Organizer: Tax exemption program costing state

Louisiana has a robust industrial sector, but the structure of the state’s industrial property tax exemption process has long hurt the taxing entities that desperately need more revenue, a community organizer says.

Broderick Bagert, lead organizer for Together Louisiana, spoke Wednesday during a St. Mary Chamber of Commerce business luncheon at the Petroleum Club of Morgan City.

Together Louisiana is a statewide network of more than 250 religious congregations and civic organizations across the state, representing over 200,000 people, according to its website.

The network has focused much of its recent efforts on advocating for reform of the state’s Industrial Ad Valorem Tax Exemption Program, known as ITEP, which has existed for more than eight decades.

In 2017, the program took away a total of $1.9 billion in potential revenue from any government entity that receives a property tax millage, including $720 million from public schools, Bagert said.

Louisiana is rich in natural resources and ranks among the nation’s leaders in oil refining, natural gas production and chemical production, among others. It’s among the worst states for infant mortality, poverty and life expectancy, Bagert said.

Bagert says public officials have been “way too lax” on giving out these exemptions without doing any cost benefit analysis.

“We’ve got one sector of our economy that is extremely important and valuable, industrial manufacturing, so important and valuable that they’ve got an enormous amount of influence over public policy,” Bagert said.

Louisiana is the only state in the nation to have a state level board, the Board of Commerce and Industry, that exempts manufacturers from the tax rolls of local entities without those entities having a say in the process, he said.

The state has oriented “the entirety of economic development toward that sector,” so that the tax burden is shifted to the other 99.6% of businesses that don’t receive the exemptions, he said.

Bagert doesn’t blame the companies who receive the exemptions for taking them. He says the structure of the Board of Commerce and Industry is the culprit in that the board is in a position “to give away somebody else’s money.” And the board only hears from companies requesting exemptions.

Gov. John Bel Edwards has made some significant reforms to the program since taking office in 2016, but the Legislature is considering some legislation that “would roll back those changes,” Bagert said.

The following information, along with additional details, on each of the three pieces of legislation to which Bagert referenced is available at legis.la.gov.

House Bill 539 would authorize the governing authority of a parish with a population of more than 435,000 to create an economic development district to provide for cooperative economic and community development among the district, the parish, the state and owners of property in the district.

Senate Bill 214 would add three local government appointees to the Board of Commerce and Industry to represent the local taxing authorities for the parish in which the project under consideration is located when the board is exercising its constitutional authority to enter into tax exemption contracts.

House Continuing Resolution 3 would require each parish to create a centralized local review board for the purpose of reviewing property exemption applications.

In 2016, Edwards issued an executive order stating that he wouldn’t sign off on any industrial tax exemptions unless the applicable local entities approve the exemptions.

Since that time, taxing entities have begun to scrutinize exemption applications and make more informed decisions on the costs and benefits of those exemptions, Bagert said.

With approval by the Board of Commerce and Industry and local governmental entities, ITEP currently provides an 80% property tax abatement for an initial term of five years and the option to renew for five additional years at 80% property tax abatement on a manufacturer’s qualifying capital investment related to the manufacturing process in the state, Louisiana Economic Development’s website says.

The Advocate reported that, for many years, the state Board of Commerce and Industry regularly gave 100% tax exemptions spread over 10 years to manufacturing companies spending money on new or existing facilities in the state. Edwards decided to limit the exemption to a maximum of 80%, a move aimed at giving localities some property tax revenue up front, The Advocate stated.

In 2018, St. Mary Parish government leaders made a push to streamline the process to determine whether to award a new manufacturer an industrial tax exemption. If leaders determine through analysis that awarding a company an exemption would create a net positive for the taxing entity in question, the parish president will discuss the benefits of awarding the exemption with the taxing entity.

Parish officials say exemptions are not awarded if they determine the exemption would not create a net benefit to the taxing entity.