From the editor: And you thought you had tax problems
Remember the tussle last winter between the St. Mary Parish School Board and Parish President David Hanagriff over a tax exemption for Metal Shark?
The back-and-forth resulted from shipbuilder Metal Shark’s request for a property tax break for a modest expansion. The School Board voted to deny the exemption, but Metal Shark got it anyway.
And thereby hangs a tale. It’s an important tale in a parish that would like to think of itself as business-friendly and ready to grow economically. You may be asked to help write a chapter in that story.
The School Board had the opportunity, fleeting though it was, to say yes or no to Metal Shark because of changes instituted by the new John Bel Edwards administration in the Louisiana Industrial Tax Exemption Program. Basically, the program offers an 80% exemption from local property taxes to new industry or to an expansion by an existing industry for up to 10 years. The business with the exemption commits to maintaining jobs enumerated in its application.
Before the Edwards changes, the program had drawn criticism for being completely top-down, with the exemption decisions being made by the state Board of Commerce and Industry, and shoddy in its oversight. The Advocate blew the whistle in 2017, finding that the program, which offered a 100% exemption then, coughed up billions in exemptions. Some of it went to enterprises that failed to live up to their hiring commitments.
The 2017 changes reduced the size of the exemption and gave the affected local governments the right to say yes or no.
Now SB151 by state Sen. J. Rogers Pope, R-Denham Springs, has been sent to the Senate floor without recommendation by the Revenue & Fiscal Affairs Committee, chaired by our own Sen. Bret Allain, R-Franklin.
The bill would give voters the chance to amend the state constitution to require approval by those affected local governments when an ITEP application comes along. But first, SB151 will have to win approval from two-thirds of the Legislature.
Pope and other supporters say local governments deserve the right to make their own decision about their own revenues. There’s also a feeling that a Republican governor would be more likely to overturn Edwards’ changes.
As for the Democrats, well, quick: Name a Democratic gubernatorial candidate.
Opponents, including big-time business lobbies such as the Louisiana Association of Business and Industry, argue that the need to get approval from four or five governmental entities makes the process too cumbersome.
Hanagriff tried to overcome that obstacle. He went to local governments and to the sheriff to acquire the right to make the exemption decision himself, provided an economic analysis showed a positive impact.
Metal Shark’s expansion of two jobs with a $73,000 annual payroll was expected to cost local governments $99,000 over the 10 years, including $46,000 in lost taxes for the School Board. Because the analysis showed a slight negative impact, Hanagriff went to Franklin and the Sheriff’s Office and received approval.
The School Board voted against the Metal Shark request over the size of the expansion and, maybe, because a previous Bollinger exemption had cost the board $85,000. But the School Board’s vote came Dec. 9, past a 30-day deadline that no one in St. Mary seemed to know about. Metal Shark got its tax break.
That case was a fluke. But it demonstrated how some local officials feel they’re getting rolled.
Together Louisiana, an advocacy group pushing the constitutional amendment, calls the ITEP program “corporate welfare.” In 2017, the group says, St. Mary governments gave up $9.3 million of property tax revenue, a number equal to 16% of the total actually collected, because of 356 ITEP exemptions from 38 companies.
From 1998 to 2017, ITEP applications from St Mary claiming to create more than 2,600 jobs actually resulted in only 223 jobs, according to Together Louisiana’s analysis.
But you should probably remember that in 2017, St. Mary was in the process of losing 6,000 jobs from its summer 2014 peak employment of 27,000, according to figures from the Louisiana Workforce Commission and the U.S. Bureau of Labor Statistics.
It should also be remembered that the local governments are giving up taxes only on the new industry or expansion, not taxes they’re already collecting.
When the School Board voted against the Metal Shark exemption, Hanagriff said the members were sending the wrong message to potential employers.
We’ll see which message gets through on the Senate and House floors and, maybe, at the ballot box.
Bill Decker is managing editor of The Review.