The East Baton Rouge Parish Metro Council recommended that a local brewery be removed from a controversial economic incentive program for violating its contract but voted against recommending the company repay the more than $30,000 in taxes from which it was exempt under the program.
The Tuesday evening recommendations for how to deal with Tin Roof Brewing Company’s lack of compliance with the Industrial Tax Exemption Program in 2018, 2019 and 2020 will now be sent to Louisiana Economic Development’s Board of Commerce and Industry, which will make the final decision on whether or how to punish the brewery.
The recommendation marks the first time that Metro Council recommended penalties for a company in violation of an ITEP contract under new rules that give local governments greater input in the program.
The significance of that first recommendation was the center of a 45 minute debate. The council took three separate votes before it could come up with a consensus.
One group of members wanted to recommend the brewery repay the tax dollars it was exempt from paying under ITEP in order to set a strong precedent for future violators. The other group was unwilling to penalize a small business for an infraction its ownership says wasn't committed intentionally.
“If we have a company that has 150 people with a 30 person HR department, we can decide this much differently,” said Councilwoman Jennifer Racca, who voted against the fine. “We have the power to do that, and we have the mental capacity to decide that based on the merits. Here today, we’re looking at a husband and wife company that went through a pandemic.”
The rest of the council wanted to recommend the tax dollars be repaid over several years in order to not impose a financial burden on the company.
“The idea of the payment back of the previously abated taxes is not meant to be punitive,” Councilman Dwight Hudson said. “It’s simply an acknowledgement that this isn’t our money. … It's taxpayer dollars. If it shouldn’t have been abated, it should go back to the taxpayers.”
Neither side was able to secure a majority until Hudson and Councilwoman Carolyn Coleman opted to join those advocating against a fine, settling the dispute with a 7 to 3 vote.
The program, known as ITEP, has been around for decades, granting manufacturers an exemption from paying property taxes that would otherwise go to local budgets in exchange for meeting state-set jobs and payroll benchmarks.
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But a 2016 executive order by Gov. John Bel Edwards gave local entities an increased role in the enforcement of the program. The rule change is five years old, but municipalities are only now receiving notifications from Louisiana Economic Development’s Board of Commerce and Industry about local companies out of compliance with the program.
As the representatives of the three East Baton Rouge Parish entities that would have received the exempted tax dollars, Metro Council, the Sheriff’s Office and the School Board all have the power to recommend a penalty to the state board.
The council punted on the issue during its Nov. 10 meeting, opting to defer the item to Tuesday night in order to give Tin Roof’s co-owner, Cammy McGehee, time to prove it had come back in compliance. That same meeting, the council recommended no penalties for a local car-parts manufacturer, Mezzo Technologies, that also violated its ITEP contract.
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Tin Roof’s non-compliance with the program occurred because the brewery failed to submit documentation that it followed through with its commitments under the program. Co-owner Cammy McGehee told the council Nov. 10 that the brewery was otherwise in compliance with its contract and blamed the issue on its former consultant. On Tuesday, McGehee said she’d discovered that the same consultant miscalculated in 2016 when the brewery first joined ITEP, and the brewery was, in fact, not in compliance.
McGehee asked the council that they recommend Tin Roof be removed from the program because it would be unable to comply going forward.
Hudson called the debate “the greatest conversation this council has ever had on ITEP,” and nearly every member voiced a willingness to set standards for how to deal with future violators.
“There’s some things on the LED side and the city-parish side that need to be worked out,” Councilman Cleve Dunn Jr. said. “There’s some structure that needs to be put in place that says what the penalty will be if this and that happens.”