Non-Disclosure Agreements and Economic Development: Key Considerations for North Carolina Local Governments

This post, co-authored by Crista Cuccaro and Tyler Mulligan, also appeared on the Coates’ Canons Local Government Law Blog here.

Increasingly, local governments engaged in economic development discussions—particularly involving data centers and other large-scale projects—are being asked to sign non-disclosure agreements (NDAs) before substantive conversations can begin. While such requests have become common, they raise important legal and policy questions for local governments.

A new School of Government bulletin takes a comprehensive look at NDAs in the context of North Carolina local government law, examining why companies request NDAs, how North Carolina public records and open meetings laws affect their use, and what practical and legal issues local officials should consider before entering into these agreements.

This blog post highlights several key themes that local government elected officials, managers, attorneys, and economic development professionals should keep in mind.

For a more detailed explanation and legal analysis of the issues discussed in this blog post, please see Local Government Law Bulletin # 147: Can Local Governments Approve Non-Disclosure Agreements?

NDAs Are Increasingly Becoming a Prerequisite for Economic Development Negotiations

Confidentiality has long been a feature of economic development negotiations, but the growing interest in large-scale industrial and technology projects has heightened the importance of managing information and its disclosure.

Companies often argue that details about their site selection process, infrastructure requirements, utility needs, and projected operations constitute competitively sensitive information. In some cases, companies view the identification of a potential site itself as commercially valuable information that should not be disclosed prematurely. Businesses may also be concerned that public disclosure could affect eligibility for government incentives or allow competitors to pursue alternative sites before negotiations are complete.

As a result, many companies now treat an NDA as a prerequisite to meaningful discussions with local governments. For local officials, this can create a practical dilemma. Refusing to consider an NDA may jeopardize the opportunity to compete for a project, while agreeing to an overly broad NDA may conflict with North Carolina’s transparency requirements.

The decision whether to enter into an NDA is therefore not merely an administrative matter. It is a policy choice that requires balancing economic development interests with legal obligations to maintain openness and public accountability.

North Carolina Transparency Laws Establish Important Limits

North Carolina law places meaningful constraints on the use of NDAs by local governments. Local governments cannot simply promise confidentiality because a company requests it. Public records statutes determine whether records must be disclosed, and those statutory requirements cannot be overridden by contract.

Recent legislation, codified at G.S. 132-1(d), reinforced this principle by expressly prohibiting political subdivisions from entering into NDAs that restrict access to records that must otherwise be disclosed under state law. Stated differently, if state law requires disclosure of a record, an NDA cannot lawfully provide otherwise.

This limitation does not mean that all business information becomes immediately public. North Carolina law already contains several mechanisms that protect certain corporate information. For example, records relating to proposed business locations or expansions may be temporarily withheld under G.S. 132-6(d), which allows a local government to temporarily withhold any records related to a specific business-location matter if the release would frustrate the purpose of creating the record. Moreover, properly designated trade secrets may remain confidential if the statutory requirements of G.S. 132-1.2(1) and G.S. 66-152(3) are satisfied.

Even with these protections, however, local governments should approach company-proposed NDAs cautiously. Boilerplate agreements drafted for private-sector transactions frequently define “confidential information” far more broadly than North Carolina law permits. As a result, careful legal review is essential before any agreement is executed. The bulletin provides contract clauses that local governments may incorporate into NDAs.

Whether an Entire NDA Can Remain Confidential Is Uncertain

Another important issue is whether a local government may withhold an entire NDA from public inspection. The answer is far from straightforward.

Although G.S. 132-6(d) contemplates the possibility that the existence of an NDA could itself be confidential in limited circumstances, substantial legal questions remain about when that result is permissible. There are two potential possibilities for withholding an NDA—temporary protection associated with business location records and indefinite protection based on trade secret status—but, as explained in the bulletin, both approaches face significant legal hurdles.

Consequently, local governments should not assume that an NDA, or even the fact that one exists, will remain confidential indefinitely. Officials should anticipate the possibility that the agreement itself may eventually become subject to public disclosure and should draft and negotiate agreements accordingly.

This uncertainty reinforces the importance of structuring NDAs narrowly and avoiding provisions that depend on long-term secrecy of the agreement itself.

Process Matters as Much as Substance

Local governments should establish clear internal procedures for handling NDA requests. Among other issues, local governments should consider:

• Who has authority to approve or execute an NDA?
• When should governing boards discuss NDAs in closed session?
• Which employees or officials actually need access to confidential information?
• How can local governments secure the right to seek advice from third parties during business location discussions?
• How will the organization respond to public records requests involving business location projects?
• What role will legal counsel play in reviewing proposed agreements?

These questions are particularly important because confidentiality obligations often extend beyond economic development staff. Attorneys, managers, planners, engineers, finance personnel, consultants, and elected officials may all need access to information associated with a proposed project.

Advance planning can reduce confusion, prevent inadvertent disclosures, and ensure that the local government speaks with one voice when responding to requests for information.

Some jurisdictions may also find it beneficial to adopt local policies governing the review, approval, and administration of NDAs. Establishing procedures before a major project emerges can help local governments respond efficiently when companies request confidentiality agreements under tight timelines.

Carefully Drafted Agreements Can Reduce Risk

For local governments that choose to enter into NDAs, careful drafting is critical.

The bulletin identifies several provisions that local government attorneys may wish to include in company-proposed agreements. These include provisions clarifying that the agreement remains subject to North Carolina public records law, establishing notice procedures when records requests are received, addressing indemnification for litigation costs associated with protecting trade secrets, preserving the government’s ability to consult with outside experts, specifying North Carolina law as the governing law, and establishing reasonable termination dates.

These provisions help ensure that confidentiality agreements support—rather than undermine—the government’s statutory obligations and operational needs.

Looking Ahead

The use of NDAs in economic development projects is likely to continue evolving. Regardless of future industry practices, North Carolina local governments will continue to face the challenge of balancing legitimate business confidentiality interests with the public’s right to transparency.

The full bulletin, Can Local Governments Approve Nondisclosure Agreements?, provides a detailed analysis of the legal framework governing NDAs, discusses procedural considerations, examines unresolved questions under North Carolina law, and offers practical guidance and sample provisions for local governments evaluating proposed agreements.

Local officials considering an NDA request should review the bulletin carefully and consult with legal counsel before proceeding.