Tax break changes stir pot
Gov. John Bel Edwards’ heart was in the right place when he decided to give local government agencies a voice in giving prospective manufacturers tax breaks. However, his effort to solve one problem may have created a process that will cause even more problems.
The governor through an executive order made changes in the process used to grant 10-year property tax exemptions to industries. The 100-percent exemptions have been granted for five years and a five-year renewal period has been virtually automatic.
A major purpose of the governor’s order was to tie the tax breaks to job creation and retention and to give local government agencies an opportunity to approve them. They are the revenue losers because the state doesn’t have a property tax. Manufacturers haven’t always been held accountable for living up to the terms of those exemptions.
Edwards also limited the five-year renewal period to only an 80 percent exemption for three years. Both the governor and the state Board of Commerce and Industry will still have to sign off on the exemptions after local agencies express their wishes.
The three agencies in the state’s 64 parishes most affected by the loss of tax revenue are police juries, school boards and the parish sheriffs. City officials are involved if the prospective industry wants to locate within their boundaries.
Unfortunately, Edwards pretty much left it up to the local agencies to decide how they would handle the approvals. The police jury, for example, could agree to give a 100 percent exemption, the school board a 25 percent exemption and the sheriff an 80 percent exemption.
A controversial situation quickly developed in East Baton Rouge Parish. Together Louisiana, a faith-based group including community leaders that is based in Baton Rouge, has taken a hard line on granting exemptions. It says Louisiana sticks out like a sore thumb when comparing corporate development incentives by state, giving local industries 10 times the national average of incentives.
The Baton Rouge Area Chamber (BRAC) got involved in the debate when Adam Knapp, its president, suggested Louisiana’s local government agencies do like Texas and create a single, local public review body to decide the exemptions.
Stephen Waguespack, president of the Louisiana Association of Business and Industry, agreed. He said having three agencies decide what to do “makes it a cumbersome program.”
“Parishes are confused about the approval process,” Waguespack said. “Businesses are confused about what the process is going to be. If we sit in this purgatory, how many of these big projects are we going to lose?”
Dianne Hanley, a member of Together Louisiana’s executive committee, wasted no time attacking Knapp in a letter to The Advocate. She said he was misinformed about the process in Texas.
“BRAC is seeking to minimize public scrutiny over exemptions in order to maximize taxpayer subsidies to a handful of its own members, which are also its largest funders,” Hanley said.
The two sides clashed when the East Baton Rouge Metro Council at its late August meeting discussed the issue. It became a case of whether local approval of exemptions might drive away prospective industries or whether it would lead to a better quality of life.
Hanley of Together Baton Rouge earlier in August had said, “We want to make it politically impossible for officials to approve inappropriate exemptions.”
Michael DiResto, BRAC’s senior vice president for economic competitiveness, called manufacturing jobs the lifeblood of Baton Rouge’s economy. He really fanned the flames with an Aug. 23 report that concluded Together Louisiana mischaracterized the manufacturing tax exemption.
DiResto in his report said contrary to the organization’s comments ExxonMobil in 2016 paid $32.7 million in parish taxes, almost three times the next highest taxpayer. He said over the past five years the company paid $70.6 million in property taxes to East Baton Rouge city-parish government, $89.8 million to parish schools and $30.5 million to the sheriff, a total of almost $191 million.
Barbara Freiberg, a member of the Metro Council, said most council members agreed it is important to quickly devise a simple, predictable and transparent system for making tax exemption decisions.
“People who come to this area need to know what to expect from these taxing entities,” Freiberg said. “We need a template. We need to get politics out of this as much as possible…”
The Edwards administration might have avoided some of the controversy that has erupted if the governor’s executive order had set up a process by which local agencies could come up with a unified rather than a split exemption decision.
Cooler heads will have to prevail if this new system of granting industrial tax exemptions is going to continue to attract new manufacturers to Louisiana.