LUTCHER — The pending closure of the Shell Oil refinery in Convent, an industrial mainstay and top employer in St. James Parish, could cost the local public school district $13.9 million over the next year and a half and change the way schools operate over an even longer term.

While the scenario presented to school board members Tuesday night represented a worst-case scenario, it's possible that some district employees could lose their jobs, and student-teacher ratios could take a hit.

If the projections do hold true through the end of fiscal year 2021-22, school finance officials said in a report that the system would be unable to maintain "current service levels" in the next full fiscal year beginning July 1 and that cutting personnel costs would be "virtually impossible" to avoid. 

The revenue loss in fiscal year 2021-22 alone, under the worst case, would total $12.1 million, the report says. Financial officials, however, focused initially on addressing $10.1 million of the overall loss, or about one-fifth of the budget for the 600-employee district.

The district's initial tax-loss estimates had been lower, but since Shell announced last Thursday it would close the Convent refinery, finance officials were also able to determine about $5.2 million in anticipated sales tax losses that were not part of early their figures. 

On top of any budget-trimming efforts, the district must also make annual long-term debt payments of about $2 million that are also financed by property taxes expected to be hit by Shell's closure.

In other communities, some bodies have the option of adjusting property tax rates upward to account for reduced tax collections dedicated to debt payments, but school officials couldn't immediately say if they had that option or would use it if they did.

The stark warning was offered in a three-page summary school finance officials delivered to a parish school board committee Tuesday in Lutcher to "set the table" for budget talks that would prepare for the closure of the 53-year-old refinery by the end of the year.

Shell's announcement that it will close the Mississippi River refinery, which employs 700 people directly and another 400 contractors, was a blow to local leaders and their constituents, who have counted on the refinery's jobs, spinoff economic activity and direct tax impact.

The impact on the school system represents only one aspect that the refinery's loss is expected to mean for St. James as other government agencies, businesses and families begin to adjust to the departure of an old standby. 

Shell had been unsuccessful in trying to sell the refinery, which had a significant fire in August 2016 and, local officials said, hadn't been profitable in recent years. The Convent facility is a standalone refinery, unlike the petrochemical or integrated sites in Geismar and Norco.

Though the Shell statement didn't directly address whether slumping oil demand and prices during the novel coronavirus pandemic had a role in the shutdown, the virus has hurt the travel and transportation industries. Some of the refinery's products include jet fuel, gasoline and diesel.

Amid the school system's dire warnings Tuesday, Assessor Glenn Waguespack said he expected that someone would buy the refinery, likely at a level well below its current $1 billion value, and generate some income for the parish.

At a minimum, he added, even a closed refinery would retain some value in the 2021-22 fiscal year, in part, because of the lag in the calculation of inventory taxes on Shell petrochemical products likely still to be in storage early next year.  

"So, it may lessen the blow just a little bit, but, you know, I think what you got is definitely the worst-case scenario. And we're hoping it's the worst-case scenario. Put it that way," Waguespack said. 

The school finance report proposes savings in non-instructional areas like maintenance, trying to quickly contain costs this fiscal year and evaluating costs per student at each school. School officials said the latter consideration could result in higher teacher-student classroom ratios.

But Jim Mitchell, the school system's chief financial officer, told board members that nearly 75% of the system's $60 million general fund budget remains in employee salary and benefits.

"And as sad as it may seem, it is very difficult to envision $10 million worth of cuts without impacting personnel," Mitchell said.

The school system ended the last fiscal year with nearly $5 million in the one-time, general fund surplus built up over past years, but that's only a fraction of the system's overall budget each year.  

The school finance report also indirectly revealed how the refinery's purchases, service needs and other expenses cycle dollars through all areas of the parish economy.

A estimated $1.8 million school sales taxes are projected to be lost through end of the 2020-2021 fiscal year while another $3.4 million school sales taxes would be lost in the next fiscal year. That's in addition to the property and inventory tax losses.

The loss in local revenue could mean an upward adjustment in the state funding through the Minimum Foundation Program.

The state public school funding formula is designed to ensure parish districts have at least a baseline amount to finance their operations and account for differences in support from local taxes.

Superintendent Ed Cancienne Jr. said, however, that those adjustments wouldn't likely show up until fiscal 2022-23, the year after the major revenue losses arrive.  


Email David J. Mitchell at dmitchell@theadvocate.com

Follow David J. Mitchell on Twitter, @NewsieDave.