Editor’s note: This story is reprinted with the permission of the News-Topic in Lenoir.
LENOIR, N.C. – The City of Lenoir and Caldwell County first offered Google broad economic incentives more than a year ago and revised the proposal three times over the following six weeks to double the time period for equipment and property tax breaks, according to documents released by the North Carolina Department of Commerce this week.
The documents also reveal for the first time that the overall economic investment could be three times larger than originally stated.
The material was obtained through a Freedom of Information Act request by the News-Topic and other media outlets. The city and county are preparing their documents for release later this month.
Google, an Internet leader in data search and applications, announced Jan. 18 that it is locating a large-scale data center in Lenoir within the Overlook Drive and Virginia Street area. The site is expected to house banks of computers to process and deliver information to users of Google’s services. The company has stated a minimum investment goal of $600 million and the creation of 210 jobs by the end of 2010. Google has said it intends to have its center operational within 12 to 18 months.
In order to land the company, state and local governments granted Google a host of tax breaks. The N.C. General Assembly passed legislation last summer exempting Google from sales taxes on equipment and electrical power. In December, the Commerce Department approved a Jobs Development Investment Grant (JDIG), valued at up to $4.77 million. According to a study conducted for the legislature, the incentives on the state side could be worth up to $100 million overall.
After being alerted that Caldwell County was a candidate to be a home for Google, local officials presented city and county incentives Feb. 2, 2006. Four days later, the proposal was revised then changed again Feb. 8. In the document dated Feb. 8, Caldwell County Board of Commissioners Chairwoman Faye Higgins and Lenoir Mayor David Barlow offer Google a 100-percent grant for business personal property taxes and a 75-percent grant for property taxes for a period of 20 years.
The proposal revised an earlier one that offered tax grants for 15 years.
Higgins and Barlow amended the offers March 14 by initialing changes to the Feb. 8 document. The changes increased the grants to 30 years on both business property and real estate taxes.
The document, signed by Higgins and Barlow, estimates the value of the project at $600 million. It also states, “We understand that, if conditions allow, the total project value may reach $1.8 billion, with the approximate tax valuation being 80% business personal property and 20% real property. We extend this revised offer understanding that the company will assist the City in any long-term water and sewer plant expansions that may be needed to serve the company’s maximum needs.”
In December, Lenoir and Caldwell County both approved measures that made the economic incentives even better for Google – referred to in the deals as Tapaha Dynamics, LLC – pushing the grant to 80 percent of real property taxes.
Higgins declined to comment about the incentives Thursday, saying she is still bound by a non-disclosure agreement.
“A lot of things are being made public quicker than I’m aware of it,” Higgins said. “I don’t know at what point I can say anything.”
Higgins referred other questions to Barlow and former commissioner Tim Sanders, who served as spokesmen during the project negotiations. Sanders remains under contract with the county through March 31 to handle additional work relating to the project.
According to a Sept. 28 grant application by the Caldwell County Economic Development Commission (EDC), the ultimate value of the city and county economic incentives could reach $165 million. The EDC application was for $222,550 through the Golden LEAF Foundation, a state economic development fund created in 1999 from the settlement of litigation against tobacco product manufacturers.
“I wish somebody would tell me where they got that figure,” Barlow said.
Said Sanders, “I wasn’t aware of that figure. That had nothing to do with our negotiations.”
The application uses the code name “Project Vesper” for the Google project and states, “a comprehensive incentive plan is currently being assembled to ‘seal the deal’…The number and scale of economic incentives for which Project Vesper is eligible are virtually unprecedented in NC, but so are the potential long-term benefits, as Vesper’s initial capital investment is expected to be one of the largest ever in NC, and impacting one of NC’s most economically distressed counties.”
The EDC said it needed the funds “to cover the costs of pre-development activities associated with industrial recruitment of Project Vesper,” including surveys, environmental studies, permit fees, legal advice and engineering work for the closure of a 5.2-mile portion of the Caldwell County Railroad.
Other documents disclose the amount of money the JDIG could be worth. Google is eligible for a $51,000 grant from the state this year, increasing to $181,000 in 2008 and $311,000 in 2009. From 2010 through 2018, the grant has a potential value of $469,000 annually.
If the estimated state and local incentives packages prove accurate, they will total $265 million. The total could even be larger if the investment amount exceeds the initial projections. By means of comparison, the tax incentives offered to attract Dell Computer to Winston-Salem in 2004 have been estimated at $280 million.
“The incentives could be a lot greater than that,” Barlow said. “And we hope that they are. If they keep getting bigger, our 20 percent of the project is bigger.
“I’ll talk about incentives all anybody wants to. Understand that the potential benefits could go from here on.”
Barlow highlighted the estimated 300 to 500 people who are expected to be hired during the construction phase of the site.
“Already our local economy has had a jump start,” Barlow said. “The local contractors are spending money, people are paying rents, and materials are being purchased.”
Sanders dismissed reports in other publications that said Google used heavy-handed negotiating tactics.
“They (Google) did not bully us,” Sanders said. “They were always concerned about being a good neighbor. They bought property that they really didn’t need.”
Barlow said the city stands to gain not only from an improved economy, but also from revenues through utility franchise taxes and the fact that Google will be the largest purchaser of water from the city.
“And there are more people inquiring about property,” Barlow said. “It’s got everybody upbeat. It’s hard to measure, but you know it’s there.
“What kind of feedback would local officials have gotten if we had gotten an announcement in January that they weren’t coming? Everybody knew a big project was being worked on. Can you imagine the disappointment? Who would have been blamed?”
Other correspondence highlights frustration on the part of Google Senior Leader Rhett Weiss at getting the legislation for sales tax exemptions through the N.C. General Assembly.
In a July 5 e-mail to EDC Executive Director John Howard, Weiss said, “Unfortunately, the sales tax exemption legislation, a major contingency for this project to occur, is still up in the air…John, do you or anyone else on your team have any idea what is holding up the NC legislature and/or why (Gov. Mike Easley) has been so absent from this overall process?…My concerns are not abstract – the legislatures and governors in two other states recently enacted the same exemptions quite efficiently, with little if any wrangling, and in a bunch less time.”
In a separate e-mail to Howard dated July 18, David Lackey – the attorney for Caldwell County – expressed doubt at being able to finalize a number of pending property transactions without an escrow letter from Google. With a subject line of “Vesper – Not a Prayer,” Lackey said, “We are rapidly, and I mean a couple of more hours at the outside, approaching the point that I fail to see how we will be able to pull together the assemblage of the site, no matter how many lawyers we try to get to handle the closings.”
Howard then sent an e-mail to Weiss about the problem and said, “Rhett…it now appears we have our backs against the wall, as described by David Lackey…
“Do you see any fallback action any of us can take in order to preserve this potential site for your use? Please accept from me that the security provided by the requested letter and the commitment to fund the acquisition of the parcels is solely based on our inability to go forward with the same project scope without your decision to locate.”
Less than an hour later, Weiss replied to Howard and said, “I am pleased to say that David Lackey now has the requested escrow letter. I’m likewise pleased that we all got through this ‘fire drill.’”…We expect the closing to be able to occur on schedule.”