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How companies like Amazon and Facebook fleece communities out of billions
![](https://1661362760.rsc.cdn77.org/wp-content/uploads/2022/04/p-1-90736446-non-disclosure-agreements-are-helping-corporations-fleece-communities-for-billions-of-dollars-e1648819245838.jpg)
On the floor of the Kansas Legislature in early February, lawmakers heldĀ a brief debateĀ over a piece of legislation called theĀ Attracting Powerful Economic Expansion Act, or APEX. The bill would provide a substantial tax incentiveāestimated at a total of $1.2 billionāto attract a large corporation to build a production plant within the state. The name of the company, though, was a secret.
In what one legislator called āa good, old-fashioned, pro-business vote,ā the stateās House and, later, the Senate approved the plan. Days later, the bill was signed into law by Governor Laura Kelly. The companyās name is still unknown to the public.
āYou kept hearing them say āthe firm,ā āthe firm,ā āthe firm.ā Itās because these people in elected office deciding what to do with $1.2 billion in public money had literally no idea which company they were talking about,ā says Pat Garofalo, director of state and local policy at the nonpartisanĀ American Economic Liberties Project. āThey didnāt even know where the factory was going to be. The few people that had those details signed NDAs.ā
Nondisclosure agreements like those signed in Kansas have become a disturbingly common part of the way economic development happens in communities across the country. Companies fromĀ AmazonĀ andĀ GoogleĀ toĀ Facebook and any number of unnamed manufacturers regularly use NDAs as part of their negotiations with the cities where they plan to build warehouses, offices, and factories. Tax incentives to lure companies are often covered by these NDAs, leaving taxpayers in the dark about whatās being built and how much itās costing them.
A new campaign,Ā Ban Secret Deals, is calling for an end to the use of NDAs in economic development dealings. Launched by the American Economic Liberties Project and a coalition of policy and advocacy groups spanning the political spectrum, includingĀ the Center for Economic AccountabilityĀ andĀ Good Jobs First, Ban Secret Deals advocates for legislation banning NDAs at the state and local levels. Itās calling on everyday citizens to sign a petition urging state legislators to take action.
āGovernors, mayors, city councils, and economic development department officials sign these deals with corporations which say that they, public officials, are not allowed to disclose anything about the deal, oftentimes including the identity of the recipient, until itās finalized and essentially a done deal,ā Garofalo says. āWe think thatās hugely problematic.ā
The scope of the problem is vast. An estimatedĀ $95 billion in subsidies and corporate tax incentives are issued every year in the U.S., and many of these incentives arenāt fully revealed to the public until after contracts or legislation have already been signed. They include eliminating taxes that companies have to pay and offering payroll reimbursements when companies begin operations. āNDAs are a corrupt way of preventing the public from weighing in on the use of public resources,ā Garofalo says.
The campaign includes a growing database of recent examples of big-subsidy and tax-incentive deals involving NDAs, made public sometimes only through Freedom of Information Act requests. Deals include the $475,000 issued by St. Petersburg, Florida,Ā to the shoe retailer Foot Locker; the $54 million issuedĀ to GoogleĀ by Columbus, Ohio; andĀ severalĀ projectsĀ adding up to more than $1 billion in incentives issued to Amazon.
āThe worst actor in this that I have seen is Amazon,ā Garofalo says. āThey get just tons and tons of subsidies for their warehouse deals.āĀ Fulfillment, a 2021 book on Amazonās impacts by journalist Alec MacGillis, explores some of the ways the company has been opaque about its warehouse developments. (Amazon did not respond to a request for comment.)
The use of NDAs for these projects is hardly a tech company innovation. āOver the last 50, 60 years, corporate interests have sold the public on a particular idea of economic development, [that] the way you build a local economy is you give a bunch of money to a corporation to move to a particular place and hire a bunch of people and create knock-on effects,ā Garofalo says. āThe vast bulk of the academic research shows that these deals donāt actually do what theyāre supposed to do and donāt actually create the economic prosperity that theyāre supposed to.ā
A recent report from the Center for American Progress shows how the promises of these kinds of subsidiesĀ rarely come true. In Wisconsin, where the state offeredĀ $2.85 billion in incentivesĀ to Taiwanese electronics manufacturer Foxconn more than four years ago, the planned factory has yet to open. The state recently revised its deal down to a still-substantial $80 million.
These deals often have serious effects on communities, which use significant amounts of local funding to secure the projects. āWeāre really talking about resource-constrained places,ā Garofalo says. āMost states are constitutionally mandated to balance their budgets. Making these deals really does mean taking money away from something elseāfrom schools, from infrastructure, from workforce development, from childcare.ā
Corporations can be less than up front about the reasoning behind their use of NDAs. Garofalo says they often cite the need to protect trade secrets, but decisions about where to site a warehouse or a factory donāt necessarily require the disclosure of such details.
āThey want to have information asymmetry. They want to be able to go back and play states off each other and prevent all the stakeholders involved from knowing whatās going on in order to bid up the price of these subsidy deals,ā he says. Amazonās nationwide search in 2017 for a city to host its second headquarters is one glaring example.Ā Cities across the country entered into NDA dealsĀ with the company from the very early stages of simply throwing their name in the hat for the project and its many jobs. Some, like New York City, which initially won part of that HQ2 race, buckled underĀ public pressure over the subsidiesĀ the project included and pulled itself from contention.
Back in Kansas, the Attracting Powerful Economic Expansion Act was framed asĀ a way to compete against neighboring OklahomaĀ for the unnamed companyās production facility. Garofalo says thereās no way for the public to know whether the two states were even in competition for the project. āWe believe if thereās more transparency youāll actually force the cost of these things down and hopefully ultimately one day eliminate them,ā he says.
A growing number of states are getting there. Legislation banning the use of NDAs is currently being pursued inĀ New York,Ā Illinois, andĀ Michigan. (The use of NDAs in labor negotiations hasĀ also seenĀ strong opposition in recent years.) Garofalo says heās hoping the Ban Secret Deals campaign will urge others to follow. Even if states donāt take up the charge, Garofalo argues that local governments, from city councils to county commissions, can make their own efforts to stop NDAs from obfuscating the economic development dealmaking process.
āFolks in local communities are way more empowered on this than they think they are,ā he says. āIt just takes a few of them getting together and saying, āNo, weāre not going to stand for it,ā to make a big difference.ā