ITEP committee eyes compromise formula for controversial tax break
Members of a Baton Rouge committee will try to forge a compromise over how to handle the controversial Industrial Tax Exemption Program after discussing three competing proposals Monday that have emerged in recent days.
ITEP is a decades-old program that gives manufacturers property tax abatements for capital projects.
Emerging ITEP proposals are colored by months of public debate between activists with Together Baton Rouge, the foremost critic of the tax break, and business groups like the Baton Rouge Area Chamber. Business leaders have warned reining in the program further could hurt economic development, while critics have called for stricter rules for the tax break, which is the state’s costliest incentive program.
Metro Councilman Lamont Cole introduced a formula that focuses on incentivizing companies to hire locally to get ITEP abatements. His proposal was most closely aligned with the goals of Together Baton Rouge.
Metro Councilman Matt Watson and school board member Michael Gaudet unveiled their proposed formula, which is more favorable to large capital projects, and also incentivizes environmental upgrades. That proposal is closer to the formula recommended by BRAC.
Chief Administrative Officer Darryl Gissel proposed guidelines based on the city-parish’s return on investment for any given project. The proposal would grant tax breaks at levels that require a positive effect on the city-parish tax rolls in 10 years.
“I’m trying to pull everyone together to get a consensus,” Gissel said.
ExxonMobil, the largest beneficiary of the program in East Baton Rouge Parish, also has waded into the debate, suggesting Monday that Baton Rouge’s chances to land a recently announced polypropylene expansion worth “several hundred million dollars” could be hurt by the uncertainty surrounding ITEP.
“We’re competing against plants not just here in Louisiana but plants in Texas and all across the world,” Jennifer Dunphy, plant manager of ExxonMobil Baton Rouge Plastics, told the committee.
The East Baton Rouge ITEP Committee is composed of representatives of the East Baton Rouge Sheriff’s Office, School Board, Metro Council and Mayor-President Sharon Weston Broome’s office. It is tasked with making recommendations to the taxing bodies on whether to approve ITEP applications by companies.
The panel has spent months figuring out how to handle the process. The Advocate previously reported that between 2001 and 2016, manufacturing jobs actually fell in Louisiana by 21 percent while companies enjoyed tax abatements that cost more than $1 billion annually, without any requirement to create jobs.
Members of the committee, which was unable to vote Monday because not all members were present, could vote April 12 at the earliest on guidelines for evaluating ITEP applications.
Until 2016, the state made decisions on when to give companies a break on the local property taxes. Under an executive order by Gov. John Bel Edwards — which also made the program less generous — locals have a say in whether to approve companies for the program.
ExxonMobil is not advocating for any particular proposal, but spokeswoman Stephanie Cargile said the firm believes there are benefits to capital projects that retain jobs, support contractor jobs and increase the competitiveness of its sites. In the next decade, Cargile said $2 billion from past Exxon investments will roll onto East Baton Rouge Parish tax rolls.
Exxon has been exempted from more taxes than it has paid over the past decade in Baton Rouge. Its exemptions amounted to more than $380 million, while it has paid about $323 million.
Watson, Gaudet and Skip Rhorer, the representative for Sheriff Sid Gautreaux, said the proposal crafted by Gissel and the one created by Gaudet and Watson are more closely aligned than Cole’s.
Together Baton Rouge organizer Broderick Bagert, however, criticized Watson and Gaudet’s plan, arguing it has no serious requirements attached. And Cole said while he likely won’t get everything he wants, he is confident he’ll be able to add a stronger job component to the final guidelines.
“We’ve got three very different approaches to this fundamental question of how we’re going to deal with industrial tax exemptions at the local level,” Bagert said. “(Gissel’s) has sheer return on investment, (Cole’s) has return on investment plus job creation, and (Watson and Gaudet’s) has essentially no standard at all.”
Bagert said while Gissel’s proposal is innovative, it should be based on five years rather than 10. He also conceded the group likely will not get everything it is asking for, but is hopeful the committee will adopt more stringent guidelines than some of those currently on the table.
Gaudet and Watson said their proposal does take into account return on investment. And by focusing on actual capital projects, rather than job creation, the guidelines better ensure the projects will be a benefit to the parish.
“This is not a giveaway,” Gaudet said. “This is a vast improvement from where we are.”