DENHAM SPRINGS – The direction the state takes on tax exemptions for the industrial and manufacturing sector could figure as a potentially contentious debate in the 2019 legislative session, but not in a traditional sense.
The lines in the sand may not represent Democrat vs. Republican or one geographic area against another. Instead, the debate may pit metropolitan areas against rural areas.
State Sen. Mack “Bodi” White, R-Baton Rouge, and state Rep. Frank Foil of Baton Rouge would return much — or all — of the control over the Industrial Tax Exemption Program (ITEP) to state government.
The move, supported by the Louisiana Association of Business and Industry, would counteract the 2016 executive order by Gov. John Bel Edwards that gave local government a stronger voice on whether the state should grant an ITEP request on new manufacturing jobs. It also cut exemptions from 100 percent to 80 percent, which would remain in place for up to five years.
Elimination of a local voice from the discussion could determine the battle lines, said state Rep. Sherman Mack, R-Albany.
“This will be more of a geographic issue than an issue of Democrat versus Republican,” he said. “Your metropolitan areas will have one view versus the rural areas having another one.”
The move comes in the wake of the East Baton Rouge Parish School Board’s rejection of ExxonMobil’s $2 million tax credit request, which spurred the oil and petroleum giant to look to areas other than the Baton Rouge refinery for future expansion projects. ExxonMobil subsequently withdrew its request due to “ongoing uncertainty” involving ITEP in Baton Rouge.
Some lawmakers and business lobbies – particularly the Louisiana Association of Business and Industry – fear a ripple effect that could cost jobs, soften future tax revenue, hurt support businesses and spur residential migration to other states in hopes of better job opportunities.
State Rep. Valarie Hodges, R-Denham Springs, jumped on the bandwagon days after the announcement. Nearly half of her legislative district includes East Baton Rouge Parish.
Any reduction or pullback from Baton Rouge could significantly affect the standard of living for thousands of households and curtail the influx of revenue to local and state governments, she said.
Most local governments understand the economic impact of granting tax breaks to corporations that generate millions of dollars in jobs for the community, Hodges said.
“In order to thrive, local schools and law enforcement as well as local jobs depend on industry to support them,” she said. “The major issue we are dealing with is the perception that Louisiana has an unstable business climate.”
Two weeks after the announcement, Hodges said she would support legislation by White and Foil which would decrease or eliminate local input on the ITEP approval process.
A move back to exclusive control by the state would prove more beneficial to the state manufacturing sector, she said.
“Right now, we have no stability on taxation of businesses, which stands to hurt us badly in the ability to attract additional jobs to the state,” she said.
“A VERY COMPLICATED ISSUE”
Elimination of the local sector in the decision process would figure as a disservice to the communities where potential manufacturers would choose to locate, Mack said.
“You take the locals away from the table as far as going to a specific parish or district, you would no longer need to go to your parish council or local school board to ask about ideas, infrastructure and what the locals would be willing to do, and how it would affect them locally,” he said. “East Baton Rouge and West Baton Rouge may be more inclined to take it, as opposed to Livingston Parish, where we care about our culture and part of our economic base is our waterways and our rural setting.
"It’s a very complicated issue -- more than party affiliation. It’s economic, environmental, geographic,” Mack said. “It really touches on a lot of the aspects of what our smaller communities statewide have to deal with.”
“KEEP IT LOCAL”
Parish President Layton Ricks said he welcomes industry, but he believes the issue comes down to a guarantee that the local sector has some voice in how it can accommodate the needs that come with the arrival of a large industry.
“If you’re going to use our tax dollars, you should not be able to tell us what we can and can’t do with them,” Ricks said. “I know there’s a fine line for state funds, but we should have input of what we’re doing because they’re still using our infrastructure, our roads, our schools, our taxing departments, our homesteads … they get every bit of it and we have no say in the matter.”
The local input involves three government agencies – the parish council or police jury, the school board and the sheriff’s office – and the municipal government, if the business is within city limits.
“IT’S ABOUT THE ACCOUNTABILITY”
Livingston Parish Assessor Jeff Taylor believes assessors could give the local and state sector a better understanding of how much the ITEP would benefit a project.
