After obtaining a non-disclosure agreement, Google comes to Minnesota

By Mike Kaszuba

Nearly three months before most Minnesotans knew that Google was interested in building a large data center in Sherburne County, local officials were already putting together a public subsidy package for the multi-billion-dollar company.

New documents obtained by Saint Paul-based non-profit Public Record Media (PRM) show that the broad outlines of an agreement with Google were being discussed while public officials agreed to be under a non-disclosure agreement that they interpreted as preventing them from publicly speaking about the project.  Other documents indicate that the talks with Google began more than a year before the project was officially announced.

County officials, along with city officials in Becker, Minnesota, signed a non-disclosure agreement in September 2018 with Jet Stream LLC, a wholly-owned subsidiary of Google.  Internal e-mails obtained by PRM show that during the time the project was being kept secret, both city and county officials referred to the endeavor as “Project Pine” without naming Google.  The project – and Google’s association with it — became public in January 2019, four months after the signing of the non-disclosure agreement.

Tax abatement discussions occurred while project was still secret

However, as early as last October, e-mails indicate that city officials were already discussing giving Google tax abatements – a taxpayer subsidy that would keep the project’s property taxes at lower levels, despite the fact that Google would be significantly increasing the property’s value by building a data center on the land.  An October 18 memo from Becker’s community development director (labeled “Pine Notes/Tasks”) included a section on “Incentives:  Abatement Timeline” and “Draft Abatement Agreement.”

A month later – with the existence of the project still not publicly disclosed – other documents showed that a county official discussed timelines for Google’s application for a tax abatement.  On November 13, assistant county attorney Tim Sime wrote to two lawyers representing Jet Stream, stating, “Thanks for helping us work though a potential timeline for Project Pine’s abatement applications. Based on our discussion, this is what I think we’re tentatively looking at.”

That same day, there was more evidence that the project was moving forward.  On November 13, the Sherburne County administrator asked an attorney for Jet Stream to review an $18 million request for state aid to help with infrastructure costs for the project.  “Please review the attachment with your client,” county administrator Steve Taylor wrote in an e-mail.

Other documents – also written on the same day – provided still more evidence.  “We are writing on behalf of Sherburne County to demonstrate our genuine support for Project Pine,” Taylor wrote in a November 13 letter to the Minnesota Public Utilities Commission.

DEED suggests local officials “say nothing” until PUC filing complete

With the Google project about to be made public in January, a state official urged continued silence.  “It would be most helpful if the local officials say nothing until the [public] filing is complete, to ensure we are in compliance with the [non-disclosure agreement],“ wrote Jeff Rossate, the executive director of the Office of Business Development at the Minnesota Department of Employment and Economic Development (DEED).

“I understand and appreciate how rumors go around, but it is best for us to not get too far ahead of the client,” he added in the January 10 e-mail message.

Under Minnesota law, non-disclosure agreements cannot bar access to government data that is deemed public under the Minnesota Government Data Practices Act (MGDPA).  The law presumes that all data collected, created, received, maintained or disseminated by governmental entities is public unless specifically classified otherwise by the act.  While private party “trade secret” data held by the government is classified as “not public” under the MGDPA, the Act’s definition of “trade secret” is narrow and specific, and the law requires a multi-part test.

Filing with PUC brought public awareness to project

Documents indicated that public awareness of the Google data center came about when the project was formally filed with the state Public Utilities Commission (PUC).

“Below is the statement approved by Project Pine for use in the event we receive media inquiries once the PUC filing is made next Monday,” Dan Pfeiffer, Xcel Energy’s senior director for corporate economic development, wrote to city, county and state officials on December 11.

When the filing was actually made nearly a month later – on January 10 – Pfeiffer wrote: “ ‘The Eagle has landed’ (in other words, the filing has been made).”

Google’s announcement was eye-opening.  The company would build a $600 million data center (creating roughly 2,000 construction jobs and 50 full-time jobs) near Xcel Energy’s soon-to-be-decommissioned “Sherco” coal-fired power units in Becker.  An April 2018 economic analysis of the six existing Google data centers in the U.S. said the projects had already created 11,000 jobs across the country and generated $1.3 billion in economic activity.

“It’s huge,” Becker mayor Tracy Bertram told a local television station.  “There’s so much excitement,” 

Five days after the Google project was publicly announced, documents showed that the formal process for giving the company tax abatements was moving forward.  “Is there a preferred form or format for the Abatement Application?” Timothy Keane, a lawyer representing Jet Stream, asked a county official on January 15.

In March, Sherburne County approved a 20-year tax abatement for Google, saving the company roughly $390,000 annually, or $7.8 million.  The following month, Becker also approved a 20-year tax abatement for the company of $313,000 annually – or $6.2 million.  (The Becker school board, despite a plea from Taylor, the county administrator, denied a request to also give Google a tax abatement).

Although the company pushed for the tax abatements, the amounts were relatively small given the tech company’s economic muscle.  Google’s tax abatement requests for its Minnesota data center came as Alphabet Inc. – Google’s parent company – posted revenues of $36.3 billion for the first quarter of 2019.  The company nonetheless painted the subsidies as important.  

