ExxonMobil has a big decision to make in early 2019 involving Baton Rouge, and whatever it decides will have major implications for the city’s relationship with the economic giant.
The oil-and-gas behemoth will soon announce whether it’s chosen Baton Rouge as the site of a major expansion project worth up to $1 billion, or another Gulf Coast city, likely one in Texas. The project is part of Exxon’s massive $20 billion Growing the Gulf initiative, and winning it would help Baton Rouge compete for additional investments included in the growth initiative.
But if recent history and recent controversies are any indicator, Baton Rouge’s chances are looking weak.
Exxon passed over Louisiana in 2017 for a multibillion-dollar plastics plant, also part of its initiative, that instead went to—you guessed it—Texas.
Moreover, Louisiana’s industrial property tax abatement program, or ITEP, which has long been a popular incentive for manufacturers, was upended in 2016. New rules established in 2018 scaled the property tax breaks from 100% down to 80% for 10 years and gave local government entities the right to veto the tax breaks.
Exxon easily gained ITEP approval for the potential expansion project, but at the same time the company has recently found itself at the center of the property tax debate in East Baton Rouge Parish.
Community group Together Baton Rouge, which is critical of ITEP, and teacher groups have spoken out against Exxon’s other property tax break requests. Groups have also accused Exxon’s Baton Rouge properties of being under-assessed, costing local entities millions in uncollected tax revenue.
The controversy has not gone unnoticed by Exxon’s corporate decision-makers. The backlash Exxon has received regarding ITEP applications, despite following the rules, creates, its officials say, a seemingly unfair and unpredictable business climate. And much of the pushback is originating from one group: Together Baton Rouge.
“By singling out ExxonMobil despite hundreds of other companies filing applications, this group is not only maligning the largest corporate investor of East Baton Rouge Schools, but they are also sending a strong anti-business message to our corporation,” said spokeswoman Stephanie Cargile in December.
If that anti-business message prevails, don’t count on Baton Rouge winning the billion-dollar expansion or any other Exxon investments included in its growth initiative—meaning the company will choose to grow in other cities instead. Getting left behind could have major implications for Baton Rouge, where Exxon is the largest taxpayer and among the largest employers.
ITEP Resolution? Not so fast
When the state approved new rules for the Industrial Tax Exemption Program in August, local industry leaders rejoiced, assuming stability would soon return to a popular tax break program upended by Gov. John Bel Edwards in 2016.
Yet here we are—six months later—and the ITEP debate is still playing out, with no end to the controversy in sight for 2019.
While the new rules did provide guidance from the state in the ITEP approval process, and capped the property tax breaks at 80% for 10 years, local government entities were still given the right to veto ITEP requests. And they have begun to take control of this newfound power, which is where the dissension comes in.
In East Baton Rouge Parish, the Metro Council created its own ITEP approval guidelines with stricter requirements than the state, while the school board, as of early January, has yet to agree on its own set of conditions for approval after a contentious debate. In New Orleans, the city council recently implemented even more stringent guidelines than Baton Rouge.
And in other parishes, such as Caddo and Lafayette, local officials have denied ITEP requests that were previously approved by the state Board of Commerce and Industry.
So, obviously, not everyone is on the same page when it comes to ITEP. And they may never be, now that local authorities have a say in whether manufacturers do or don’t have to pay property tax dollars owed to parish governments.
—Annie Ourso Landry
Clear focus on plastics
Move over oil and gas. Plastics will be the 2019 buzzword in the industry sector. Sustainable plastics, to be precise. Most manufactured goods—including about 50% of today’s cars—are now made of advanced plastics, driving global demand for the material. It’s also affordable, thanks to the low cost of natural gas, which is used to produce plastic. Major oil-and-gas companies with a presence in the area, such as ExxonMobil and Shell, will capitalize on the trend by shifting their focus to plastics production in upcoming years. But the key will sustainability, in response to consumer calls for environment-friendly products.