More than 18 months after Gov. John Bel Edwards’ executive order scaling back the state’s Industrial Tax Exemption Program and giving local governments more say so over whether to grant the generous incentives—a move that caused widespread concern in the business community and general confusion in local governments—his administration today is proposing a new set of rules designed to make the incentive program easier to administer while still remaining competitive.
The proposed rule changes, which Louisiana Economic Development Secretary Don Pierson is presenting this morning to the Louisiana Board of Commerce and Industry, have come about over the past several months after meetings with business and industry groups, local governments, assessors, union representatives and community groups like Together Louisiana. Pierson says all of the stakeholders have had input into drafting the new rules and all have been willing to compromise on something.
“Various stakeholders will find elements of this they like and elements they do not,” he says. “But I’m very comfortable with the direction we’re taking.”
The proposed changes are significant in several key ways. For one, they would give the state the power to evaluate ITEP applications and recommend approval of property tax abatements under the program before local governments ever get involved. Only after the Board of Commerce and Industry gives preliminary approval to an exemption would the application go before local governments for an up or down vote. If a local government takes no action on an ITEP application after 30 days, it would automatically go into effect for 10 years.
Another important change would cap the tax break at 80% of a manufacturer’s property tax bill for 10 years, thereby enabling local government to start collecting some property tax revenues during the first year of a manufacturer’s operations. The current program, which was enacted with Edwards’ 2016 executive order, grants a full exemption for five years and an 80% exemption for the next three years.
The old program, which Edwards’ order overturned, routinely granted manufacturers full abatements for 10 years, effectively depriving local governments of millions of dollars in property tax revenues.
A third key rule change would streamline and simplify the application manufacturers are required to submit to the state. That application will have to clearly spell out the size of a manufacturer’s capital investment, how many jobs it will create and the size of its payroll, among other things.
Had the rule changes been proposed in 2016 when Edwards overhauled the 80-year-old program, a lot of confusion and wasted effort might have been alleviated. But Pierson says hindsight is 20-20.
“Like any version of software or a new car, until you’ve actually tested it, you can’t recognize where you can make improvements,” he says. “I don’t know that anyone could have anticipated this design. But this is a thoughtful approach … and should make process more effective and efficient without affecting the local voice.”
The Board of Commerce and Industry will not vote on the proposed rules at its bimonthly meeting today, but will take them under advisement. Pierson says the soonest the board could enact them would be at its June 27 meeting, which means ITEP applications in the pipeline could be approved under the new rules beginning in the third quarter of the year.