Raleigh, N.C. — Does North Carolina's public records law drive away big businesses who might be looking at locating a plant or headquarters in the state?
That's what Richard Lindenmuth, the executive Gov. Pat McCrory has tapped to lead a new nonprofit economic recruitment agency, suggested during a recent public meeting, as reported by Triangle Business Journal.
"Why would a CEO ever let us know where they are looking if they are subject to public records," Lindenmuth said, according to the paper. "Texas knew, but we didn't. We can't even have an open, frank discussion about everything."
The paper says that Lindenmuth said that business leaders looked at North Carolina's law and were unwilling to work with state job recruiters.
"Maybe we just gave the guy's competitive advantage away," he said. "In a case like Toyota, they don't want anybody knowing about it until it's announced. We've lost a number of deals because of that."
Lindenmuth referenced Toyota because the auto giant recently decided to move its North American headquarters to Texas. Charlotte was reportedly a runner-up.
So here's the question: Does the state's public records law thwart job recruitment generally or the Toyota deal specifically?
The law: For those not familiar with North Carolina's public records law, it says that the documents generated and obtained by the state and local governments are property of the citizens and must be disclosed unless there is a good reason not to do so. For example, there is a broad exemption for criminal investigations so that police are not forced to turn over their notes to criminal organizations they may be probing.
In the case economic development, North Carolina also provides a broad exemption: "public records relating to the proposed expansion or location of specific business or industrial projects may be withheld so long as their inspection, examination or copying would frustrate the purpose for which such public records were created." Those records have to be disclosed only after the business had decided to locate here or elsewhere.
The bigger picture: Until 2013, the Commerce Department was the state's lead job recruiter. But McCrory's administration, in an effort to make business recruiting more nimble, created a private nonprofit to work with the Commerce Department. The North Carolina Partnership will serve as the marketing arm of the state and be the first point of contact for businesses looking to relocate here.
However, the exact rules that will govern the partnership are still under discussion. The state legislature did not complete work on a bill last year that would have governed the partnership, although it did give McCrory permission to form the partnership and get started on the transfer of responsibilities. Among the key points of discussion between the administration and the legislature are what rules – including what sections of the public records law – the new nonprofit will have to abide by.
While the private company may wine and dine a potential client, the state will still retain the final decision on an incentives – tax rebates, training assistance or other perks – given to a company in order to induce them to relocate.
The business case: "I share some of those concerns," said Commerce Secretary Sharon Decker, who works with Lindenmuth. "The business marketplace is just extremely competitive."
Companies, she said, do not like sharing information about the location and workforce numbers behind any expansion, particularly if that information might become public before a final decision is made. Even once a decision is made, she said, companies might worry that they disclosed something in writing to a public body that could give competitors insight into their operations.
"I cannot cite an example where I can say empirically that the need for disclosure would have caused us to lose a deal," she said.
But, she said, she has heard from companies that they will not give North Carolina as much information about as project as they give to other states.
"Has it made a difference? I can't tell you that it has, but I do know that it has been a point of regular conversation," she said.
Sen. Harry Brown, R-Onslow, the lead author of the public-private partnership bill, said he also believes that the need to disclose material given to the state could be problematic. But like Decker, he could not cite a specific example.
"You won't hear about it, that's the thing," Brown said. "You won't ever hear about it because those are very discrete negotiations in most cases."
Toyota: Toyota's news release announcing its move to Texas doesn't mention North Carolina as a competitor. Carly Schaffner, a spokeswoman for the company, would not acknowledge that Charlotte was even in the running for the project.
"We needed a site that was closer to our manufacturing operations, in a neutral location, one without an existing Toyota presence," she said. "The decision was based on a very broad range of criteria, including geographic location, availability of suitable building site, direct flight connections, quality of life and cost of living for our associates, time zones and proximity to our manufacturing base. Nearly 100 locations were considered. No single criteria determined the final decision."
She made no mention of public records laws.
"I've looked at Texas' law," said Jonathan Jones, a lawyer and former journalist now heading the North Carolina Open Government Coalition. "It's darned tootin' similar to North Carolina's."
It's similar, but not the same. North Carolina's law allows for disclosure once a project has announced it will locate in another state.
Texas' law allows for information to be withheld, "until an agreement is made with the business prospect," according to the Texas Attorney General. But there is not a disclosure requirement if the company does not come to Texas.
"If no agreement is reached, any information about the economic development negotiations, even the fact that they ever occurred, may never be disclosed to the public," according to the Texas Public Policy Foundation.
Worth pointing out: Most, if not all, other states that do incentives, such as Texas, require disclosure of information once a deal is done. So, there would rarely be any situations in which North Carolina was disclosing information about a company that at least one other state was not also required to disclose.
More experts: "It has not been a problem from my perspective, as far as my ability to show the assets of our community to a prospective business," said Adrienne Cole, executive director of Wake County's economic development arm.
She and Casey Steinbacher, president of the Greater Durham Chamber of Commerce, say that companies frequently demand local economic recruiters be discreet while negotiations are ongoing.
"But I've never had a company say to me, 'The public records law is a problem for us,'" Steinbacher said. "Confidentiality is incredibly important, but in the last eight years that I've been here, we've been able to work that system in a way that addresses that concern."
That concern for privacy was on display during the effort to recruit Toyota, according to The Charlotte Observer, which described a secret visit by company officials.
Other state leaders not directly involved in economic development also are skeptical about the impact of public records on business recruiting.
"I think that's an unfortunate comment. I don't necessarily agree with that," Senate President Pro Tem Phil Berger said when asked about Lindenmuth's assertion.
Jones, of the Open Government Coalition, said that both businesses and government officials should want information about recruitment efforts to be public.
"Citizens should know and understand how the government is using their tax dollars to recruit businesses," he said.
While people often think of that in the context of making sure state leaders don't give away too much when recruiting a business, Jones said, "It cuts both ways." Disclosure allows people to see that a business that goes elsewhere may have been asking for too much or that a company that does relocate here is a good value.
"Giving citizens a chance to see how their government is a functioning is always a good thing," he said.
As for the argument that public records drive away job prospects, Jones said, "I think it just doesn't bear any weight at all. There's no merit to it.
"If the public records law were that big of an issue, we wouldn't have been in the race (for Toyota)," he said. "There are other big fish that have landed in North Carolina without the public records law being an issue."
Recent big deals have included the financial giant MetLife, which chose to locate operations in Cary and Charlotte last year.
The call: North Carolina's public records law does not protect corporate information as strictly as some other states, but it does cloak that information from disclosure until a company relocates here or elsewhere. Those involved in job recruitment are unable to point to a specific case in which the public records law has been an issue that blocked a company from considering North Carolina. In the specific case of the Toyota deal, the company talked about a lot of factors that played into its decision, but public records weren't one of them.
Given the state of North Carolina's law and the lack of evidence to support his statement, we're giving a red light to Lindenmuth's assertion that public records harm job recruitment. There's simply no proof.