“You may look at the parish council for building a bridge or a road, or the school board to know about the kids, but if they want to know about the tax millages, they need to go to an assessor,” he said. “We deal with those numbers every day.”
Taylor also believes the state should tighten its accountability to businesses which receive approval for ITEP.
“ITEPS are a necessary and unnecessary thing – it all depends on what it does for you,” Taylor said. “If you have something that’s not going to bring jobs and not going to give you a tax base and if it’s not going to do anything for school, it’s not worth giving it to them.”
He also believes the state should move away from automatic removal of the credit if the application does not receive approval in 30 days. The local process would ensure that the applicant is held to the conditions they agreed upon before initial approval of the exemption.
Taylor said he may take the local option to the legislature for approval process in Livingston Parish. He said the issue could become a moot point if lawmakers choose to put the issue back under exclusive state control.
“A DOUBLE-EDGED SWORD”
Livingston Parish School Superintendent Rick Wentzel, meanwhile, also supports local input on the decisions. Any project that will involve local money in the equation should involve a voice from local government, he said.
“Hypothetically, we bring a business, they’re going to employ 200 people, so you have to figure that those people will live within the parish, but then you’re not going to get any tax revenue from that?” he said.
Wentzel considers the issue “a double-edged sword.”
“You want industry and you want manufacturing, but we don’t have the revenue like those parishes along the river,” he said. “We’d love to have those conversations with Exxon and Shell, but you need to look at each individual situation and each individual ITEP and blanket them all.
“You want to attract those businesses because they help you with the revenue part of it,” he said. “It’s not just the tax part of it, but they bring people who shop at your stores. There’s a benefit, and you could give up some of the tax for that.”
The ability to attract businesses may not play as large a role in larger metropolitan areas, as well as areas along the Mississippi River whose geography creates a selling point for industries, Mack said.
In Livingston Parish and other areas farther from major rivers, the issue comes down to a balancing act of keeping the rural charm at the same time it attracts industry and creates jobs.
It plays into the mix over the need to keep the local voice in the discussion.
“It’s economic, environmental, and geographic,” he said. “It really touches on a lot of the aspects of what our smaller communities statewide have to deal with.
“It’s very complicated, but in Livingston Parish I feel our local school board and parish government should have a voice at the table when it concerns industry or development,” Mack said. “You can’t just look at on its face and make an opinion … you have to delve into how it affects the community.”
The removal of the local voice from the discussion would not help matters, he said.
“If you were to take away the democratization of ITEP away from the table, it’s not helping because now you’re taking citizens away from the table,” Mack said. “Our local governments and school boards at least need to have a voice at the table.”
“THE WRONG MESSAGE”
The message from the rejection of the Industrial Tax Exemption Program for the ExxonMobil Baton Rouge Refinery sends the wrong message to corporate entities over the need for the program, according to the head of the Livingston Economic Development Council.
To the contrary, the ITEP has been the catalyst for growth of the industrial sector in Livingston Parish, LEDC President/CEO David Bennett said. Twenty-seven manufacturers in Livingston Parish have used ITEP to build or expand operations in the area – 13 of which are new companies, he said.
Companies that have used ITEP for development in Livingston Parish include Epic Piping, Ferrara Fire Apparatus Inc., CB&I pipe manufacturing (formerly McDermott), Premiere Concrete, and Northshore Concrete.
“It’s everything from five employees to 500 employees,” Bennett said.
Rejection of the ExxonMobil bid may boost competition among other parishes, much in the same way West Baton Rouge Parish officials said they would take the workers from the East Baton Rouge refineries.
The move by WBR represents the intensity of competition for manufacturing jobs, he said.
"It used to be state to state, but now it’s parish vs. parish,” Bennett said. “We have a lot of competitive advantages in Livingston Parish, including Interstate 12, low crime and great schools, but there are other parishes with similar attributes.
“At the end of the day, nobody knows what’s ultimately the final catalyst in the decision to locate,” he said. “If they narrow it down to two or three parishes, financial advantages are the final tool.”