Filling the gap: Economic Development Districts fuel long-term growth in Louisiana

Louisiana is one of the nation’s most attractive locations for real estate development due to a diverse mix of available development sites, a skilled workforce, abundant natural resources and a business-friendly tax environment. Today, over 50 Economic Development Districts (EDDs) in Louisiana provide developers and governmental bodies much-needed dollars to finance new projects without any obligation to repay the funding. EDDs have supported developments in Lake Charles and Zachary, hotels in downtown Baton Rouge, a regional retail development in Lafayette, and even the conversion of a distressed public housing project in New Orleans into an award-winning affordable housing neighborhood, among other things.

How EDDs Work

EDDs are special taxing districts established by a governmental body to provide funding for economic development projects within a well-defined geographical area. An increment of undedicated existing sales, hotel or property taxes (“Existing Tax Increment”) and/or up to 2 cents of new sales and/or occupancy taxes and 5 mills of property taxes (“New Tax”) generated within the EDD can be used to fund a wide variety of project components, including property acquisition, buildings, streets, infrastructure, sidewalks, parking facilities, public buildings, plazas and much more.

Understanding the Process: Establishing an EDD is a multi-stage process that requires a keen understanding of real estate, finance, Louisiana public law, and the local political climate.

Green Field or Developed Area: If the EDD includes any registered voters, the governing authority must hold an election to levy a New Tax. For that reason, virtually all EDDs using levying New Tax are created on “green field” sites where there are no registered voters. By contrast, no election is necessary to use an Existing Tax Increment or if no registeed voters are located within the EDD.

Proven Economic Value: According to the Louisiana Constitution, the governing authority must have “a demonstrable, objective, and reasonable expectation of receiving at least equivalent value” in exchange for contributing funds generated by the EDD to the project. Often, an economic impact study is obtained to support the economics of the EDD.

Cooperative Endeavour Agreement (“CEA”): The governing authority, the EDD and the developer execute a CEA detailing the transaction and the parties’ obligations, dedication of taxes, the list of the proposed EDD-funded projects and their priority.

Dedication of Existing Taxes and Levy of New Tax: The governing  authority will dedicate the Existing Tax Increment and/or levy the New Tax utilizing a process established by the Louisiana Legislature.

Given the growing success of EDDs, we can expect to see them utilized more in the future. They have become an important catalyst for Louisiana’s long-term economic prosperity and a powerful tool for developers to take their projects to the next level.

ABOUT THE AUTHOR: Charles A. Landry, a Fishman Haygood LLP partner, has advised on Economic Development Districts statewide. He is proficient in real estate structure and development, P3s, land use and zoning. He assists clients with transactions involving residential developments, office buildings, shopping malls, hotels, medical facilities, golf course communities and industrial developments. Known for his ability to balance diverse stakeholders’ priorities, Charles has been a moving force in high-profile P3s, including the Shaw Center, IBM Complex in Baton Rouge, NOCCA, the Water Campus, IBM Center in Monroe, and Moncus Park in Lafayette.

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