Boomerang: Metal Shark exemption comes back to the School Board
The saga of the Metal Shark tax abatement continues.
The St. Mary Parish School Board heard Thursday that the shipbuilder didn't comply with its 2021 pledge to create two jobs with a modest expansion at its Franklin-area yard.
Metal Shark received the exemption despite a School Board vote in 2021. Now it's up to the state Board of Commerce and Industry to take any action over the failure to comply. The School Board voted narrowly to ask for its property taxes back.
The amounts involved are small: two jobs, a payroll of just over $70,000 and an exemption from about $10,000 in property taxes that would have been owed to the School Board over 10 years. But the exemption request landed the School Board in the middle of a bigger issue: How far should the state government go in exempting new and expanding industry from local taxes to encourage economic development?
Gravois Aluminum Boats LLC, doing business as Metal Shark, made its request for tax relief in 2021 under the Louisiana Industrial Tax Exemption Program.
From 2008-15, ITEP offered exemptions of 100% from local taxes for 10 years. The decision about whether ITEP applications were accepted was completely up to the Louisiana Board of Commerce and Industry.
Critics said the board passed out ITEP exemptions too easily, sometimes with little regard for how many jobs were actually being created or the impact on local governments, and sometimes for routine equipment purchases dressed up as expansion.
The Louisiana Department of Revenue says local governments gave up nearly $10 billion in tax income 2008-15 under those rules, assuming the exemptions would last the full 10 years.
Then, in 2016, then-Gov. John Bel Edwards signed an order creating new ITEP rules: Eligible industries could get local exemptions of up to 80% for five years, with an option for five more. Applicants were required to disclose and stick to their estimates of how many jobs would be created.
And, in the most controversial change, local governments that would be affected by the exemption could say yes or no to giving up the taxes they would otherwise be due.
It was under those rules that Metal Shark submitted its ITEP application in 2021.
The 2016 rules didn't do much to slow ITEP approvals. The Revenue Department said about $7 billion in local tax exemptions were approved 2016-2020, again counting the full 10-year term of the exemptions. That's about $1.4 billon approved each year, higher than the $1.25 billion a year under the 2008-15 rules.
Even so, some officials worried that the need to go to multiple local government boards for an exemption would discourage potential employers. Then-St. Mary Parish President David Hanagiff's solution was to get approval from all the parish's local governments to make the decision on all spplications on his own, provided an economic analysis showed a positive benefit.
But the analysis for the Metal Shark expansion showed what was described as a slightly negative economic impact. Hanagriff nevertheless got approval from all the affected governments except the School Board.
There, at their December 2021 meeting, board members objected to the exemption for a relatively small expansion, and what some members felt was a lack of attention by the state to the number of jobs actually created through ITEP applications.
The board voted against the Metal Shark exemption.
Then came a new wrinkle. Before the month was out, the School Board learned that its vote came after the end of a 30-day deadline that both parish government and school officials
said they knew nothing about.
The state government ruled that Metal Shark would get the exemption in spite of the School Board vote.
Fast forward to Thursday. St. Mary Economic Development Director Evan Boudreaux reported that Metal Shark had not met its job and payroll goals in 2022.
The company cited a slowdown in its business in the Northeast and difficulty hiring workers, both related to the COVID pandemic, Boudreaux said.
The Board of Commerce and Industry can leave the exemption in place, reject it or send the issue back to the School Board and Metal Shark to work out a payment, Boudreaux said.
The announcement didn't sit well with board member Marilyn LaSalle of Patterson.
"I'm really tired of giving [businesses] an exemption," LaSalle said, "and there's always an excuse, and we let them go."
LaSalle moved to ask the Board of Commerce and Industry for a refund of the taxes it would have been due. The board approved the motion by a 6-5 vote.
Since the Metal Shark debate, the ITEP rules have changed again. Gov. Jeff Landry signed new rules that eliminate any job creation requirements and turn ITEP application requests over to boards created for that purpose in each parish.
But under those rules, the governor will get the final say on applications.
In February, Metal Shark reported that it sold its Alabama operations with plans to operate a third shipyard, this one in Iberia Parish. Its existing sites near Franklin and Jeanerette employ 400 people, according to the company website.