Alarm bells sounded in June 2016 when Gov. John Bel Edwards issued an executive order to rein in the state’s Industrial Tax Exemption Program, Business Report Editor Stephanie Riegel writes in her latest column.
“The 80-year-old ITEP is something of a sacred cow in Louisiana, and is considered one of the most valuable incentives in the state’s economic development tool kit,” she says. “After all, it’s not like Louisiana has great schools or infrastructure to offer. But a tax break? That’s easy, especially when it’s someone else’s money.”
Until last summer, Louisiana generously exempted large manufacturers from paying local property taxes five years and routinely rubber stamped their renewal requests. But over the decades, local governments—denied the property tax revenues needed to fund local services—increasingly became reliant on the state government for help. That’s one of the many reasons Louisiana is always on the brink of financial disaster, Riegel says.
Edwards, in an attempt to curtail the fiscal dysfunction, made several controversial changes to the ITEP. Among them: The Democratic governor gave local governing bodies that are directly affected by the loss of property tax revenues—specifically, parish councils, sheriffs and school boards—authority over whether to grant the exemptions.
“This was greeted with howls of protest at the time, but it makes sense,” Riegel says. “It’s also the way every other state with an industrial tax exemption does it, including Texas, with which Louisiana hopelessly compares itself and tries to compete.”
For insight into how the program works at the local level in Texas, Riegel reached out to Iain Vasey, a former BRAC executive who now heads the Corpus Christi Regional Economic Development Corp.
“In Texas, industrial tax exemptions are and always have been controlled by local governments. Vasey says the system works well there for a couple of reasons,” Riegel writes.
Now, 15 months after Edwards issued his order, the first batch of new applicants for the ITEP is coming up, and local governments will soon be called upon to weigh in on whether to grant the lucrative incentive.
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