An economic development bill signed into law in July has already helped spur at least one multimillion dollar project at the Port of New Orleans, and Port of Greater Baton Rouge officials hope to see similar results here.
“It’s our intention to recapture some of the cargo that bleeds off to Houston and Mobile,” says Christian Jensen, the president of Transportation Consultants, Inc., naming two port cities that draw business away from Louisiana.
TCI’s $12 million project at the New Orleans port will include a logistics terminal and warehouse for packaging plastic products on a 30-acre site. Plastics producers in the Baton Rouge corridor would no longer have to ship items by rail to Houston, where the facilities already exist.
The project most likely wouldn’t happen without Act 474, which creates two tax credits. An import/export credit awards a $5 state tax credit per ton of cargo shipped through Louisiana ports, while an investor incentive grants a state income tax credit for a developer’s costs on a significant port infrastructure project, redeemable at 5% of costs per year.
“It’s another tool in our toolbox,” says Jay Hardman, executive director of the Port of Greater Baton Rouge.
The import/export credit applies only to containerized and “break bulk” cargo—goods that must be loaded individually and not shipped in bulk like grain or oil. Hardman says the Baton Rouge port doesn’t get significant tonnages of break bulk cargo, and so that incentive might not be as significant locally.
But incentives to promote new capital projects could be a big deal. Hardman mentioned the possible $5 million expansion of a petroleum products storage facility as a project that might qualify. On a bigger scale, Point Bio Energy plans an $80 million plant that would produce wood pellets used to fuel power generation in Europe.
“This would be a huge incentive for them,” he says. Hardman says the project could bring deep-draft cargo back to the port, and provide a boost to Louisiana forestry. Frank Fitzpatrick, an executive vice president with Point Bio Energy, couldn’t discuss the financing picture for the project or how the incentives might fit in, but said the company hopes to start the project by the end of the year and finish 12 to 14 months later.
The Port of Houston has spent $600 million on infrastructure in the past few years, while more than $400 million has been spent at the deepwater port in Mobile, Ala., says Chris Kane, an attorney with Adams and Reese whose practice areas include transportation and maritime issues. Louisiana ports and their tenants, aware they weren’t going to get $400 million, lobbied the Legislature to create incentives that would draw cargo and new investments from the private sector.
“This is a groundbreaking step for Louisiana,” Kane says. “We’re kind of out in front of this, very similar to how we were out in front on the movie credits program. Will other states duplicate it down the road? My guess is yes.”
These days, most states have incentives for film production, so Louisiana doesn’t enjoy the competitive advantage it once had. Similarly, there’s nothing to stop other states from creating their own $5 [or $6 or $7] per ton shipping incentive, so any boost from that incentive might be short-lived. But significant infrastructure projects, once built, can’t just be picked up and moved.
“Once that infrastructure is rooted, you begin to see interest from distribution centers and manufacturing facilities that are directly participating with the local port authorities to attract new cargo,” Kane says. “To me, that’s the real economic development teeth in this bill.”
Louisiana ports generally don’t have the resources of their competitors, says John Hyatt, vice president with The Irwin Brown Company, a customs broker and international freight forwarder. He says Houston’s port has its own taxing district, while Mobile receives plenty of attention from Alabama as the official state dock. Meanwhile, Louisiana has 38 separate port operations; some are small, but every one has a legislator who wants their port’s share of money from Baton Rouge. The Ports Association of Louisiana pushed for the incentives in hopes of creating a new funding device, Hyatt says.
Louisiana Economic Development will manage the program. LED will decide which companies or projects qualify to make sure any credits awarded have a net benefit to the state, and it will have the authority to recapture those credits if the funds are not spent as required.
