Opinion | How Amazon, Google and Other Companies Exploit NDAs
In March, when the City Council of Fort Wayne, Ind., voted 7 to 2 to approve $16 million in tax breaks for a corporation to open a distribution center in the city, it was something of a shot in the dark: Four of the Council members — including two who voted in favor of the deal — didn’t know which corporation they were considering.
How was it possible that public officials lacked such crucial information? Alarmingly, as a condition of its negotiations with the city, the company had required city officials who knew its identity (including the mayor) to sign nondisclosure agreements that kept them from sharing its identity before a deal was reached.
The company turned out to be Amazon.
As absurd as it may seem, it is not uncommon today for large corporations negotiating economic development deals to have public officials sign nondisclosure agreements, or NDAs. This practice needs to be stopped. By keeping salient information hidden, these NDAs impede government accountability and public involvement in economic policymaking. State and city officials should ban them.
Amazon is particularly aggressive in using economic development NDAs, but it is hardly the only corporate titan to do so. Google negotiated for many months with local officials in Minnesota to build a data center in Sherburne County before residents learned in 2019 that those negotiations were occurring; the officials had agreed to an NDA that they believed kept them from discussing the project in public. And when the City Council of Gallatin, Tenn., approved nearly $20 million in tax breaks last year for the creation of a data center in the city, the company that stood to receive the benefit was not named. Months later, it was revealed to be Facebook.
Amazon and other companies have used economic development NDAs in other states as well, including New York, Ohio and Maryland. And these are just the instances that have been publicized; there are very likely to be more that have occurred without notice.
Corporations seldom offer a public rationale for the use of economic development NDAs, but economic development officials often maintain that the agreements prevent rumor-mongering and protect proprietary information. This justification is unconvincing.
The real purpose of these NDAs appears to be preventing public input in economic development deals. After Google started talks in 2017 to buy land from San Jose, Calif., for a company campus, a Google official explained in correspondence to a local official that the company used economic development NDAs to avoid public relations difficulties that might arise from information about the endeavor being revealed in its early stages. Google, it seemed, didn’t want to deal with residents who might have objected to the project.
It is easier for corporations if these arrangements are presented to the public as a fait accompli, rather than a proposal fully open to debate. For their part, lawmakers have an incentive to play along, since making deals with corporations feeds a politically popular narrative of “job creation,” whether or not the facts support that narrative.
And the facts too often do not support it. States and localities spend about $95 billion annually wooing corporations with tax incentive deals, and most of the evidence shows that they receive little for it in terms of real economic benefits. The loser is the public, whose tax dollars could otherwise be spent on public services that provide something of value.
States and cities should bar elected officials and other economic development officials from signing nondisclosure agreements with corporations. There have been efforts to do this, though none has succeeded yet. Several members of the New York City Council proposed a law along these lines a few years ago after Amazon’s efforts to build its secondary headquarters in Queens. More recently, Representative Michael Halpin, Democrat of Illinois, sponsored a similar bill in his state in this legislative session, as did State Senator Michael Gianaris, Democrat of New York.
Efforts to ban economic development NDAs must continue. Such bans aren’t the only thing that lawmakers can do to expose the ways in which corporations secure public dollars for their private benefit. But they would be an important step — one that should be taken before another public dollar is spent to help rich corporations get richer.
Pat Garofalo (@Pat_Garofalo) is the director of state and local policy at the American Economic Liberties Project and the author of “The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs.”
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