United States

Expert says non-binding memo isn’t necessarily cause for concern

(The Center Square) — In announcing $75 million for Absolics to build a new Covington, Georgia, facility, the U.S. Department of Commerce referenced a “non-binding preliminary memorandum of terms.”

The mention raises questions, ranging from the definition to whether the deal could fall apart and, if it does, what would happen to the money.

“The non-binding memo isn’t necessarily a red flag,” John C. Mozena, president of The Center for Economic Accountability, told The Center Square via email. “That’s fairly normal and everybody usually just writes triggers into their agreements to make sure that money changes hands once every relevant agreement is executed.”

Mozena added that’s not always true everywhere, pointing to Texas, where “it’s been very common for companies to do a less-lucrative state subsidy agreement to get local agreements that are dependent on the state deal, then back out of the state deal but keep the much more lucrative local deal in place.”

“What jumps out at me is the broader issue of just what this money is for. There’s no point to subsidizing something that’s already happening – as the story noted, the plant was already under construction,” Mozena said. “Absolics and its Korean parent SKC obviously believed there was a market for their products and profit to be made when launching the plant, all the $75 million from taxpayers is doing is sweetening the deal for them.

“What’s fundamentally happening here is that the federal government is adding to inflation by using borrowed money to improve a Korean company’s profit margins, just so politicians can take credit for something related to domestic computer chip manufacturing,” Mozena added.

A commerce department spokesperson pointed to a NIST news release that said, “As explained in its first Notice of Funding Opportunity, the Department may offer applicants a PMT on a non-binding basis after satisfactory completion of the merit review of a full application.” A spokesperson for U.S. Sen. Jon Ossoff, D-Georgia, who announced the $75 million for Absolics, did not respond to a request for comment on the “non-binding preliminary memorandum of terms.”

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