Legislative Report

HB444: Economic development tool or tax giveaway? A proposed constitutional amendment by Rep. Alan Seabaugh would allow local governments to negotiate deals with private entities that would provide early access to revenue but reduce local government income once exemptions expire. Seabaugh calls it a tool

by Mike Stagg

HB444 proposes to amend the state Constitution to allow corporations to negotiate tax deals with local governments. Opponents say it's a scheme to allow big corporations to waive their tax obligations.

Shreveport Rep. Alan Seabaugh says his HB444 would give local governments an additional tool to use for economic development. The bill would amend the state Constitution to allow local governments to negotiate property tax deals with corporations considering locating in their jurisdictions.

"This is completely voluntary," Seabaugh explains via telephone on Monday morning. "It's based on the idea that those local elected officials in local elected bodies can make decisions in the best interests of their constituents."

Lafayette Parish Assessor Conrad Comeaux describes Seabaugh's bill as "an attempt to go back to the bad old days where anyone with enough political muscle could get their taxes waived."

The bill would allow local governments to negotiate tax deals with companies allowing them to make payments in lieu of taxes. The deals would be codified in cooperative endeavor agreements executed between individual local governing authorities and the corporations.

Seabaugh

"These are completely voluntary agreements," Seabaugh says. "If a police jury or a parish council wants to enter into a CEA, the school district is not obligated to enter in to it."

The bill grows out of a failed deal in Cameron Parish between a company operating a liquified natural gas facility and the Cameron Parish Policy Jury, according to people familiar with the deal and the bill.

The company had been granted a five-year industrial tax exemption waiver by the state's Board of Commerce and Industry (those waivers are routinely extended for a second five years). The industrial tax exemption waives local property taxes during the life of the exemption. The state does not have a property tax.

The company approached Cameron Police Jury officials with the idea of negotiating a deal which would put some money in the hands of the local government before the exemption expired. In exchange for that, the company wanted the parish to lower the company's tax bill.

The police jury and the company signed a cooperative endeavor agreement formalizing the deal. The Cameron Parish assessor sued saying the agreement violated the state Constitution. The assessor won. Seabaugh's bill, which is co-authored by Rep. Chris Broadwater of Hammond, seeks to make legal deals like the one nixed in Cameron.

"This bill opens a Pandora's box of tax issues," Comeaux tells The Independent. "It's bad tax policy. It allows local governing bodies to play favorites with tax payments." Comeaux and the Louisiana Assessors' Association are opposed to Seabaugh's bill.

In a letter to his fellow assessors, East Feliciana Parish Assessor Jeffrey Gardner says that Seabaugh's bill seeks to make legal unconstitutional tax practices.

"The bill literally creates an 'anything goes' system of alternative taxation which is limited only by a taxpayer's negotiating strength," Gardner writes. "The result is not only rife with potential for abuse but violates the constitutional requirement of equality and uniformity in taxation."

Gardner goes on to say that the bill contains no provisions for oversight of the agreements to determine if they are financially sound for local governments, provides for no transparency in the negotiations between the companies and local governing bodies, and provides no criteria establishing eligibility or the length of time the CEAs would be in place.

Brod Baggert, executive director of the non-profit Together Louisiana, says his group is adamantly opposed to the bill.

"It's abundantly clear by now that the purpose of the Louisiana tax code has been to give away the store to corporations and to leave the people of this state under water," Baggert tells The Independent in a telephone interview.

"It's outrageous that we are even considering the idea of negotiating away local government taxes," he continues. "Because it's a constitutional amendment, it will require two-thirds approval from both the House and the Senate before it ever gets a vote by the people. I think it'll be a cold day in Hell before this ever gets to a vote by the people."

Seabaugh tells The Independent that he expects his constitutional amendment and its enabling legislation companion bill HB445 to be considered by the Ways and Means Committee on Tuesday.