A formula proposed by the Baton Rouge Area Chamber to evaluate applications for the Industrial Tax Exemption Program was met with harsh criticism Friday from the community group Together Baton Rouge, whose members called it a “radical piece of public policy.”
The debate, which came at a meeting of the East Baton Rouge ITEP Committee, was the latest in a protracted public spat between the two groups over the tax breaks. BRAC has defended ITEP as a vital tool for attracting and retaining large employers, while Together Baton Rouge has lambasted the program as a no-strings-attached corporate tax giveaway.
East Baton Rouge Parish officials have slowly waded through their newfound authority over ITEP, which Gov. John Bel Edwards gave to local governments in a 2016 executive order. A committee composed of representatives of the East Baton Rouge Parish Metro Council, School Board, Sheriff’s Office and Mayor-President Sharon Weston Broome’s office is tasked as an advisory board to evaluate the program.
BRAC proposed what they are calling a "matrix" to calculate companies' tax breaks at the last committee meeting. It would be used by officials to decide whether a company is granted a tax break based on how many jobs it creates or how much money it invests. The committee punted on voting on the proposal until at least next week.
Together Baton Rouge organizer Broderick Bagert said the matrix would put Baton Rouge wildly out of step with localities in places like Texas that offer similar tax incentive programs.
“You’ve set the bar so low, it’s no longer a bar. It’s a floor,” he said. “(The matrix) creates the impression of scrutiny, but really would allow a virtual carte blanche subsidy.”
Together Baton Rouge members laid out a series of standards they want implemented, including tying the incentives to increases in output to prevent companies from “gaming the system” by applying for tax breaks for routine capital expenses.
The group used ExxonMobil’s Baton Rouge refinery as an example, arguing ITEP has cost East Baton Rouge Parish millions in tax revenue, while Exxon refineries in places like Beaumont, Texas and Joliet, Illinois pay far more in property taxes.
The oil giant quickly shot back after the meeting, arguing its ITEP abatements are larger than other companies in the parish because its capital expenses are so large.
“We are glad to be the largest property tax payer in the parish. The refinery alone paid $19 million in 2017,” ExxonMobil spokeswoman Stephanie Cargile said in a lengthy statement, noting the company invested more than $340 million in the parish last year.
But the company also used almost its entire 2017 capital budget to apply for ITEP tax breaks, Bagert said, which highlights the backwards nature of a program that should aim to incentivize projects that haven’t happened yet.
Exxon said its capital investments — more than $1 billion in the past three years in the Baton Rouge area — help the company retain jobs for its more than 6,500 local employees and contractors.
“We think it's a shame that without any advance notice, a good portion of the presentation made today to the committee was really an attack on ExxonMobil,” said Michael DiResto, executive vice president at BRAC.
DiResto defended the chamber’s matrix proposal, which was designed to not exclude projects that would end up having a net positive effect on the parish, even though they don’t create many jobs or involve a large dollar investment. For instance, DiResto pointed to a project by the Westrock Company in north Louisiana announced last year that retained 400 jobs at the paper mill without creating new jobs. The state ponied up incentives for that project in an effort to save the jobs from being eliminated.
“The reaction we’ve gotten is this is a really reasonable proposal,” DiResto said. “It's not radical.”