Google used shell companies and subsidiaries to hide its involvement in expansion plans that yielded millions of dollars in tax breaks, according to a report by The Washington Post on Friday, casting light on how tech companies cut deals with local governments.
When the search giant planned to build a data center in Midlothian, Texas, Google used a subsidiary called Sharka LLC, The Post reported. Other subsidiaries Google set up for development projects include Jet Stream LLC and Questa LLC.
Google also extensively uses non-disclosure agreements with officials, The Post said. In the case of the Texas data center, Google was seeking a decade of tax breaks, but Midlothian’s head of economic development was barred from disclosing Google’s involvement in the project, the report said.
The size of deals between local governments and tech companies was thrust into the spotlight Thursday after Amazon dropped: It was no longer going forward with plans to build a massive second headquarters in New York City. The withdrawal followed intense opposition from local politicians and union groups, fueled in part by the tax breaks the city gave the e-commerce giant.
Deal-making is crucial for Google as it revs up expansion. Earlier this week, CEO Sundar Pichai said the search giant is investing $13 billion in data centers and offices around the country, mostly in the Midwest, East Coast and South. That includes new and expanded data centers in Ohio, Nebraska, Oklahoma, South Carolina and Texas. New and expanded office locations include sites in Virginia, Georgia and Chicago.
In California, Google is building a giant campus in San Jose, about 15 miles from the company’s headquarters in Mountain View. The new San Jose outpost will be Google’s second-largest campus. Partnership for Working Families, which obtained the Google records and shared them with The Post, has sued the city of San Jose over its negotiations with Google. The advocacy group didn’t respond to a request for comment.
A Google spokeswoman called its tactics “standard industry practices.” At the early stages of deals, companies often strive to keep negotiations quiet because they don’t want to tip off competitors or announce their plans prematurely. But some critics have pointed to the secrecy as detrimental to local communities, which sometimes can’t protest until it’s too late.
“We believe public dialogue is vital to the process of building new sites and offices, so we actively engage with community members and elected officials in the places we call home,” the Google spokeswoman said in a statement. “Of course, when we enter new communities we use common industry practices and work with municipalities to follow their required procedures.”
Still, tamping down concerns from local communities will be an ongoing battle for tech giants, as Silicon Valley faces more scrutiny than ever over its scale and influence.
On Friday, Google tried to highlight some of the benefits of its expansion. The company said Google’s data centers create $1.3 billion in economic activity, $750 million in labor income, and 11,000 jobs throughout the US in a single year.