Chicago Tribune: Pat Garofalo: Companies such as Amazon should stop demanding NDAs

February 10, 2022 State and Local Policy

In 2020, Amazon received more than $100 million in tax breaks from University Park to build a distribution center. In addition to the money, Amazon wanted a promise that University Park’s village trustees wouldn’t disclose Amazon’s identity until the deal was done and dusted, preventing the community from providing input on a massive local economic development deal until the outcome was already a foregone conclusion. The village’s trustees granted that request, withholding Amazon’s name.

If that sounds corrupt and outrageous, well, it is. But it’s also extremely common: In Illinois and across the country, major corporations demand that local officials – be they mayors, city councilors, or even governors – sign non-disclosure agreements when negotiating economic development deals. These agreements preclude officials from divulging a host of relevant details, including, as in University Park, the very identity of the corporation that is in line to receive subsidies from the public.

As one local Illinois official told WBEZ, which investigated Amazon’s use of NDA’s in and around Chicago: “It’s customary now, when mega-Fortune 500 companies come, that they prefer that you not divulge what they’re doing … It happens all the time.” At the state and local level, Illinois spends hundreds of millions of dollars annually on economic development programs such as EDGE, PILOTs, tax abatements, or grants, so there is vast potential for spending public dollars without public input due to the proliferation of NDAS.

Fortunately, there’s a very simple solution available: States can ban the use of non-disclosure agreements in economic development deals. SB 3038, the Honesty in Economic Development Act sponsored by Illinois Sen. Robert Peters and Rep. Will Guzzardi, would do just that, allowing Illinois to set a new standard on transparency and accountability for the entire nation.

The use of NDAs in economic development deals causes several concrete harms. First, the agreements violate a fundamental principle of local democracy: That a community should be able to provide input into the use of public resources and receive information that allowing it to evaluate the work of elected officials and public servants. By hiding the details of economic development deals, NDAs prevent this flow of information and democratic feedback. Corporations like Google have admitted that preventing public input into deals is the explicit goal of NDAs; they’re afraid that if members of the public had access to the gory details of economic development, they wouldn’t like what they saw

These NDAs also harm small businesses. Economic development subsidies disproportionately flow to larger, national or multinational businesses, including chain restaurants and big box stores, which puts local Illinois businesses at a disadvantage, forcing them to subsidize their dominant competitors with their own tax dollars.

For instance, the $741 million that Amazon has received to build out its distribution network in Illinois disadvantages local Illinois retailers who don’t have their distribution system paid for by the public. NDAs in these deals prevented local businesses from providing input into economic development deals that directly harmed them, their suppliers, their customers, and their employees.

Those funds have also disproportionately come from Black neighborhoods, highlighting another harm of NDAs: Allowing corporations to extract more resources from some communities than others. By impeding the public flow of information, corporations can make different demands of different localities, with the effect being that some pay far more in public subsidies for hosting a corporate facility than do others.

At its core, this debate is about how best to develop local economies: With secret backroom deals between public officials and corporations or with broad-based investments that communities themselves decide they need. Academic research shows that most economic development incentives do not actually sway corporate location decisions, not do they result in the promised economic benefits across a host of metrics. This has been Illinois’ experience with major deals for Sears, Motorola, and Target, among many others. It’s far better to invest in people and places, promoting local businesses and the communities in which their workers shop, buy homes, and raise kids, than to rain public money down on some faraway corporation that will mostly wind up in a Cayman Islands bank account.

At a minimum, though, if an economic development deal is as beneficial for the local community as proponents generally claim it will be, they should be not just willing to discuss it publicly, they should be eager to do so. But they hide behind NDAS to prevent that from happening. Illinois should remove that tactic by passing the Honesty in Economic Development Act and take a first step toward building a truly inclusive and effective economic development system.