Analysis: Impact Of LA Property Tax Break Changes Still Unclear
BATON ROUGE (AP) — More than a year ago, Gov. John Bel Edwards enacted a sweeping set of changes to a 70-year-old lucrative property tax break program for manufacturing facilities in Louisiana, which had been criticized as rubber-stamped giveaways with too few strings attached.
The rewrite was aimed at steering the incentive to facilities that will create jobs and that are backed by local communities.
Forty-seven tax break applications for certain additions to existing facilities have been denied since the executive order was issued 14 months ago. But the broader implication of the new restrictions on the property tax exemptions is still shaking out.
Many projects already had been in the application pipeline when the order was issued and remained subject to the old rules. For new applicants, these types of construction projects can take a long time to complete and make it through the tax break process.
With that sort of lag time, it still could be months before manufacturing facilities and Edwards see what the new rules will mean.
"The showdown at high noon is coming, but it hasn't happened yet," said Broderick Bagert, with Together Louisiana, a group of faith-based and community leaders that pushed for more scrutiny of tax break applications.
New and expanding manufacturing facilities are allowed, under Louisiana's constitution, an exemption from paying local property taxes for up to 10 years — an initial five-year period and a five-year renewal — through the Industrial Tax Exemption Program.
The Board of Commerce and Industry and the governor must sign off on the exemptions. But that vetting has been panned as lacking scrutiny for tax breaks that siphon millions of dollars in property tax income from local government agencies, public schools and police.
In June 2016, Edwards issued an executive order tying the tax breaks to job creation and retention and giving the local government agencies that stand to lose tax revenue a say in whether exemptions are issued. In October, the Democratic governor amended the order, limiting the tax break renewal period to three years for new applicants and reducing the tax break to 80 percent for those renewals.
The changes prompted objections from business groups.
"I think it just makes it a cumbersome program," said Stephen Waguespack, president of the Louisiana Association of Business and Industry.
Critics of the program say tax breaks had been granted too haphazardly, with little obvious benefit to the parishes losing the property tax revenue.
Bagert said the Industrial Tax Exemption Program is Louisiana's costliest economic development incentive per capita. He cited statistics that showed an approval rate of 99.95 percent for the nearly 17,000 applications that went before the commerce and industry board from 2000 through this year.
"We need to start looking at this as real money," Bagert said. This isn't Monopoly money."
Economic Development Secretary Don Pierson said the program is not "corporate welfare," but helps draw employers that create jobs, pay taxes and contribute to the economy for decades. He said the projects' impact on a community greatly "outweighs the cost of the (tax) abatement." But he also said Edwards' changes don't gut the program.
"We still are one of the most competitive states in terms of business environment," Pierson said. "The change in the program has affected the desired outcome. It's improved the accountability in the program, and it's brought a greatly appreciated local voice into the process."
Waguespack said the new requirements added uncertainty for companies applying for property tax breaks that need to seek multiple resolutions of support from the sheriff, school board and municipal governing authority.
"Parishes are confused about the approval process. Businesses are confused about what the process is going to be," Waguespack said. "If we sit in this purgatory, how many of these big projects are we going to lose?"
Pierson said 39 other states have similar property tax break programs requiring local resolutions of support. He said he's been traveling the state speaking with local officials about their new role in the project review.
Together Louisiana also is reaching out to local governing authorities, to help them with "decision-making rubrics," Bagert said.
"We see the next few months as so important because a precedent is going to be set," he said.
– by AP Reporter Melinda Deslatte