Friday, Aug. 17, 2012 | 2 a.m.
- Apple deal proves race for new business is cut throat among cash-strapped states (Aug. 5, 2012)
- Why one Nevada official alone had autonomy to decide Apple’s tax breaks (Aug. 2, 2012)
- Stealthy team effort led to $89M in tax breaks, drew Apple to Reno-Sparks (June 27, 2012)
- An unfruitful policy (May 13, 2012)
- Subsidiaries’ benefit to Nevada? Depends on where you fall on taxes (May 6, 2012)
- Nevada’s apple rots at its core (May 2, 2012)
- How Apple uses subsidiaries, including one in Reno, to avoid paying billions in taxes (May 1, 2012)
- More business news
When Apple needed help negotiating the tax breaks it sought as a condition to build a $1 billion data center in Northern Nevada, the company turned to Greg Ferraro, a veteran Carson City lobbyist and top adviser to Gov. Brian Sandoval.
But Ferraro not only has a close relationship with the governor. He also has a $200-an-hour public relations contract with the Governor’s Office of Economic Development, the agency with which Apple company officials would be negotiating.
In yet another example of the insular world of Nevada politics, Ferraro’s company was, in essence, collecting paychecks from negotiators sitting on opposite sides of the table.
Although the client roster for Ferraro’s company includes the state and Apple, he said he personally represented only Apple in the dealings that netted the company $89 million in tax breaks.
“There’s no way I saw, or was worried about, a conflict in that intersection,” he said.
Ferraro played a key role in the Apple deal, putting together meetings between company representatives and state and local officials. He sat in on some of the meetings, some of which were held in his Reno office.
Steve Hill, director of the Governor’s Office of Economic Development, said Ferraro represented only Apple, not the state, in the deal that lured the iconic technology company to Nevada.
A state board approved a $200-an-hour contract with the Ferraro Group for public relations and communications in 2009, before Sandoval was elected governor. The contract was extended in 2011 for another two years. The almost four-year contract, in total, is capped at $180,000.
The Ferraro Group contract with the state calls for it to help the state develop its message for the public. The group has sent out press releases. Monthly invoices were not immediately available.
“What they do is public relations and communication,” Hill said. “What they don’t do, ever, is get involved in any way, shape or form in any abatement process we have going on.”
Ferraro said his business partner in Las Vegas, Holly Silvestri, is the lead on the contract with the Governor’s Office of Economic Development.
Nevada, in many ways, is a small state, with a small number of influential lobbyists who also often serve as political advisers and campaign managers. Ferraro is one of those lobbyists whose roles often intersect with state government and politics.
But in the eyes of some who criticize tax abatements for private companies, Ferraro’s dual role is a confirmation that such deals often are seen as “juice jobs,” requiring businesses to hire connected lobbyists.
“When you provide tax benefits to not everyone, but to select companies, generally the ones that benefit are those companies that are most influential with the government,” said Joe Henchman, a vice president with the Tax Foundation, a nonprofit based in Washington D.C.
The Nevada Policy Research Institute, a libertarian-leaning think tank, has criticized Sandoval’s push toward greater economic development authority because it could lead to the government “picking winners and losers.”
Lobbyists such as Ferraro often are the go-between in that effort.
“If you’re contracting with an agency and lobbying them at the same time, that’s a pretty clear conflict,” said Geoffrey Lawrence, deputy public policy director with the research institute.
Bob Fulkerson, executive director of the Progressive Leadership Alliance of Nevada, has wondered how good the Apple deal is for Nevada after nearly $90 million in tax revenue is forgiven over 10 years. He also criticized the seemingly sudden process under which it became public just hours before the Washoe County Commission considered and approved the deal.
Ferraro’s role “demonstrates the incestuous nature of Nevada politics and the role that lobbyists play in shaping public policy for the profit of their own clients,” Fulkerson said. “Sometimes that’s in conflict with the best interest of the state. Sometimes it isn’t in the best interest of the state.”
News that Apple had decided to locate a data center near Reno was received enthusiastically in Northern Nevada and was touted by Sandoval and his economic development team as a coup for the young agency.
Apple is the biggest name in the high-tech world. Its decision to build a data center plays right into Sandoval’s economic development plan, which focuses, in part, on incubating the information technology industry. State officials say it could lead to future investment in Nevada.
But the deal also has generated scrutiny because of the size of the tax abatement.
Although the project was touted by the Governor’s Office of Economic Development’s press release — sent by the Ferraro Group — as a $1 billion investment, most of that will be in computer servers. Those are not manufactured in the state and must be imported, Hill said at the economic development meeting earlier this month. The company has promised to employ 35 people full time and hire 200 contractors.
The Apple deal is the first to be negotiated by the newly created economic development office.
In the past, tax incentives have been awarded under specific requirements detailed in state law. But those terms, which capped tax incentives at 10 years, weren’t generous enough to lure Apple from rival locations, such as rural Oregon.
So Hill, who is given significant authority to approve tax breaks under the new program, turned to a separate law. As a result, Apple is eligible for up to 12 years of sales tax abatements and 30 years of property tax abatements.
The terms of the agreement between the state and Apple were negotiated by Hill and Apple company representatives, not Ferraro, Hill said.
He pointed out that local government officials could have stopped it if they had concerns, or even negotiated the deal directly with Apple.
Sandoval, in an interview earlier this month, described the negotiations as “intense.” Hill said it was the best deal Nevada could have gotten.