Deception

If reader comments posted on news sites are an indication, some members of the public think the city and the state cut a crappy deal with Apple.

“Trade out 89mill for 16mill just for 241 long term jobs!” wrote one reader. “Say just for fun, 241 jobs at 100,000 per year per job is only 2.4mill a year. 20.4mill over ten years in wages.”

“Yea, that’s JUST what Apple needs—tax breaks.”

“Of course the City Council is only friendly to the big guys. Small businesses get picked clean with taxes, fees and regulations. I know, I used to own one here.”

Readers across the nation joined in: “Reno, if you think your tax structure is right why would you do this?”

Local reaction might have been otherwise if the state and city governments had leveled with the public about what was going on. But there was a careful effort by both state and local officials to deceive the public by withholding information.

The deal provides tax breaks—an overall 79 percent reduction in the normal tax load—to get Apple Inc. to build two facilities in the area in a billion-dollar investment over a decade.

The news about the Apple deal did not become public until the county released a document about it on June 22, and that document did not contain the kind of information needed to know what was going on. It did not even mention Apple, which—given the mammoth corporation’s reputation for raiding taxpayer treasuries—would have set off all kinds of alarm bells.

The city released data even later, Councilmember Jessica Sferrazza said. “We didn’t get the staff report, like I said, until Tuesday—or late Monday evening. … There should be ample opportunity for time for the public to review our staff reports. That’s why our staff reports are put online.”

That staff report was posted online, but it concealed more than it revealed. It was in a non-searchable form and did not mention the word Apple, instead using a code term—“Project Jonathan.” Depending on how the term was used, it may represent a whole new kind of open meeting law violation—inserting false information into public documents in order to mislead the public.

At the state level, Sandoval administration officials said they did things by the numbers.

“This was not sprung on the elected officials or staff,” state economic development director Steve Hill told the Las Vegas Sun. “All along the way we have talked to the city of Reno and their staff, the school district and their folks, the county and their folks.”

It was sprung on the members of the public, and some of the elected officials Hill named say it was sprung on them, too.

“I was made aware that it was Apple last Friday [June 22], when I met with a representative from Apple,” Sferrazza said. “[That was] the first I had heard about the project or any detail about the project.”

Some people who voted on the tax breaks didn’t have even that much notice. Sferrazza’s colleague David Aiazzi told the Sun he was not informed until Tuesday, when the Reno councilmembers were given the staff report on the deal. That gave them one day to absorb all the information and decide how to vote.

Hill also said, “I think the place to have that debate [on transparency] … is at the Legislature. Once those tools are in place, I think then they have been provided for those who are elected, and those who are appointed to use those tools to really carry out what they’re intended to be used for.” That assumes the tools provided by the legislature were complied with. State law reads that meeting agendas must be “clear and complete” in describing the matters before a public body. The code term was used to keep the public from understanding what was going on.

The Washoe County Commission, Washoe County School Board and Reno City Council all posted agendas whose “clear and complete” wording is doubtful—Apple was not mentioned in any of them, and taxes were mentioned only in the county agenda. They were worded carefully to exclude information and to mislead the public:

Washoe County Commission: “Discussion and possible action on application for endorsement of an application to the Nevada Commission on Economic Development for abatement of one or more taxes imposed on personal property and sales taxes for a new business to be located at Reno Technology Park, an area eligible for Community Development Block Grants and therefore qualified for such an application—District Attorney/ Finance. (All Commission Districts.)”

Washoe County School Board: “5.11 PROJECT JONATHAN - CONSIDERATION OF ACKNOWLEDGEMENT AND WAIVER IN CONNECTION WITH REIMBURSEMENT AGREEMENT WITH CITY OF RENO.”

Reno City Council: “J.11 Staff Report (For Possible Action): Discussion, direction, and potential approval of Amendment No. 1 of the Reimbursement Agreement dated June 8, 2011 by and between the City of Reno and Northern Nevada Urban Development and Management Company.”

The Nevada open meeting law allows information “which relates to proprietary information” to be kept secret—but the name of the corporation and public tax breaks hardly fall under the category of trade secrets. The law also says documentation can be kept confidential, but only until Apple decides to relocate into the county. There would have been no votes on tax breaks unless Apple had made that decision.

One state legislator said, “I’d like to have public employee contract negotiations opened to the public, but how do you make that case after this?”

A Reno investment counselor said, “We’re essentially paying Apple to create jobs, and paying them more than the jobs are worth. This deal should have been better. They [city and state negotiators] were in over their heads. This is Apple, which is at the top of the game in tax breaks. Making it public would have made it possible to dissect it before it was voted on. A lot of people in the business community could have chimed in.”

Apple has a reputation for having built its success as much on corporate welfare as on its products. Earlier this year, the New York Times reported, “Apple, say former executives, has been particularly talented at identifying legal tax loopholes and hiring accountants who are known for their innovation. … Without such tactics, Apple’s federal tax bill in the United States most likely would have been $2.4 billion higher last year, according to a recent study by a former Treasury Department economist, Martin A. Sullivan.”

Against such expertise, were locals able to cut a good deal? And were elected officials given enough time to answer that question before they had to vote? The headline on one website that monitors Apple activities was, “Reno City Council unanimously approves 79% tax break for Apple data center” (MacDailyNews).

Sferrazza argues that the Reno deal is not yet firm, that there is a 30-day period before it becomes final. But any new information or public opposition would require elected officials not just to vote against Apple, but to change their previous votes in Apple’s favor, an awkward stance for politicians. Normally, the public debate on an issue takes place before elected officials vote.

In the end, the final decision was that of the members of the county commission, school board and city council, who went ahead with the votes scheduled by their staffs. Nowhere was it required that they vote immediately. They could have delayed the votes to give themselves—and the public—time to know what they were voting on. But out of 19 members of those bodies, not one proposed delaying the vote to give the public more time.