Reform #10: Ban Non-Disclosure Agreements
Too often, the public is left out of discussions about the use of costly economic development subsidies because companies force elected leaders to sign non-disclosure agreements (NDAs). Our solution is simple: States and cities should ban officials representing the public – be they elected leaders or heads of economic development departments – from signing NDAs with corporations.
Short of that, governments should create a 60-day sunshine period between when a deal is negotiated and when it is legally enacted.
Practically speaking, it may be difficult to eliminate the use of non-disclosure agreements altogether. There are public records laws that exempt real estate transactions, for example, which are often a part of economic development projects. But regardless of the reason for the NDA to be initially used (and such cases should be severely limited), there is no excuse for the public to not have ample time to study a deal long before any project involving public money is approved.
So once any incentives have been offered, and before a deal is formally approved, there must be at least 60 days during which the offer itself and the records of the negotiations are public information. Residents must have advance access to complete development dockets so they can oppose, support or improve proposed projects.
Why NDAs are so problematic
NDAs are undemocratic, condescending, and exclusionary: They exclude of the voices of residents when it comes to how their money is spent. They also take away an important accountability mechanism – companies should not get government subsidies unless and until they have clearly made a case for why they deserve the money and what the community will get in return.
An NDA may enable a company to avoid more rigorous scrutiny about its past performance on incentives, about its environmental or labor history, oe even basics such as a cost-benefit analysis. They are a key way big companies rush the process when making big tax-break grabs.
NDAs also advantage larger national firms that have the resources to hire secretive site consultants, who have every reason to keep these deals out of public eye; many site consultants work on commission – so up to 30% of the money may not even be supporting jobs.
NDAs also make it harder to connect the dots if there is “pay to play” involved. That is, people need to know if the company or its executives are lobbying or making campaign contributions. But if they don’t even know the company is bargaining for tax breaks, they can’t make the connections.
What an NDA ban should include
There are many kinds of economic development subsidies; legislation banning NDAs should cover them all. For example, Illinois’s draft legislation introduced in 2022 covers economic projects “including, but not limited to, tax incentives, payments in lieu of taxes, tax abatements, bonds, notes, loans, grants, or rebates.”
There are also other “as-of-right” (or automatic) tax breaks and subsidies companies receive in the name of economic development. While legislation covering NDAs would not apply to those, a best practice is for states to track and publicly list the corporate beneficiaries and costs of each of those claimed entitlements.
If a company is claiming it needs public subsidies and is promising of jobs, capital investments and other community benefits, it should be required to prove it to the public’s satisfaction and approval – and be held accountable if they fail to deliver.
A diverse group of organizations, including Good Jobs First, is seeking to end of use of NDAs. Visit bansecretdeals.org for more information.