The N.C. Commerce Department’s most-frequently used excuse for keeping information about “economic incentive” deals from the public and state legislators—that the deals contain “trade secrets”—has been gutted. The bayonet wasn’t wielded by an opponent of the bribes—but by the secretary of commerce of another Southeastern state.
The secretary, who requested (for obvious reasons) that he not be identified, said in a telephone interview Friday that no corporate official, fearful of bringing on the destruction of his company, would share a trade secret with a government official, or anyone else outside the organization. That being the case, no company has ever divulged a trade secret to his state, the official said. The veracity of that information has long been obvious to skeptics of economic incentive deals that state officials offer to big companies. But confirmation by a secretary of commerce that state officials are not privy to trade secrets could have a significant impact on legislation that currently is on hold in North Carolina’s General Assembly.
The legislation, Senate Bill 393 sponsored by Democratic Sen. David Hoyle of Gaston County and prompted by the North Carolina Press Association, would clarify public records laws and require the state Department of Revenue to publish annual reports on the use of economic development tax incentives. The Senate approved the measure in June and sent it to the House. The House Commerce Committee was to begin debate on the bill July 19, but Hoyle withdrew it after Commerce officials complained that House legislators proposed stronger public-records requirements. Hoyle did so to allow Commerce officials more time to study the new requirements. Commerce officials, no doubt, are busy dreaming up new ways to derail the legislation or to run out the clock on the legislative session.
The unidentified secretary of commerce also said that he decided against making a final offer to a corporation that North Carolina officials also were intensely courting because he feared the company would avoid paying taxes by transferring revenue made in his state to other states that didn’t levy income taxes. In that case, any economic development offer made by the state would have been a sham. Despite that highly probable development, North Carolina Gov. Mike Easley and the Commerce Department decided to offer the company incentives anyway.
The reformed legislation ostensibly would take care of part of that problem. It would require the Department of Revenue to publish annual reports on the use of incentives. That would include the total amount paid by the Commerce Department for all incentives the previous year and an accounting of the number of jobs companies created in the state. Still missing, however, is a foolproof method to determine how much income the company derived from its North Carolina operations. An innumerable variety of accounting gimmicks could foil any attempt by state officials to do so.
There is a difference between “trade secrets” and “confidential information,” the anonymous secretary said. Companies do ask that some sensitive information be kept confidential temporarily. For example, that would include negotiations on pending real estate sales, the prices on which might escalate if landowners knew where a company wanted to build a plant. But such confidential information doesn’t qualify as a trade secret, he said.
North Carolina’s headlong rush into the incentives racket under the Easley administration has already cost taxpayers hundreds of millions of dollars. And the total continues to soar.
It’s time for the public, and state legislators, to be brought into the deal-making process. As the public records law now stands, everyone except for a tight inner circle in the Easley administration is kept in the dark until the last minute. Then legislators are pressured to approve these deals quickly, mostly on blind trust.
But now we know that the Department of Commerce and the governor know almost as little about these deals as anyone else. It’s a shell game that North Carolina can no longer afford to play.
Richard C. Wagner is the editor of Carolina Journal.