BRAC defends industrial tax exemption program that Together Baton Rouge claims has cost Baton Rouge $769M

Louisiana’s Industrial Tax Exemption Program has done little to attract new business or jobs to East Baton Rouge Parish over the past 17 years and has cost the city-parish some $769 million. That’s according to a new study that will be released later today by Together Baton Rouge.

The group, which has lobbied for curbs to the business-friendly program, found in its study that 99% of ITEP exemptions between 2000 and 2017 went to existing companies in the city-parish, rather than to new companies coming into the area.

“This is supposed to be an incentive program to attract new business to the area,” says Together Baton Rouge Executive Director Broderick Bagert. “Instead, it goes to existing companies. It’s like giving someone an incentive to wake up in the morning.”

The study also found that:

  • Only 6% of ITEP exemptions in the parish went to projects that increase production capacity. The other 94% subsidized routine equipment expenditures.
  • The top seven ITEP recipients of the past 20 years actually reduced the number of jobs in their petrochemical plants by 1,980.
  • East Baton Rouge Parish lost some $769 million in property tax revenues it could have been receiving were the program not in place. That included $318 million that would have gone to East Baton Rouge Schools, $106 million for the East Baton Rouge Sheriff’s Office, and $102 million for East Baton Rouge Parish government.

The data comes as changes are going into effect for the state’s 80-year-old ITEP, which, until recently, gave manufacturers a five-year break with an automatic five-year renewal on the property taxes they owe to local government.

In June 2016, Gov. John Bel Edwards signed an executive order designed to make the program more like those in other states. The order does away with the automatic renewal of the five-year 100% tax exemption, scaling it back to 80% for three years.

More significantly, the order gives local governing authorities—school boards, sheriffs and parish councils—the authority to grant or deny exemptions. Over the past few months, those entities have been meeting with state and economic development officials to determine how to begin processing the applications.

Some local governments, West Feliciana and West Baton Rouge parishes among them, have decided to forfeit their authority to weigh in on the exemptions and leave the authority with the state’s Board of Commerce and Industry.

Bagert says his purpose in releasing the new data today is to show local governing authorities how much money is at stake and to encourage them to apply tough standards when evaluating applicants.

“We’re trying to influence the local bodies to say, ‘There are things that have been done for a long time but that doesn’t make them wise things,’” Bagert says. “We’re encouraging them to use scrutiny to determine which ones of these ITEP applicants are really incentives and which ones of these are corporate welfare.”

Officials with the Baton Rouge Area Chamber, who have defended the ITEP and questioned Together Baton Rouge’s data in the past, say they’re concerned the new order puts East Baton Rouge Parish at a competitive disadvantage—not only against other states but against neighboring parishes. They also caution local governing authorities against counting on property tax money by denying exemptions. The companies, they say, may decide not to come at all.

“We’re worried about the short term,” BRAC Senior Vice President for Business Development Kyle Zeringue says. “If your process is not predictable and you lose the project because you have no process or predictability or stability you’re going to end up with zero percent of nothing.”

Zeringue had not seen Together Baton Rouge’s new data on the cost of the ITEP so could not comment on it. But he says the numbers aren’t as important as the bigger issue of competitive surrounding the future implementation of the program.

Bagert says Together Baton Rouge isn’t trying to inject uncertainty into the process, but is encouraging local governing bodies to apply a rigorous process to evaluating the potential ROI of ay exemptions they might grant.

—Stephanie Riegel

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