Is Amazon Secret Company Behind $37M in Ohio Tax Breaks?

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By Alex Ebert

The Ohio government is keeping a tight lid on the name of the company that has been promised $37 million in state tax incentives and a 15-year free pass on property taxes amid negotiations on a $750 million investment outside Columbus.

The subsidy recipient is Sidecat LLC, which, according to secretary of state filings, was formed in Delaware less than five months ago and registered to do business in Ohio only 65 days ago. But this week the Ohio Tax Credit Authority approved a 40-year sales and use tax exemption for the company, which has no track record. According to county property searches, the organization doesn’t own the land where the center would be built.

However, property records and city resolutions directly link Sidecat to a suspected expansion of Amazon.com Inc.'s data processing facilities in the Columbus suburb of New Albany. Despite publicly announcing the project and its incentives, city and state officials refuse to comment on the actual party.

Transparency advocates say the continued deception makes no sense for subsidies the state already announced and local government already approved. Plus, without knowing the name of the company, they say, taxpayers effectively are left without a way to evaluate the deal and pressure their local officials.

But economic developers say confidentiality is a must for states seeking to attract large companies that stimulate the local economy and fill the local coffers.

Picket Fences and Fiber

New Albany, Ohio, is a picturesque town of 11,000, known for white picket fences, red brick architecture, and a high-tech industrial park littered with Fortune 500 companies’ data centers.

The $1.3 billion of tech investment at the New Albany International Business Park is fed by a fiber-optic network and a fast-track permitting process that the city boasts “reduces a company’s typical project timeline from two years to eight months.” The park hosts data centers from giants such as American Electric Power Co. Inc, Nationwide Mutual Insurance Co., Discover Financial Services, and Amazon.

In return, the park generates 80 percent of the city’s general fund revenue. The 10.2 million square-foot park has also generated $64 million in tax dollars for local schools—10 times more tax revenue than if the property had remained farmland. And its tech space is about to get 900,000 square feet bigger.

In late July the city council passed resolutions supporting a single project that would nearly double the square footage of data centers in the park and bringing in a guaranteed $1.4 million to the city annually by 2023. But New Albany spokesperson Scott McAffe told Bloomberg BNA the new resident, Sidecat, “still hasn’t made a decision” if it’s going forward, and the city won’t comment further on the development.

What’s in a Name?

Despite the secrecy, public records and the secret company’s name indicate the decision to break ground likely lies with Amazon.

The name “Sidecat” is a term for a computer program that organizes, or concatenates, text files next to one another. Amazon already runs a data center in the New Albany park through its subsidiary Vadata Inc, and, according to Licking County property records, Vadata’s three properties are on the same street as the proposed location of the new data center.

Amazon wouldn’t respond to requests for comment about the project or whether the name hints at a new center by its existing location. However, county records show a holding company affiliated with the developer of the business park purchased properties that make up the 345-acre site proposed for the data center. That same holding company sold Vadata its 64-acre lot for nearly $13 million.

But previous Amazon projects, with state subsidies estimated over $80 million, were more overt. The state approved incentives using Vadata’s name in 2014, eschewing a pseudonym for Amazon’s Web Services company.

However, both the Ohio Development Services Agency and the private nonprofit Jobs Ohio refused to comment about the Sidecat deal it announced July 31. They won’t comment on the actual party in interest or whether the name “Sidecat” holds any significance.

Necessary to Negotiate

Confidentiality and nondisclosure agreements are “standard practice” in economic development negotiations between governments and companies considering investment because they provide the space necessary to allow government vetting of projects and protection of companies’ proprietary data, Steve Arwood, CEO of Miller Canfield Consulting, told Bloomberg BNA.

“There are three main reasons for why the NDA is important,” said Arwood, the former head of Michigan’s Economic Development Corp. “First, companies don’t want to tell their competition where or what they’re doing. Second, most states request a high degree of financial disclosure.”

In his previous job, Arwood led the Michigan agencies that closed development deals with industry giants, including Amazon. Now he’s back in the private sector, helping companies negotiate with state actors.

He said the third and largest reason for confidentiality in negotiation is that companies want to manage expectations for their staff, their shareholders, and the localities in which they operate. Often that means negotiations for large projects are started by a consultant, and the company’s real name isn’t used.

“I’m a big proponent of transparency, but the biggest cause for concern is where a company is expected to do something and it doesn’t,” he said.

Lynn Knight, vice president of knowledge management and development for the International Economic Development Council, told Bloomberg BNA that it isn’t the role of economic developers to announce incentive deals.

“It’s the companies’ news. When communities jump the gun they jeopardize or kill deals,” she said. “You can’t require negotiations be transparent, because then it’s an auction, and an auction for incentives isn’t good for anybody.”

Knight said that because complete transparency can’t be expected, “the time for people to weigh in is when incentives are debated” at the state or local level.

When Confidentiality Crosses Into Secrecy

Confidentiality can be harmful because debate often isn’t robust or isn’t possible, Greg Lawson, a research fellow for the free market think tank Buckeye Institute, told Bloomberg BNA. He said most tax expenditures “are buried in budget bills,” so the choice whether to grant an incentive should be open to public scrutiny.

“If you’re getting a tax expenditure or special arrangement that doesn’t apply to anyone else, that’s a policy debate and that’s a political debate,” he said. Lawson, who advocates for tax reform, said the Buckeye Institute would rather eliminate expenditures and and lower taxes for all businesses.

When complete transparency isn’t possible, states should provide as much detail as they can, Michelle Surka, a tax and budget advocate with the liberal U.S. Public Interest Research Group, told Bloomberg BNA.

“When you don’t have the name of the company, it’s hard to keep the company and the government accountable for things,” Surka said. “How do we know the deal we’re making is a good one? It leads naturally to a race to the bottom.”

To contact the reporter on this story: Alex Ebert in Columbus, Ohio, at aebert@bna.com

To contact the editor responsible for this story: Jennifer McLoughlin at jmcloughlin@bna.com

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