Determining Whether a Company Has Received Subsidies

Determining whether a company has received subsidies

Fishing Expeditions: Determining Whether A Company Has Received Subsidies

Accountable development researchers are generally asked to carry out one of two types of subsidy research. We have already discussed the situation in which the researcher is asked to gather information about a known subsidy deal, whether proposed or implemented. In other cases, the research project starts with a given company – probably one at the center of a controversy involving some aspect of its social responsibility record – and the goal is to find out whether the firm has received economic development subsidies of any kind. This is, in effect, a subsidy fishing expedition.

This kind of research is made difficult by the limited state of disclosure and the absence of a comprehensive centralized data source. Moreover, some states still treat subsidy data as non-public or proprietary information.

On the other hand, disclosure is steadily improving. See the 2014 Good Jobs First report Show Us the Subsidized Jobs for details and its appendices that include a list of links to disclosure sites. In addition, Good Jobs First has created a database called Subsidy Tracker that allows you to search recipient records from more than 600  state, local and federal programs at the same time.

Location-Specific Searches

The way you design your research strategy depends a great deal on whether you are looking for subsidies awarded to a company in a specific jurisdiction or if you are on a broader fishing expedition involving a company that operates in numerous jurisdictions and may have received subsidies from any of them. We begin here with location-specific searches.

Disclosure sites. If your search is limited to one of about three dozen states with some degree of routine public disclosure, your task becomes a lot easier. You simply plug the name of the company into one of the state databases (and the Good Jobs First Subsidy Tracker) and see if particular subsidy awards turn up.

It is also worth checking the website and printed reports of specific enterprise zones in your target geographic area to look for references to specific companies. If you have a specific facility in mind and know its location, you can usually check to see whether it is located within an enterprise zone or a TIF district. You can also check the Community Development Block Grant reports for a particular jurisdiction to see if specific companies are mentioned.

Economic development agencies and elected officials. While some deals are kept quiet, others are readily publicized by public officials taking credit for the jobs and other economic benefits the deals will supposedly bring about. It is thus worthwhile to search the websites of the relevant state and local economic development agencies, which often list the companies that have been lured to the area (or kept from leaving the area) with economic inducements. If the website doesn’t have the information, call the agency and ask. Don't let on that you may be planning to criticize the deal. Officials at these agencies – which sometimes are run as a non-governmental non-profit – will often be more than happy to boast about their successes. For possible subsidies involving larger companies, be sure to check out the database of the state's governor. It is common for governors to issue press releases touting agreements by companies to make large investments in the state, and attendant subsidies will often be described. Also check the websites and annual reports of bond agencies and state commerce departments.

Local and regional media. Given the limited scope of public disclosure, subsidy researchers need to make extensive use of media coverage to track down deals. Subsidies may be mentioned in the media because public officials have issued a press release about a deal, because the subsidy is the subject of a public hearing, because a community or public-interest group is criticizing the deal, or because an investigative reporter is looking into the matter. In any event, such media mentions will alert you to the existence of the subsidy and give you leads for doing further research.

Consequently, any location-specific subsidy research must include a thorough search of the archives of the relevant local or regional media outlets, including local business publications. At one time, this meant going to a newspaper's offices and seeking permission to go through its "morgue" of old clippings. Today most publications put back issues online, allowing you to search on your own.

If the publication does not have its own online archive (or if the archive is too limited in scope), you should check whether back issues are available through one of the commercial databases services -- especially Lexis-Nexis, Factiva, and NewsLibrary -- that aggregate the electronic archives of many publications and make them available for searching on a subscription basis.

Once you have located your relevant electronic archive, the next challenge is to formulate the right search strategy. If your company is small, you might want to view all the “hits” on the company name to see if any of them mention subsidies. For larger companies, this may be impractical, given the large number of hits that are likely to occur. You'll need to combine the company name with relevant search terms.

The problem is that the vocabulary of economic development subsidies is far from consistent. Apart from the word subsidy (which is not commonly used), you will need to search a variety of synonyms, such as incentive, financial assistance, tax break, and infrastructure support, as well as the names of specific subsidy types, including property tax abatements, tax increment financing, enterprise zones, community development block grants, investment tax credits, and industrial revenue bonds.

Note that it is much easier to use complex search statements in commercial databases such as Nexis and Factiva than in the search engines that appear on most publication websites.

Industrial Revenue Bonds. Industrial revenue bonds, also known as industrial development bonds, are mechanisms by which government give companies access to lower-cost financing through the issuance of tax-exempt bonds. (See the overview of IRBs in our Researcher's Guide.) IRBs are the only category of economic development subsidy for which a fairly comprehensive database exists. The reason is that, when IRBs are issued and offered to the public, the issuer must distribute a prospectus known as an Official Statement.

These documents are analogous to the filings a company makes to the Securities and Exchange Commission during an initial public offering of stock, but with an important difference. The Official Statement is not issued by the company receiving the benefit of the bond offering, but instead by the government entity that is issuing the bond on behalf of the company.

Official Statements can be obtained from a website known as EMMA (Electronic Municipal Market Access) produced by the Municipal Securities Rulemaking Board. Once you have located an Official Statement, you will find that most of it deals with the financial terms of the bond offering, though there is usually a description of the purpose of the offering, including the name of the company involved and the intended use of the proceeds.

Property tax abatements. Since property tax records are public information, it might be assumed that property tax abatements would be readily available. In our experience, this is not always the case, especially in the online versions of property tax records that governments make available on their website or via commercial services such as Lexis-Nexis. The best approach is to use the electronic databases as a way of identifying where a given company owns property. Armed with that information (including identifiers such as lot and block numbers), contact the local tax assessor's office (usually at the county level) and inquire about the existence of any abatements or exemptions.

National Searches

If your target company is large and operates across the country, you may want to look for examples of subsidies in many different jurisdictions. Your first step would be to use the Good Jobs First Subsidy Tracker to see what turns up in the state programs it covers.

Otherwise, you can take the methods described above for specific areas and expand the scope of the search. Conducting the same search over and over again for each state could be quite time consuming, so it is best to look for ways of searching the entire country at once. Here are some tips on doing so:

Media. Skip the archives of specific local or regional publications and go right to the big commercial databases such as Lexis-Nexis and Factiva. They cover thousands of publications and usually have archives that go back much farther than those of individual publication websites. They also cover archives of press releases and Congressional testimony.

Also check the archives of the few publications that cover subsidies on a national level, especially that of Site Selection. See especially the annual list of top deals in the May issue. Also see web-only features such as the Incentive Deal of the Month. Back issues of Tax Incentives Alert (beginning in November 2004) can be found on Lexis-Nexis.

SEC documents. If your target company is publicly traded, do a full-text search of its SEC filings at the EDGAR website. Plug in terms such as “tax credits” and “tax increment financing” to see where there are references to the receipt of such subsidies in the company's financial statements. The financial statements disclosed by companies in their 10-K filing will also include aggregate information on state taxes paid.

Property tax records. Commercial databases such as Lexis-Nexis allow you to do a single search covering all property tax records from around the country that are available online. This way you can locate far-flung properties owned by a specific company and then call local officials to inquire about abatements.