A tax abatement application filed by Google for Becker on February 12 also portrayed the public subsidy request as a “common practice.”  The tech giant’s tax abatement application stated that “the competition for data centers from other cities and states is very strong.  In light of this competitive environment, Google is continually evaluating its options before making a decision to invest $600+ million in Becker.  Abating local property taxes for a specified duration is common practice for capital intensive projects such as large-scale data centers.”

Documents indicated that negotiations with Google stretched back before 2018.  In November, Sherburne County’s Taylor sent a document to Becker officials stating that “over the past two years, discussions have taken place with a Fortune 100 company with a well-known brand who is potentially interested in developing a state of the art, high tech facility totaling approximately $500M in capital investments”, and “50+ [full-time jobs] and up to 1,000 construction jobs.”

Discussions around non-disclosure agreement 

Documents show that in February, Taylor elaborated on the need for a non-disclosure agreement with Google.

“Google, Facebook, Amazon, Apple, Microsoft, et. al. are all sensitive to trade secrets and concerns regarding being put into a competitive disadvantage by releasing too much information and data . . . hence the use of Non-Disclosure Agreements” [NDAs], he wrote in a February 17 memo to county commissioners.  “Having said that there are certain provisions in MN state statute that requires disclosure of certain information.”

“This developer trusts us and we have not had the typical transparency issues that apparently other jurisdictions have had,” he added.  “The developer has clearly stated that there is no intent to shield information or not be transparent – in many cases it is simply impossible to predict value of the building, construction costs etc.”

The details in the non-disclosure agreement were nonetheless revealing.

A copy of the agreement, signed by Taylor and other top county officials and obtained by PRM from the county, included language stating that any legal disputes between Jet Stream LLC and Sherburne County would be settled not in Minnesota – but in New York.  “This agreement shall be governed by the laws of the State of New York, without reference to conflict of laws principles.  The exclusive venue for any dispute relating to this Agreement shall be in the state or federal courts within New York, New York,” the agreement stated.  It is unclear whether a final copy signed by Jet Stream with the city and county contained the language.

The agreement also prohibited either of the parties from releasing “any articles, advertising, publicity or other matter relating to this Agreement (including the fact that a meeting or discussion has taken place between the parties) or mentioning or implying the name of the other party.”

In November, an attorney for Kutak Rock, a law firm representing Jet Stream, shared the preliminary site plan for the project with state, county and city officials in Minnesota, but reminded them it was confidential.  The attorney’s November 14 e-mail was marked “CONFIDENTIAL – SUBJECT TO NDA.”

Taylor wrote his February memo partially in response to a Washington Post story on Google’s data centers, which carried the headline, “Google Reaped Millions of Tax Breaks As It Secretly Expanded Its Real Estate Footprint Across the U.S.”  He said he wanted to instead send county commissioners “more balanced information” on the project.  “I have been reading the Washington Post off and on since I started college in 1980,” Taylor wrote.  “They have a certain ‘slant’ on matters such as this.”

Google involvement in project approval process

As the project moved ahead, documents obtained by PRM revealed how deeply Google inserted itself into the approval process.

Two days before the project’s filing with the PUC – which provided public notice of the project – Google asked for a change to the “talking points” that public officials would use in answering questions about the data center.  “They have requested a minor change in the talking points,” wrote DEED’s Rossate in a January 8 e-mail to city officials in Becker.

“[The] adjustment is the following:  to remove the reference to $80,000 average wage (for the 50 positions) and replace it with ‘an aggregate payroll of $4M’ for the same number of positions.  As you know, the math works out the same, but it doesn’t box them in at this time, in the event some are higher and some are lower,” Rossate added.

A week after the project was made public, Google e-mailed the city and county to offer more help with “external communications” regarding the data center.  “We thought it might be a good idea to share our contact information so that we can discuss any relevant items that pertain to our potential data center – especially as it might involve external communications,” wrote Genevieve Dufau, a Google official, in a January 18 e-mail.  Dufau said she was Google’s energy policy lead for Minnesota.

A few weeks later Todd Guerrero, an attorney for Kutak Rock, sent the city an e-mail message.  “Attached is a draft of the tax abatement application,” Guerrero wrote to Marie Pflipsen – Becker’s community development director – on February 11.  “It has been marked as a Non-Public Trade Secret version.”

On March 5, with the city and county preparing for hearings on the tax abatement request, Guerrero again e-mailed Pflipsen, this time asking her to wait before the tax abatement agreement was shown to the city’s economic development authority.  “Is it necessary that the agreement go in the packet” being sent to economic development authority members?  Guerrero asked.  “I doubt that I will be able to get Google to review it that quickly.”

On March 12, Guerrero also asked public officials what the company should expect at the hearings.  “Who does City and County expect to appear and present[?]” he asked in an e-mail.  “What questions does mayor/council members/board commissioners have/will have?”

The next day, Guerrero wanted even more detail.  He asked to review the city and county legal notices of the hearing, as well as the agenda for the meetings.  “Have the agendas been published yet for the hearings?” he asked city and county officials in a March 13 e-mail.  “If so could you please forward?”

Pflipsen forwarded Guerrero a draft of the formal request for city action that would be presented at the upcoming meeting, and added that she was also including “my draft of the [projector] slides” that would be part of her presentation before city officials.

“That you Marie – appreciate it,” the Jet Stream lawyer replied.