The dark secrets of corporate subsidy deals

Every year, state and local officials negotiate about $95 billion in economic development deals, competing with one another to recruit companies to their communities with lucrative subsidies in exchange for their business.

But some corporations are becoming increasingly aggressive about forcing officials to sign nondisclosure agreements that could end up hurting the communities that the businesses were supposed to help, according to a new report by the American Economic Liberties Project, a progressive antitrust advocacy group. The N.D.A.s sometimes prohibit officials from disclosing basic information about a corporation, like its name and the type of business it’s building, Pat Garofalo, an author of the report, told DealBook.

These N.D.A.s prevent community members, like workers and local businesses, from sharing their input on the deal until after it is completed. One recent example is the $4 billion battery factory that Panasonic will build in Kansas, which will get nearly $1 billion in subsidies. Before the deal was completed, Panasonic was also negotiating with Oklahoma, and the states were in a bidding war over the electronics giant’s business. But lawmakers could not talk about the corporation on the other side of the bargaining table in public — and sometimes didn’t even know its name. In April, Oklahoma officials complained that they had two hours to contemplate a complex incentive package worth $700 million, or about 8 percent of the state budget. “How am I supposed to go back to my constituents and say, ‘I gave away three-quarters of a billion dollars to a company that I don’t even know their name?’ Is that responsible?” State Representative Collin Walke said during an appropriations meeting.

Some states have introduced bills to ban these N.D.A.s, which the report calls “an extremely common tactic” in development deals. This year, such legislation was introduced in New York, Michigan, Illinois, and Florida. New York’s State Senate voted unanimously to approve a ban. Garofalo thinks the New York lawmakers were galvanized by the Amazon HQ2 bid that fell apart in 2019. But he notes that communities don’t have to wait for politicians to fix the problem. Engaged citizens have used public meeting and records laws to solve subsidy mysteries, and sometimes a little transparency is all it takes, Garofalo said. “When the public does get a say,” he told DealBook, “the deals are better, or bad deals are knocked off right away.”