In one of his first acts in office, Governor John Bel Edwards issued a pair of executive orders reforming the Industrial Tax Exemption Program (ITEP), a lucrative incentive for big business. The governor reduced the tax relief from 100% to 80% of property taxes owed and, more importantly, gave the local government a say in the approval.
There is now an initiative in the Legislative Assembly to make these changes law. This would cement the power of local tax bodies – typically the parish council, sheriff and school board – to approve or deny their share of the exemption.
If lawmakers support the proposal, voters will consider amending the state constitution this fall to make the changes permanent.
Senate Bill 151sponsored by Sen. Rogers Pope, R-Denham Springs, was advanced without objection Monday by the Senate Committee on Revenue and Fiscal Affairs.
Prior to the Edwards orders in 2016, Louisiana’s ITEP program was once considered one of the most generous tax incentives in the country, exempting industrial and manufacturing sites from 100% of local ad valorem property taxes for 10 years , practically every time they added a new building. or refurbished a piece of machinery.
Companies would apply for ITEP incentives from the state Board of Trade and Industry, which approved 99.95% of the applications it received, according to Together Louisiana. The group of residents organized to oppose the program and stylized it with the biting description of “corporate welfare”.
According to Louisiana Economic Development (LED), which administers the ITEP and other state business incentive programs, ITEP generated approximately $10 billion in lost tax revenue from 2008 to 2015 that should have gone to local governments.
Other parts of the executive orders required that every ITEP project be tied to job creation. Previously, companies did not have to create new jobs to benefit from the tax exemption. And rather than just presenting their plans to the Board of Commerce, companies now also have to woo local authorities if they want property tax relief.
By most accounts, the reforms retained bipartisan support and provided significant amounts of tax revenue for schools, infrastructure, and public services at the city and parish levels.
Pope, a former school principal, said he started working on the constitutional amendment two years ago because it was important to preserve the ITEP reforms for the future, pointing out that the next governor could very quickly undo them all with the stroke of a pen.
Legislation has picked up speed. The Senate committee received 117 emails and dozens of cards from the public, indicating support for the measure. Predictably, opposition has come from corporate lobby groups, including the Louisiana Association of Business (LABI) and the Industry and Louisiana Chemical Association, as well as large corporations such as Exxon Mobil, among others.
LABI Vice President Jim Patterson, who spoke out against the bill, suggested the reforms had hijacked businesses from Louisiana. He cited statistics showing that the total number of new ITEP applications received by the state has dropped nearly 600 times from before 2017.
However, the senators told Patterson that the statistics were taken out of context. Sen. Rick Ward, R-Port Allen, later warned lawmakers and the public not to use statistics and “turn them into something they are not” when testifying before a legislative committee.
“You can take a very large number and scale it down to something small, knowing what the truth of consolidating all those numbers was, and that can be pretty misleading,” Ward said. “So usually it’s going to be found out. Whether LED was there or not, someone was going to have that information.
Patterson said the drop in ITEP applications is a sign that companies view the program as “burdensome and problematic”, adding that the numbers fell from 619 in 2016 before the reforms took effect to 197 in 2017, followed by 150 in 2018.
“Obviously we’re not bouncing back the way we should,” he said.
Other senators asked how many pre-2017 ITEP requests were for miscellaneous small capital additions under $5 million, a category of incentives that executive orders eliminated. Miscellaneous capital additions include items such as equipment maintenance and machinery refurbishment.
Sen. Gary Smith, D-Norco, said minor capital projects previously accounted for about 80% of all ITEP requests.
Together, Broderick Bagert, from Louisiana, also explained that pre-2017 LED rules required a company to file a new application for each capital addition it claimed, whereas they are now consolidated on the same form. . Under the old rules, he said it was common for a company to have 36 ITEP requests pending in a single year.
Bagert also provided data that shows that the ITEP has in fact spread to more companies since the reforms took effect. Citing statistics from the program, he said capital investment had risen from $83 billion in the five-year period before the reforms to $113 billion in the five-year period after. More telling, he said, is that the number of start-ups, whether new companies or new industrial plants built by existing companies, increased from 122 to 136.