Cities recruiting businesses would be given leeway
March 10, 2011

Memphis legislators are pushing a bill in the General Assembly that would allow local governments to keep many of their dealings with industrial prospects secret for up to five years.

The rule would kick in if a city or county government’s attorney says releasing the information would hurt efforts to recruit companies that might bring new jobs.

Amid fierce competition for economic development projects and with a state unemployment rate of 9.5 percent, Tennessee officials are often tight-lipped about how they recruit corporations — and the incentives they’re offering — for fear of tipping off competitors in another state.

But opponents of the newly proposed bill say it would give local governments broad powers to basically craft their own public records rules and go beyond current law to keep information away from taxpayers.

“The bill would allow local governments to adopt their own public records policies in the handling of that information, which means that a company could insist that a city sign a confidentiality agreement that would prevent it from talking about incentives and other things that might cost the taxpayers money,” said Frank Gibson, executive director of the Tennessee Coalition for Open Government. “And it gives the municipality’s lawyer a lot of power to decide what can be kept secret.”

The measure, introduced in the state Senate by Sen. Mark Norris, R-Memphis, and in the House by Rep. Larry Miller, D-Memphis, is backed by the Greater Memphis Chamber of Commerce, which complained that the city lost a potential new manufacturing plant because no guarantee could be given that proprietary information about its operations would remain private.

If it passes, the bill would amend the state’s Open Records Law to allow a city council or county commission to “designate certain records as proprietary information, and thereby not subject to” the law that requires public records to be open for inspection by the public.

While the bill says a contract signed by a local government would stay open for review, it seems to allow for sealing any information if the city or county’s attorney “determines that a document or information should not be released or disclosed because of its sensitive nature.”

Dexter Muller, senior vice president for community development at the Memphis chamber, said the bill is “not intended to keep secret things like tax incentives” that local governments might promise, but “to protect trade secrets that an industrial prospect might share” as it investigates local services, such as utilities.

“When public funds and infrastructure are involved, that information shouldn’t be kept secret. The public has the right to know that,” Muller said.

But others argue the measure is too broad, and say it could be used to hide information from the public such as $90 million in incentives for manufacturer Electrolux to build a plant in Memphis.

Gibson, a former newspaper editor who runs the open records nonprofit, also pointed to a presumed state sales tax deal to aid as it builds a pair of distribution centers in Bradley and Hamilton counties, adding 1,400 new jobs.

In that situation, Tennessee state officials are using taxpayer confidentiality laws to refuse to acknowledge whether Amazon has been given an exemption from a state law that requires any retailer with a physical presence in the state to collect sales taxes.

If there is a sales tax break for Amazon, it could amount to millions in lost revenue for Tennessee, which depends on the sales tax for two-thirds of tax dollars in its general fund.

The Amazon deal was struck under former Gov. Phil Bredesen, who left office in January, but not before seeking a rule change to exempt retailers from sales taxes if they sell at least 50 percent of their goods outside of Tennessee.

Bredesen’s Republican successor, Gov. Bill Haslam, has spoken in favor of granting sales tax exemptions to companies such as Amazon, but his revenue commissioner on Feb. 17 abruptly canceled a hearing on the rule change because of a freeze on new regulations imposed by the new administration.

Chambers uncommitted
In the case of the Memphis-backed records bill, Muller said the Memphis chamber initiated the idea after meeting with representatives of the Nashville, Knoxville and Chattanooga chambers of commerce.

But the other three chambers say they haven’t taken a position on the measure.

“We are aware of it, but we haven’t seen it, so we haven’t taken a stand on it,” said Ralph Schulz, president and CEO of the Nashville Area Chamber of Commerce. “We’ll probably give the Memphis people a call to find what their intent was and where they’re headed with this.”

But Schulz said some sensitive information about industrial prospects ought to be kept secret.

“In general, if there were proprietary information involved, no business would want that exposed,” he said.

The two companion bills — Senate Bill 1168 and House Bill 1774 — haven’t had a hearing at the Capitol yet.

A hearing on the House bill was scheduled for earlier this week, but it was postponed for two weeks. No hearing has been set in the Senate.


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