In May, 2020, the city of Gallatin, Tennessee, voted to provide nearly $20 million in tax breaks to an entity called “Project Woolhawk” that proposed building a data center in the area. Local economic development officials refused to confirm who or what was behind that name, only that it was a major tech company: they had signed a non-disclosure agreement that precluded them from identifying the corporation publicly. Even as the Gallatin city council voted to grant taxpayer resources to this company, no public official would say what “Project Woolhawk” was.
It was Facebook.
In August, the social networking giant was formally announced as the beneficiary of Gallatin’s tax dollars. But don’t expect more information any time soon. Facebook’s identity was not only concealed by local officials during the planning of the project, but the agreement officials struck with the company also requires the city to alert Facebook any time someone files a public-records request related to the data center project.
A company that claims to be all about community and free expression is remarkably opaque in its business dealings. Cloak-and-dagger tactics are standard operating procedure when Facebook gets involved with local communities. While Facebook’s global proliferation of misinformation and conspiracy theories and international election meddling may get more attention from the United States Congress, the corporation also creates less well-documented harm much closer to home. Along with Google, Facebook has made an art of extracting local resources to fuel its corporate dominance, while blocking forms of democratic accountability so that local voters can’t voice their displeasure.
Direct subsidy deals like the one in Gallatin are not the only corporate benefits that Big Tech extracts, and hides, from the public. Local officials have also agreed to block voters from knowing how much power or water big corporations use in a local area, and how much they pay for it. For example, one South Carolina agreement allows Google to be listed by the local utility as merely “undisclosed customer,” with the price it pays for its power — a major expense for a corporation powered by numerous energy-sucking servers — blanked out. Some cities even treat offers to companies that didn’t result in a successful agreement as trade secrets that can never be disclosed.
As one professor explained when talking about Google employing these tactics, “Google has a strategic interest in getting their name out of these deals so that they go down more quietly, without public debate.” These backroom actions serve two purposes. They prevent local residents from opposing and potentially derailing a deal during the negotiation phase, since by the time residents know what is happening with the arrangement and what it will cost them, the deal is done. In addition, they protect incumbent lawmakers from accountability, as lawmakers face less pressure when voters are kept in the dark.
Corporations get away with these tactics because they promise to bring jobs and investment to communities that desire (and may even be desperate for) both. In addition, technology projects bring an aura of new-economy prestige to areas that have been left behind by deindustrialization and free-market tax and trade policies.
Those promises are often left unfulfilled. But by then it’s too late for the community to get back what was lost: resources that could have gone into anything from schools to roads to libraries.
Communities are increasingly vulnerable, not just because these corporations take pains to conceal what they are doing, but because many of the communities they target are news deserts. In theory, local journalists would act as a counterweight to these problematic practices. But Facebook and Google have taken care of that avenue of accountability, too. Their dominance in the digital ad industry has killed off local newspapers all across the country.
This convergence speaks to the reality that tech companies are siphoning money out of communities in more ways than one. Revenue that used to fund local journalists now goes into the coffers of Facebook and Google. Some outlets have been bankrupted; others have been snapped up by national chains and either sold for parts or left to run on skeleton staffs. As a result, according to the Save Journalism Project, 32,000 newsroom employees have been laid off in the last ten years. Sixty percent of U.S. counties have no daily newspaper and 171 counties have no newspaper coverage at all.
In addition to making these communities easy pickings for Big Tech, this decline in news coverage has eroded local governance and commerce. It lowers democratic participation, since regular newspaper readers are more likely to vote. Areas with less news coverage see fewer candidates running for office and incumbents winning more often.
Lack of local news coverage also makes local financing of public projects more expensive. According to a 2018 study, towns that experienced a newspaper closure had higher borrowing costs in the following years, with the average bond issue costing an extra $650,000, because the lack of local news coverage led to the belief that officials would be worse stewards of the public dollar.
Thus, giant corporations with plenty of cash can, and do, swoop in, taking advantage of a deteriorating economy that they helped to create.
None of this has to happen, though. It’s not an inevitable aspect of twenty-first century commerce, but occurs because of choices policymakers have made. Officials at the federal, state, and local levels can take action to ensure that Gallatin and every other community in which Facebook, Google, and other big corporations operate are protected from the harms these giants generate.
For instance, federal lawmakers and enforcers can force changes to the business models these corporations employ, such as altering or removing the shield Big Tech has from being held liable for user-generated content, which would give newspapers a fighting chance in the digital ad market. State and local officials can take steps to stop subsidizing these corporations, and place restrictions on the ability of local officials to capitulate to corporate secrecy demands, such as banning non-disclosure agreements. There are several other ideas worth considering too, such as states joining into compacts to prevent the use of corporate tax incentives, or Congress tying the abolition of those incentives to other federal funding.
If that happens, and when “Project Woolhawk” approaches the next Gallatin, concerned citizens will be able to know what’s being done with their resources in their name, with enough time to do something about it if they disapprove.
Pat Garofalo is director of state and local policy at the American Economic Liberties Project and author of The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs. He recently authored the report “Close to Home: How the Power of Facebook and Google Affects Local Communities.”