company for on-the-job training periods
- Federal Work Opportunity Tax Credits
Loans and Loan Guarantees
- Industrial revenue (or development) bonds for low-interest loans
- Other state and/or local loan programs at subsidized rates
- Gap financing, sometimes including TIF
- Small Business Administration loan guarantees
- Conditional loans that turn into grants
Technical Assistance and Fee Waivers
- Expedited handling of permits
- Agreement to lobby other levels of government for additional subsidies
- Fee waivers of many kinds associated with construction and land transactions
- “Economic development” utility rates
- Consulting on modernization, automation, energy efficiency, and other issues
- Cash grants such from “deal closing funds”
Variations in subsidy transparency
Some types of subsidies are easier to find than others. Documents containing subsidy data are sometimes considered proprietary. In other cases, the granting agency may not collect the information you are seeking. Occasionally, the agency administering the program may be a quasi-public or privatized entity that is exempt (or argues it’s exempt; we don’t believe it is) from state Freedom of Information Act (FOIA) laws.
Generally, discretionary subsidies (those provided to an individual company) are more transparent than entitlement subsidies (those a company qualifies for by meeting program criteria). Discretionary subsidies usually require a public body to receive an application and to deliberate on that application.
On the other end of the spectrum are entitlement subsidies such as investment tax credits. Since no company’s income tax return is made public, it is often not possible to know how much a particular credit was worth to a company. The good news is that just because you cannot see a company’s income tax return doesn’t mean you cannot make a good faith estimate about the value of an income tax credit.
For example, suppose a company builds a $100 million plant, and the state has an investment tax credit which allows the company to deduct 5% of that investment each year for 20 years. It also allows the company to “carry forward” any unused tax credits from one year to the next if the credit exceeds its total income tax bill in any given year. So, at the very least, you can say that the company has a tax credit entitlement of $100 million. Whether or not the company will be able to use all of that credit will depend on the plant’s future profits and the state’s tax rate.
The list below breaks subsidies and documents into three categories based on the typical quality of their disclosure.
- Subsidy applications (after approval, and excluding income tax credits)
- Job training agreements
- Revenue bond loan agreements
- Other loan agreements
- Tax increment financing (TIF) development agreements
- Grants and rebates
- Deals that require state legislative approval or city/county ordinance (not all information will be discussed)
- Job creation or job retention data (monitoring tends to be poor or use unreliable methods such as corporate self-reporting)
- Agency outcome-monitoring reports (quality varies a great deal)
- Recruitment records (especially if private-sector entities, such as chamber of commerce are involved)
- Minutes of development agency board meetings (are often perfunctory and fail to record meaningful details)
- Property tax abatements
- Corporate income tax credits, such as those for capital investment, research and development, job creation, or meeting enterprise zone criteria
- Sales tax exemptions
- Other corporate tax exemptions, such as those on raw materials and inventory, or utility tax cuts
- Corporate income tax-formula savings (the most controversial one is the “single-sales factor formula,” which is very lucrative for manufacturers)
- Offers made to recruit companies that were ultimately successful
Timing of disclosure in a subsidy deal
Another factor that will impact your research is whether you are researching a deal that has already been signed, or a deal that is still being negotiated.
The first phase of a deal is the pre-application negotiation — the period in which a company is considering a major new project, perhaps pitting several locations against each other. Companies usually demand secrecy during the negotiation process by requiring public officials to sign a non-disclosure agreement (NDA). Although there may be general public awareness that talks are occurring (such as the Amazon HQ2 competition), there is rarely any kind of disclosure about the subsidies being sought.
The next phase of a deal is the period after the application is filed but before it is approved. Because most discretionary subsidies have mandatory procedures such as public notice and public hearings, there is usually a brief window period during which information is available before the deal is signed. If the purpose of your campaign is to either block a deal or win improvements to it, this is a critical research moment. Although most states will not release records of the negotiation process until after a deal is approved, you should be able to access the company’s application and any supporting documents it submitted.
After a deal is approved, the records relating to it should be public under the state’s open records laws. Again, proprietary financial information about the company is typically exempt from such rules.
As the deal is implemented, you should be able to collect records pertaining to the actual value of subsidies, the company’s compliance with the terms of the subsidy agreement, and whether project outcomes match the expectations set forth in the development agreement. The collection of outcome data — such as the actual number of jobs created, wages paid, etc. — varies between states and programs It is also rarely compiled in one place in an accessible format. The exceptions to this rule, and tips on finding data regardless, are discussed below in the section on key documents. There may also be a significant time lag between the time a deal is approved and the point at which details are made public.
Tips for tracking deals in progress
Much research on subsidy deals occurs after a deal has already been signed, often in response to problems that have arisen. A number of campaigners have begun taking a more proactive approach to subsidy research, looking to intervene to block bad deals and shape projects to be more accountable and more beneficial to local residents.
For this type of work, it is important to monitor the websites of local newspapers and follow the social media feeds of local officials. You should also regularly check government websites of agencies involved in development decisions, including development agencies, redevelopment authorities, the legislature, and the office of the executive. Find out where announcements of requests for proposals (RFPs), public hearings, and votes on projects are posted.
