Testimony to the House Local Government Committee on HB 695
Chair King, ranking member Sims and members of the committee: Thank you for the opportunity to present testimony on House Bill 695. I am Zach Schiller, research director of Policy Matters Ohio, a nonpartisan, nonprofit research institute with the mission of creating a more vibrant, equitable, diverse, and sustainable Ohio. We agree that nondisclosure agreements (NDAs) covering economic development have no place here and thwart good government. However, we have some recommendations on how to best implement such a ban. For limits on NDAs to have real impact, the bill should also be amended to repeal the recent addition to Ohio law under which information provided to receive local tax abatement and other economic assistance is no longer a public record.
Nondisclosure agreements are one reason that Ohioans across the state are attending public meetings to voice their concerns about data centers. Residents’ fears have been stoked by NDAs that have hidden projects from public view, sometimes while officials quietly negotiate with data center companies. In Wilmington, for instance, officials signed an NDA in January 2024 and withheld many project details for more than a year and a half while conducting secret negotiations with the company. From Perry to Piqua, from Waterford to Mt. Orab, residents are understandably disturbed by NDAs.
NDAs undercut local democracy by excluding residents from providing input on economic development decisions. Officials cannot be fully accountable when they operate in secret. In some recent deals in Ohio, even the name of the company involved has been initially shielded from the public. NDAs are anti-taxpayer; they make it more difficult for anyone outside a deal to suggest improvements. Of course, they also make it harder for residents to understand what the impact will be on their communities, be it noise, traffic, pollution, job growth, or use of water and electricity. And they favor big companies. How often do small businesses ask for a nondisclosure agreement?
Legislation limiting nondisclosure agreements has been introduced in states across the country, by legislators of different parties. This is truly a nonpartisan issue.
House Bill 695 is at the same time both too broad and too narrow. It appropriately excludes cities because of home-rule concerns. The Legislative Service Commission notes in its analysis of the bill that it is unclear if a court might find that the bill would violate home-rule protection.1 HB 695 should be amended so that villages and home-rule townships are also excluded, and it does not run afoul of Ohio’s home-rule provision.
At the same time, HB 695 should be broadened to ensure that it allows the public to be fully informed and to meaningfully participate before deals are made. To achieve this, it should include not just elected officials but those who are responsible for economic development, whatever bureaucracy they may be a part of. This includes state officials, including those at the Ohio Department of Development, as well as port authorities.
HB 695 does not undercut Ohio’s existing law that protects companies from misappropriation of trade secrets.2 While we have yet to hear testimony from opponents of the bill, you should take arguments that NDA limits will bring economic catastrophe with a large grain of salt. The attorney general’s sunshine law manual explains that, “Signed non-disclosure agreements do not create trade secret status for otherwise publicly disclosable documents. As with all other types of contracts, non-disclosure agreements cannot nullify public records obligations.”3 So NDAs don’t provide some kind of blanket protection against all disclosure, and their elimination won’t create a flood of new public records.
Limits on NDAs are just one element of the transparency that’s needed for economic development in general and data center development in particular. Another is the availability of public records on local economic development assistance. Unfortunately, with House Bill 184 approved last year, the General Assembly took a major step backward and made these records confidential. No longer can residents expect to get the basic details on what applicants for such assistance promise in jobs and investment. It appears to undercut the Tax Incentive Review Councils that are responsible for annually reviewing such assistance – or perhaps they will have to operate in secret. Local officials now must be concerned that they could be criminally prosecuted for providing information to constituents.4 The approval of this new law would make any prohibition of NDAs far less meaningful.
We urge to you to reverse this move and repeal the paragraph that was added to Section 9.66 of the Revised Code. This would be an appropriate pro-transparency move in keeping with the bill before you. HB 695, with appropriate amendments, is a solid step toward allowing the public to be able to participate meaningfully in decision-making. Thank you for the opportunity to testify.