Gov. Bill Haslam is in danger of suffering a rare setback in the Republican-dominated legislature with his proposal to make secret the names of the owners of companies asking for millions of dollars in tax money to build or expand in Tennessee.
The governor and his Economic and Community Development Commissioner Bill Hagerty insist confidentiality is necessary to help Tennessee compete with other states seeking new jobs.
The governor plans to expand the state’s “Fast Track” incentive program for businesses to pay not only for roads, utilities and worker training, but also to build and equip industrial plants.
In its original form, the administration’s bill authorized the state to require businesses applying for tax breaks or outright grants to surrender financial statements, cash-flow reports, corporate structure and ownership. But all the information is sealed from public view. Proponents say the companies won’t surrender the information unless it will be kept confidential.
The bill’s critics don’t oppose letting companies keep proprietary information secret, but object to handing out tax money to companies whose owners aren’t known.
Haslam argues the public should trust state government not to favor companies owned by family members or benefactors or cronies of legislators or administration officials.
“I think there are some folks who are like, ‘Well, we’re trying to decide are we going to invest in Tennessee or Indiana or Florida or Texas or wherever,’ and they might be a smaller, privately owned company,” the governor said in defending the bill. “As long as they don’t intersect in anybody in the public sphere, I’m not certain why we need to know that.”
Haslam’s bill made it to the Senate floor, where passage was anticipated, but Sen. Roy Herron, D-Dresden, railed against it and essentially shamed Republicans into postponing action.
Herron raised the specter of the state’s history of public corruption, referring to the arrests of seven state lawmakers in the Tennessee Waltz bribery scandal only seven years ago.
“The temptation for corruption is too great,” the senator said. “The temptation for malfeasance is too strong. Some of you have been here. Some of you know. Some of you used to serve in the Senate with those who no longer are here because they were tempted. What makes us think that others in government might not also be tempted as well?”
Herron put the bill’s sponsor — Sen. Bo Watson, R-Chattanooga — on the spot, demanding to know “the compelling reason” for keeping the business ownership secret. Watson tried to defend the bill, making the administration’s argument that it’s good for the state’s economy.
“This is information that is currently not available to the state,” Watson said. “They won’t release this information because of the confidentiality of its nature. This is information that, if obtained by the state, will allow the state to make better decisions about who we give these kind of incentives and credit. The information we possess, the better decisions we can make.”
“Call me old-fashioned or whatever,” Herron fired back. “We Methodists have a saying. Open doors, open hearts, open minds. As far as the public’s business, it seems to me we’re better served by open doors, open records, open meetings. This goes the opposite direction. We’ve operated under the current law for literally years and years. If we’re going to start making these records secret and even the ownership secret … there’s got to be a compelling reason. I’ve not heard it yet.”
“What compelling reason is there to hide the ownership of those who are getting the tax dollars we appropriate?” Herron asked. “That’s breathtaking. It’s shocking. It’s astounding. And quite frankly, it seems to me irresponsible. If there’s a reason we’re doing business with people who don’t want the taxpayers to know they own the companies, tell us why that should be. I don’t understand it. I’ve not heard an argument for it. What could be more fundamental to an open government, what could be more important to the way we do business, than to be open and honest about who’s getting the money? We’re not talking about proprietary information. We’re talking about who gets the money.”
With the media joining public-interest lobbying groups and even the Tea Party in opposition to the bill, the administration’s allies now are working behind the scenes to find a compromise. Under a proposed amendment, the company’s ownership no longer is listed as confidential, but it’s also not among the items to be made public. The outcome is the same as in the bill’s first version.
“Private companies just do not want all that information divulged, and that’s understandable,” House Speaker Beth Harwell said. “On the other hand, citizens have a right to know how their tax dollars are being used and spent, and I think we’re going to come up with what will be pleasing to both of those.”
Senate Speaker Ron Ramsey was less circumspect at the beginning of this controversy, stating flatly that the Senate won’t pass the proposal until the administration agrees to make business ownership publically known.
“Some will argue that maybe ownership shouldn’t be divulged,” Ramsey said. “Well then, don’t ask for a grant. It’s that simple. There are certain things that should be divulged and that’s one of them.”
But last week, Ramsey was waffling under pressure from Haslam administration officials. He said he was looking for a compromise to allow at least some ownership structures to remain secret.
Clint Brewer, spokesman for the Economic and Community Development Department, said the administration isn’t backing down.
Brewer said disclosing business ownership “would hurt the effort to create jobs in the state. None of our border states do that. It’s never been done in the department before. We can’t find anywhere else in the United States where a state requires this. It would just hurt our competitive advantage.”