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LABI, Louisiana’s largest business lobby, wants changes for ITEP tax break

February 4, 2019
By Sam Karlin
Originally Posted on The Advocate

Louisiana’s largest business lobby is pushing for changes to the state’s Industrial Tax Exemption Program in an effort to make it easier on companies seeking tax breaks, the latest push by business interests to defend the incentive program.

ITEP, a decades-old property tax exemption for manufacturers, has for months remained at the center of a debate over tax breaks, economic development and funding for local services like schools. The debate has played out most prominently in Baton Rouge.

Stephen Waguespack, president of the Louisiana Association of Business and Industry, said Monday at the Press Club of Baton Rouge the program is “broken,” despite a round of changes made last year that were backed by LABI and a host of other industry groups and firms. If not fixed, the program’s current form will drive away investment in the future, he said.

For decades, the state Board of Commerce and Industry routinely handed out 100 percent tax exemptions spread over 10 years to manufacturing companies spending money on new or existing facilities in the state. Gov. John Bel Edwards reformed the program in 2016, and after that made subsequent changes. Currently, companies must gain approval from multiple taxing entities before the state will hand out a tax exemption on a capital addition or new plant. Edwards’ reform made 80 percent the limit, a move aimed at giving localities some property tax revenue up front.

Waguespack said he supports local input, but argued the program should be changed again to give companies seeking tax breaks a “single point of contact” in each parish because the process has turned into “local chaos” in some places. He said local officials also should be able to grant more lucrative exemptions than the 80 percent currently allowed, but also said they should not be able to reduce the amount below an 80 percent “floor.”

Waguespack stopped short of saying exactly what that single point of contact should look like, saying locals should be able to determine that.

“We’re willing to work with anyone on this to get that local input in a way that takes away some of the chaos we’re seeing,” he said.

An Advocate series in 2017 found the program allowed manufacturing companies to cut jobs while saving billions in property taxes over the years. 

After Waguespack’s talk, LABI also released a new report on ITEP that made a case for why the tax break is necessary and is an effective tool to offset Louisiana’s “unnecessarily complex tax system.” Together Baton Rouge, a local advocacy group and the main critic of ITEP, released its own report last month that argued the opposite.

The LABI report also made several recommendations to local officials, including instituting “a standard policy and process across local entities” and creating “rubrics and criteria” to “recognize the short- and long-term value that manufacturing brings to a community.”

The East Baton Rouge School Board and Metro Council have both passed guidelines for ITEP. The school board’s guidelines apply only to requests submitted after the newest ITEP rules took effect Aug. 20.

“For many years, when it came to ITEP we were the only state where local governments didn’t have a say in how their tax dollars were collected, and my executive order fixed that,” Edwards said in a statement. “Louisiana continues to have one of the most generous ITEP exemptions because we know ITEP creates shared value for our manufacturers and our local communities — to grow together, with a certain path for the future.”

Together Baton Rouge has railed against the exemption program, arguing it mainly goes to routine spending from companies already here that would happen anyway.

The group last month successfully lobbied the East Baton Rouge School Board to reject two ITEP requests from ExxonMobil — the parish’s largest beneficiary of ITEP — a move that will bring in nearly $3 million to local schools over the next decade. The school system is facing budget cuts of between $30 million and $40 million this year.

Exxon then pulled its requests from consideration by the Metro Council and sheriff and issued a terse statement about Baton Rouge’s “uncertainty.” That set off a wave of backlash from industry groups seeking to promote the program as a job-creator and a needed tool to offset a complicated and business-unfriendly tax structure in the state. Months before, Exxon was approved locally for a $31.7 million tax break on a potential expansion of its polyolefins plant.

EBR Mayor-President Sharon Weston Broome hosted a pep rally for the petrochemical giant shortly after that vote.

Waguespack said LABI’s push to change the program is not driven by Exxon being rejected for ITEP applications.

Before the school board’s vote last month, Greg Bowser, head of the Louisiana Chemical Association, called for returning the program to its original form, saying Edwards’ changes “took away Louisiana’s advantage to other states.”

Two Baton Rouge-area state lawmakers, Sen. Bodi White and Rep. Franklin Foil, have said they are working on legislation to change ITEP, but it is not clear what exactly that will look like.