BRAC unveils proposed ITEP matrix; Together Baton Rouge lays out desired criteria

As East Baton Rouge Parish moves slowly toward deciding how to handle the Industrial Tax Exemption Program, the Baton Rouge Area Chamber today outlined a proposed matrix to evaluate the program.

Local officials gained newfound authority over ITEP, a large and contentious program previously run exclusively by the state, under an executive order issued by Gov. John Bel Edwards in 2016. The program exempts manufacturers from local property taxes.

Together Baton Rouge, a local advocacy group that has lobbied extensively to reform the ITEP program, also outlined its requests today to a group of local officials tasked with evaluating ITEP applications. Together Baton Rouge and BRAC have sparred publicly for months over how to handle the program.

The committee, composed of two Metro Council members, as well as representatives from the East Baton Rouge Sheriff’s Office, school board and Mayor Sharon Weston Broome’s administration, will reconvene in two weeks after bringing BRAC’s and Together Baton Rouge’s proposals to their respective voting bodies. Meanwhile, the state is mulling another round of changes to the ITEP process, though it’s unclear what they will look like.

BRAC’s recommended matrix would grant full ITEP property tax abatements to any eligible small business with 50 or fewer employees. For larger companies, applications would be graded on a sliding scale, with smaller investments eligible for a 50% tax break for the first five years and projects over $20 million or creating more than 20 jobs eligible for the full tax break.

BRAC President and CEO Adam Knapp said the program is a vital economic development tool as companies decide where to locate. The committee of Baton Rouge officials has decided to create a matrix to evaluate the applications, while some other parishes have committed to providing full exemptions to any company that applies.

“Predictability is not predictability if the matrix varies from month to month, year to year,” Knapp said.

Together Baton Rouge laid out several proposed eligibility criteria of its own. The group said the matrix should account for the depreciation of the capital additions and exclude projects that are already complete as well as routine investments that don’t increase output.

The return-on-investment analysis of the applications should also not assume the tax break caused the investment, Together Baton Rouge said. The analysis should weigh the benefits of the investment against the opportunity costs of lost property tax revenue the parish would otherwise receive.

Knapp said he hadn’t previously seen Together Baton Rouge’s eligibility criteria and will review it ahead of the committee’s next meeting in two weeks.

One remaining unanswered question is how to prevent firms from bundling several unrelated capital projects to make their application exceed $20 million, which would garner the full exemption.

Councilman Matt Watson also asked BRAC to draw up a provision that would incentivize environmental projects that improve air and water quality and reduce emissions.

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