St. James Parish officials are backing a large new property tax exemption for the Motiva oil refinery in Convent that burned in a massive August fire.
The parish officials recently agreed to forgo new taxes on the repaired section of the plant that would have supported schools, sheriff's deputies and parish government. Instead Motiva will save $10.5 million on its revamped H-Oil unit over the next five years, according to an Assessor's Office estimate. The state must still weigh in on the exemption.
The local decisions were the first time St. James officials have employed a still developing procedure allowing locals a say on the state’s property tax exemption program for major manufacturers, long seen as one of the most lucrative in the nation but also an important enticement for the state's industries. The exemption applies to new plant facilities and equipment.
“We like it because if anybody gives away the local taxes, it should be the local people, not the state,” St. James Parish President Timmy Roussel said of the new process.
Motiva recently wrapped up a $150 million reconstruction of its burned H-Oil unit at the 225,000-barrel-per-day refinery off La. 70 and, in March, was in the process of bringing the entire unit back into production before another fire at the plant.
The unit, one of only three in the world, processes heavy leftovers from oil refining for conversion into fuel oil and a diesel-type material.
The state's industrial exemption program, which dates from the 1930s, had been the only one in the nation in which a state give away tax revenue of local governments without their say. Until now, the decision has come directly through the state Board of Commerce and Industry.
Under pressure from critics of the program, Gov. John Bel Edwards signed an executive order last year that the sheriff, School Board and local governing authority — usually a city council, parish council or police jury — must agree to an exemption before the state can consider it.
Edwards also shortened the old full, 10-year exemption to a 100 percent exemption for five years with an option for another three years at 80 percent of the value of the project. The three-year option for Motiva, if approved, would save the plant another $5 million in property tax, the Assessor’s Office estimated.
Edwards’ order took effect June 24. Don Pierson, Edwards’ economic development secretary, said state officials are still talking with some governments about how to handle the new process. The state rules are still being finalized as well.
Pierson said he’s not aware of any parishes that have rejected new exemptions so far.
“We may encounter a parish that doesn’t want to participate for a certain reason and it may have to do with the type of project that it is or it might have to do with their fiscal circumstances. There could be varied reasons,” Pierson said.
More than 160 companies have submitted early notifications of intentions to seek the tax exemptions under the new rules for capital investments worth a combined $35.7 billion. If all were granted, the exemptions would be worth nearly $596 million in forgone property tax for local governments across the state in the first year alone, state economic development officials estimated.
Those requests, which won’t be processed until work is nearly done, could take years to play out. But no new exemptions approved through the new local process, like Motiva’s, have reached the state Board of Commerce and Industry as of Sunday.
Meanwhile, through mid-April, the board has continued to handle exemptions grandfathered in under the old system, approving 962 of 969, state economic development officials said. The board met again Wednesday, but a precise tally of how many more grandfathered projects were approved was not immediately available.
Some local officials and those in business and economic development circles worry about having local officials with potentially different ideas on the exemptions vote on what in the past had been a virtually automatic exemption.
“Uncertainty is really the enemy of industry recruitment,” said West Feliciana Parish President Kevin Couhig, a former assistant secretary of commerce and industry in the 1980s who worked on industrial recruitment.
He said the Parish Council, sheriff and School Board in that parish agreed earlier this year to blanket resolutions agreeing to the full exemption available in the future from the state if facilities otherwise qualify. The resolutions, he said, avoid the need for votes each time new projects come along.
Kate MacArthur, president and CEO of Ascension Economic Development Corporation, said she proposed a similar resolution to that parish's leaders.
Some in industry have aired worries that new incentives won’t be as big as in the past and would eliminate exemptions for smaller upgrades, she said, but the larger issue is uncertainty.
“We’ve had a couple of projects that are looking that have that as their major concern. They’re nervous about announcing a major investment when they don’t know what that (exemption) is going to be exactly,” MacArthur said.
Ascension Parish Council Chairman Bill Dawson said he believes parts of the industrial tax exemption program needed some of the corrections Edwards implemented, including an end of exemptions for smaller maintenance projects.
Though the details will matter, Dawson said, the council is considering MacArthur’s idea so industries can know the tax impact of their long range investments.
“We have to just make sure what we’re giving people is an incentive for them to locate in Ascension Parish,” he said.
For all the hand-wringing, however, St. James and Ascension officials haven’t shied so far from giving the full exemption, though parish officials say that won’t always be the case.
“The reality is we are going to look at every one that comes forward under merit of the law,” said Steve Nosacka, the St. James Parish economic development consultant and mayor of Gramercy.
Ascension leaders in February tried out the new public process on what was really the renewal of a five-year property tax exemption grandfathered in under the old rules for a $3.1 million upgrade to the Shell Chemical plant in Geismar.
Motiva also had little trouble getting its exemption approved for the burned H-Oil Unit.
Roussel, the St. James president, said the leaders of that parish’s taxing jurisdictions met and discussed various aspects of the fire, including that no harm came to surrounding residents and that the fire is believed not to have been Motiva’s fault, and decided to keep Motiva whole.
Following an earlier vote by School Board and letter from Sheriff Willy Martin Jr., the council approved the exemption unanimously April 19 after brief public presentations by Shell Oil official Joe Baker, Motiva refinery manager Hugues Bourgogne and Roussel.
“It’s a big repair project that is costing a considerable amount of money and what’s significant about the project, when it’s done, is it retains 66 jobs that are directly involved with that H-Oil unit,” Baker told the council.
The value of the exemption was not mentioned. Motiva, which is a joint partnership of Shell Oil and Saudi Aramco, is in the process of being dissolved. Shell will retain the Convent refinery in the break-up.
The St. James Parish School Board backed another exemption last week. Louisiana Sugar Refining in Gramercy is planning a $3.7 million expansion to produce smaller, retail-sized bags of sugar. The exemption, which needs support from the Parish Council in May, would save $342,000 in taxes over eight years.
Edgar Cage, a leader in Together Louisiana, a group that advocated for the changes ushered in by Edwards, said whether local governments agree to new exemptions wasn’t the point of the reform effort. It was to add sunlight and accountability.
“That’s what we feel good about, that (local governments) have complete control over their own tax base, their own destiny," Cage said.