The industrial tax exemptions enjoyed by manufacturers in Baton Rouge are poised for change, but public officials on Wednesday pondered whether revamping the tax breaks would chase away business or would improve the quality of life in the Capital City.
For the first time, local governments will help decide whether manufacturers in Louisiana receive property tax abatements that companies such as ExxonMobil, Georgia-Pacific and Formosa Plastics have received over many years. And while both current and future companies looking to build in Baton Rouge are continuing to inquire about the industrial tax exemptions, the city-parish has no set plan on how they will determine whether to grant the tax breaks.
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The industrial tax exemption cost city-parish entities a combined $9.9 million in property tax revenue in 2016, city-parish Finance Director Marsha Hanlon said during Wednesday's Metro Council meeting.
The $9.9 million in lost revenue was split across local government entities, including the Fire Department, mosquito abatement, emergency medical services, libraries and the city-parish's general fund. The general fund's contribution was $1.9 million of the exemption.
Dozens of attendees representing the faith-based advocacy group Together Baton Rouge imagined various ways in which the city-parish could be spending that money: drainage projects, pay raises for police officers, mental health and substance abuse treatment improvements.
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"It's sort of ironic that the largest benefactor of ITEP (industrial tax exemption) lives in an area that needs the most services," said Edgar Cage, one of Together Baton Rouge's leaders, as he referenced ExxonMobil in north Baton Rouge. He and other speakers noted north Baton Rouge's lack of healthcare, economic development and educational opportunities.
But ExxonMobil also paid $32.7 million in taxes to the city-parish last year, according a report from the Baton Rouge Area Chamber based on its conversations with the assessor's office.
And while Together Baton Rouge earlier this month issued a report that says the corporate subsidies are a drain on local taxpayers, BRAC released a scathing response Wednesday saying TBR's assessment is "outlandishly flawed."
The BRAC response also points out that ExxonMobil recently passed on building the world's largest ethylene cracker plant in Baton Rouge and instead took advantage of more than $1 billion in property tax breaks offered in Texas.
"Manufacturing jobs are the lifeblood of Baton Rouge's economy," Michael DiResto, BRAC’s senior vice president for economic competitiveness, said at the Metro Council meeting.
Together Baton Rouge's members implored the Metro Council to cut back on the tax exemptions, and some said ExxonMobil may have chosen the Texas location for its ethylene cracker plant because of the state's better schools — an area Baton Rouge could have more money to improve if not for industrial tax exemptions.
But DiResto's take had a warmer reception from some council members.
Councilwoman Barbara Freiberg said boiling the industrial tax exemption down to the idea that the city-parish is missing out on $9.9 million a year in tax revenue oversimplifies the issue. She and most other council members agreed it is important to quickly devise a simple, predictable and transparent system for the tax exemption decisions.
"People who come to this area need to know what to expect from these taxing entities," she said. "We need a template. We need to get politics out of this as much as possible so if we put X, Y and Z in, you're going to get X, Y and Z out of it."
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Council members Donna Collins-Lewis, LaMont Cole and Chauna Banks appeared less inclined to support generous industrial tax exemptions in the future for companies that already are in Baton Rouge. Banks said Baton Rouge's economy is too dependent upon industrial and manufacturing jobs and that it needs to diversify.
"At some point, we're going to have to make a decision to cut back on companies that have a profit of billions of dollars," Collins-Lewis said.
Cole said he would not expect a corporation like ExxonMobil to leave Baton Rouge simply because it stopped receiving such generous exemptions, given the inexpensive energy prices the area offers.
"I've heard people say Exxon's not going to go anywhere, they've been in Baton Rouge 100 years," countered Councilman Buddy Amoroso. "I'll take you to Detroit; I'll take you to Pittsburgh," he said, referencing the losses of the automobile and steel industries that were the backbone of those economies for years.
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Despite their different outlooks on the tax exemptions, council members agreed to set up a committee to determine how the exemptions will be granted in the future.