Earlier this week we reported in a story titled “New study underscores the supply-side swindle in La.” about a tax-giveaway boondoggle known as the Industrial Tax Exemption Program in which an un-elected state entity known as the Commerce & Industry Board forgives billions of dollars annually in corporate property taxes that would otherwise go to schools, police and other critical needs. The program was supposed to be an incentive to prompt companies to expand operations and/or to relocate to Louisiana and thereby create jobs.
But in a scathing report, “Costly and Unusual,” released a week ago by a consortium of Louisiana nonprofit civic groups and church congregations calling itself Together Louisiana, state residents learned that the ITEP is more of giveaway to fat cats than an incentive to create jobs. The report, based on state government data, found that it costs local municipalities, school boards and parishes is about half a million dollars for every job created through the program. That’s an unacceptable return on investment.
On Friday, LED issued a press release announcing changes to the program:
Louisiana Economic Development announced the state’s Industrial Tax Exemption Program will operate under new guidelines beginning today. The Louisiana Constitution, which authorizes the program as an incentive for manufacturers to invest in capital projects in Louisiana, authorizes the state’s governor to determine a method of approval that is in the best interest of the state. The program, also known as ITEP, allows manufacturers to secure a 100 percent exemption of local property taxes on eligible new building and equipment expenditures for up to 10 years. Until now, LED screened ITEP applications for eligibility, the Louisiana Board of Commerce and Industry approved ITEP contracts, and the contracts were effective upon the governor’s signature.
Through an executive order issued today, Louisiana Gov. John Bel Edwards is making the following changes:
Local governments (parish governing boards, municipal governing boards, school boards) will sign off on the level of local tax exemption that is acceptable to their governing boards for ITEP projects in their jurisdictions.
All ITEP contracts must be accompanied by a Cooperative Endeavor Agreement, or CEA, that outlines a job creation or job retention component – and terms by which the manufacturing investor must abide – to retain the property tax exemption for the initial 5-year period and a potential second 5-year renewal period. ITEP applicants previously had to apply for renewal after the first five years.
For clarity, the Board of Commerce and Industry may submit companion rules it deems necessary to the governor for consideration, but the governor will not approve ITEP contracts that do not feature local governance approval and a CEA unique to the project that includes job creation/job retention requirements.
“Today’s action secures a bond between our state and local governments, the people of Louisiana and our valued manufacturing partners,” LED Secretary Don Pierson said. “We’re pledging to taxpayers that the Office of the Governor, LED and the Board of Commerce & Industry will do our absolute best to ensure we attract manufacturing investments that not only are good for our economy, but also are good for our local governments, schools and other taxing jurisdictions, including law enforcement, libraries, fire protection, and water and drainage districts.
“Just as important, we are enhancing our commitment to the economic development community – our business prospects, our manufacturing employers, and our regional and local allies in economic development – that the State of Louisiana will provide the best value for economic development projects in a way that sustains our employers, their workforce, and the communities in which they live and raise their families. Today’s action by Governor Edwards is a blueprint for creating a better Louisiana for everyone.”
Changes to the Industrial Tax Exemption Program also are based upon best practices in other states. In Texas, for instance, discretionary tax exemptions are allowed in each county based upon the attractiveness and impact of the project. Some 38 other states also allow for local oversight of the local tax exemption process.