Attending and participating in in-person and virtual hearings on subsidy issues held by development boards, city council committees, and other bodies will increase your understanding of the mechanisms by which development decisions are made.
Steps to researching a deal
Search the news
Development deals don’t always make it into the local news, but when they do, news articles can provide valuable research leads. Depending on the deal’s size and location, check the websites of local, national, business, and community newspapers, and/or economic development trade publications. See the section on determining whether a company has received subsidies for tips on searching for articles.
Read the articles from oldest to newest, pulling out key facts and creating a chronology of events. Look for information regarding:
- Key moments in the deal, including the announcement of subsidies, dates of council votes, signing of the agreement, groundbreaking, opening day, expansions, layoffs, lawsuits, etc.
- Key players in the deal, including state and local agencies, elected bodies, developers, companies, and citizen groups. Also note the spokespeople quoted for each of the above, as they may be your contacts
- The type and estimated value of subsidies involved and program names
- The benefits the project is anticipated to produce (job creation, investment, ripple effects, etc.)
- What attracted the company to an area, and if other regions were also in the running
- Any debate as to whether the subsidies were necessary
- Any changes that were proposed or made to the deal prior to signing or after signing
- Discrepancies between the benefits promised and those delivered
- Projected subsidies vs. subsidies actually collected by the company
- Project code names
Use this information to create a chronology of the deal. A chronology allows you to reconstruct events as they unfolded and to imagine them from the perspective of the government agency or company. You may also be able to find relationships between events that may not have been obvious originally.
Take note also of the journalists who covered the issue, as they may be good contacts for your organization when you want to get press.
Gather information from government websites
Your goal here is to collect any online information about the deal, and also to acquaint yourself with the agencies involved.
Look in particular for:
- Press releases – Use this information, typically put out by the lead agency or executive’s office, to add to your chronology.
- Descriptions of the deal – Governments may post information online about large deals they are very proud to have landed.
- Deal documents (rare) – A few jurisdictions, particularly city development agencies, provide online access to key documents such as development agreements. Some city councils keep online archives of their meeting minutes.
- Agency contacts – Jot down contact information for likely sources — people quoted in the newspaper; officials in charge of administering a subsidy; heads of the division of business recruitment (for states) or the development department (for cities). If those names are not available, try public relations officers. At the local level, that person you need to speak to may be the city manager, clerk, or mayor.
- Descriptions of subsidy programs – Familiarize yourself with the subsidy programs you know are involved in the deal and with any other major subsidy programs the state or city offers. You don’t need to get bogged down in the details of the programs, but it helps to have program names — and the basic qualifying criteria or incentive structure — in mind when you call development officials.
Interview development officials
You’ll have to make a judgment call as to your next steps: do you want to begin interviewing development officials or obtain key documents first? If you already know what documents exist and how to locate them, you may want to get the documents first and go into the interview with as much information as possible. This approach is also advisable if you do not want development officials to know you’re researching a deal.
However, in most cases, a preliminary interview with development officials is helpful to determine what information exists and how to obtain it. If possible, interview development officials twice: once to get a sense of what documents and information to look for, and again after you’ve seen the documents.
Obtain copies of key documents
Typically, you want to direct your document request to the agency that took the lead in negotiating the deal. The easiest way is to contact a staff member involved in the project and request the documents directly. These officials are familiar with the project and the paperwork associated with it and may be able to send the documents right away. In other cases, they may require you to submit a written FOIA request. The agency may also direct you to the state public information office. At the local level, you may be referred to the city clerk.
The documents to seek include:
- Pre-application records – Documents may include staff memos, meeting notes, or correspondence between the development agency and company. They may also include research evaluating the project’s projected impact. Records from this period can normally be obtained only after the application is filed, and they are often quite revealing.
- Application records – The application materials are generally public records, although you may encounter claims that some parts of the application are not subject to FOIA. Normally, that only applies to detailed financial data that would be filed with a loan application or other proprietary information about a company that would cause it harm if disclosed to a competitor.
The usefulness of application records depends on how much information they collect. Applications may require companies to state how many jobs will be created (and/or retained), how many of those jobs will be full-time, whether they will include health care, and what wage levels they will pay. Companies may also be asked if they are relocating from another site within the state, and whether the relocation will cause job loss.
- Development agreements, memorandums of understanding, contracts – Typically, the development agreement will outline the major subsidies negotiated by the local government. While an agreement may not provide details about all subsidies, it will often refer to them (such as in a clause in which a city promises to help the company apply for a state job training grant), thus providing a road-map for you. The development agreement may also contain information about the expected public benefits of the project; the company’s commitments for job creation, investment, wages, or other measurable outcomes; means for monitoring compliance; and whether clawbacks or other penalties apply if the company fails to meet its goals.
Research the subsidy programs
At some point, you’ll want to look at the statutes and rules governing the subsidies involved in the deal. These may reveal that the company has legal requirements that are not obvious in the development agreement. See researching subsidy laws and programs for a guide to researching statutes, bills, and administrative rules.
In general, extensive public records of taxpayer-funded subsidy deals, even if they are incomplete for the aforementioned reasons, should be available. Do not let officials tell you otherwise.