Reviews | Politicians signing NDAs when giving corporate grants is a terrible idea

In Michigan, the latest example involves General Motors, one of the state’s largest employers and a Beneficiary government largesse. In January, the Michigan Economic Development Corp., which administers state grant programs, awarded GM $600 million to build a battery factory. This sum was made possible by the decision of the Michigan Legislature December pass over $1 billion in business grants. Still, if lawmakers wanted to know which companies would receive that money, they had to sign a nondisclosure agreement.

The NDAs were signed between lawmakers and the Michigan Economic Development Corp., almost certainly at the request of the companies involved. The Mackinac Center for Public Policy has discovered, through a Freedom of Information Act request, that at least 13 Michigan lawmakers have signed these NDAs. So does Governor Gretchen Whitmer (D). While the state provided us with copies of the NDAs, it redacted the names of the companies, preventing the details of the negotiations from being revealed even after the agreement was reached.

When it came time for the legislature to vote on the billion-dollar program, lawmakers who had signed the NDAs were not allowed to tell the public which company or companies would benefit. Worse, it seems the rest of the legislature had no idea where the money would go. The first time Michigan taxpayers heard of the subsequent $600 million giveaway to GM was when it was announced.

Michigan’s experience is not unique, and in many cases politicians sign NDAs directly with companies. Last March, in neighboring Indiana, the Fort Wayne City Council approved $16 million in tax relief for an anonymous beneficiary. Only five of the nine board members knew the company was Amazon because everyone involved in the deal, including the mayor, had signed NDAs at Amazon’s insistence. (Amazon founder Jeff Bezos owns The Post.)

Facebook did a similar trick during the negotiation $20 million in tax breaks with Gallatin, Tennessee, just like Google when while searching favorable treatment for the construction of a data center in Sherburne County, near Minneapolis. Kansas lawmakers come pass a $1 billion incentive deal with one of the most expansive NDA deals to date. Besides not knowing which businesses will benefit, Kansas residents don’t even know which parts of the state will be affected.

The national number of NDAs signed by officials is unknown, but it is clear that they are widespread. In 2020, a An Illinois official said it “happens all the time”, especially “when the Fortune 500 mega-corporations arrive”. Considering that states and cities provide up to $95 billion in business incentives each year, it’s clear that a taxpayer revenue stream is negotiated each year with the risk that taxpayers will only find out the details. after approval of the agreements.

That’s exactly the point. While companies and politicians say NDAs protect sensitive negotiationsnon-disclosure agreements help ensure that companies’ potential big paydays aren’t gobbled up by unwanted publicity.

A Google employee basically admitted this in 2017 when he tell officials in San Jose that NDAs “discourage” public relations issues. Whereas major subsidy announcements can spark outrage — see what happened after Wisconsin in 2017 made incentive promises to chipmaker Foxconn that ultimately reached $4.1 billion – it’s understandable that corporations want to keep those pesky taxpayers in the dark for as long as possible.

But that doesn’t make it acceptable. The citizens who fund these deals and feel the effects in their local communities deserve to know how politicians want to spend their money or exempt corporations from paying taxes. If city councilors, state legislators, or governors are considering giving taxpayer support to a company, there should be public hearings or means to provide feedback. Studies consistently show that these subsidies and tax incentives hurt economic growth, fail to create the number of jobs promised, and generally fail as a policy tool. Taxpayers should be empowered to do so.

It starts with the prohibition of NDAs for public officials. Lawmakers in several cities and states have introduced such measures in recent years, including bipartisan legislation introduced in Michigan this month; they deserve to go national. As long as corporations can demand silence from their potential benefactors, taxpayers have good reason to wonder who their representatives really serve.

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