ExxonMobil on Tuesday said it will drop its pending requests for property tax breaks in Baton Rouge and warned the “uncertainty” surrounding tax incentives could deter future spending at its local plants.
The move came days after the East Baton Rouge Parish School Board, for the first time, voted to reject two requests by ExxonMobil to exempt it from paying a combined $2.9 million over 10 years to local schools. Exxon was set to ask the Metro Council Wednesday to approve the exemptions.
Exxon was seeking the tax breaks through the Industrial Tax Exemption Program, or ITEP, a longstanding and controversial property tax benefit for manufacturers.
Several local Exxon leaders issued a terse statement Tuesday decrying a “lack of predictability” and “confusion” surrounding the ITEP program. The statement was attributed to polyolefins plant Manager Stephen Hamilton, chemical plant Manager Dave Luecke, refinery Manager Gloria Moncada, plastics plant Manager Angela Zeringue and Port Allen lubricants plant Manager Scott Gleason.
"Unfortunately, the perception of Baton Rouge has become one of inconsistent treatment from one company to another, a lack of predictability and confusion among local elected officials, who are inundated with misinformation from activist groups," the company said. "We question if anti-business activist groups are opposed to the state ITEP rules or just opposed to ExxonMobil’s participation in the program."
Together Baton Rouge, the advocacy group that has railed against the ITEP program, applauded Exxon’s decision.
“Local standards provide the thing that’s most important, both for our corporate partners and for our community, which is predictability,” said the Rev. Lee T. Wesley, of Together Baton Rouge. “What’s new is that, for once, it’s not the predictability of a rubber-stamp; it’s the predictability of a genuine standard. That’s a positive and important change.”
Changes sought by Gov. John Bel Edwards “brought ITEP back in line” with Texas and the way the rest of the country handles exemptions, the organization said. Both the School Board and Metro Council established standards for how to approve the exemptions in recent months, and the exemptions in question did not meet those standards, the group said.
Together Baton Rouge was rallying members this week ahead of the Metro Council meeting, urging members to ask their council member to reject the tax break requests.
Exxon completed several capital projects at its Baton Rouge sites more than a year ago, but said it waited to bring the exemptions for a vote until new rules were implemented for the state's ITEP program. Edwards reined in the program and gave local officials a say in whether to award the exemptions with a 2016 executive order. Now it offers an 80 percent exemption over a decade, instead of 100 percent. Before the reform, the state Board of Commerce and Industry routinely approved the local property tax exemptions without input from locals.
Exxon had already dropped two of the five ITEP requests before the Board of Commerce and Industry met and approved the remaining exemptions last month. The third ITEP request is at the company's West Baton Rouge lubricants plant, and was approved by local officials there.
But for the first time last week, the East Baton Rouge Parish School Board voted to reject the two exemption requests in Baton Rouge. Because of state rules, Exxon had the opportunity to seek exemptions from the property taxes levied by the Metro Council and Sheriff, even though the School Board voted to reject the exemptions from its millages.
Now, Exxon spokeswoman Stephanie Cargile said, the company will not pursue the tax breaks from the Metro Council or Sheriff Sid Gautreaux.
The requests in Baton Rouge were for $64 million in spending at the Exxon refinery, which created 18 jobs, and $3 million in spending at the polyolefins plant, which created zero new jobs. Exxon already won approval locally for a $31.7 million exemption on a separate potential expansion at its polyolefins plant that would be worth more than half-a-billion dollars. The firm has not yet made a final investment decision on building the project, but one is expected soon.
For months, local teachers and Together Baton Rouge have vocally opposed the exemptions, arguing the parish should not be giving incentives for projects that already happened. Local teachers almost staged a walkout over the ordeal.
Between the school board vote and Exxon’s decision Tuesday, East Baton Rouge Parish will receive more than $6 million in additional property tax revenue over the next decade, according to the company’s calculations.
Cargile also said the company will continue to apply for ITEP exemptions in the future, but will "assume there is no ITEP incentive when making cost projections in advance of future investment." Exxon has said the uncertainty over ITEP hurts its chances to land new investments.
The company already filed advance notifications, the first step toward getting a tax break through ITEP, on several new capital expenditures in Baton Rouge for 2019.
Exxon’s statement said the decision to cancel the applications means the company must “reassess previously-projected costs” for the projects, which are already complete. “This may include a reduction in investments that grow jobs, expand operations or support community projects,” Exxon said. It was not clear what projects Exxon was referring to, and Cargile said she could not provide additional information about it.
Several industrial groups rushed to Exxon’s defense Tuesday.
The Baton Rouge Area Chamber, which has publicly backed Exxon and its pursuit of tax breaks, said the decision and statement is a "wake-up call." The organization said "community activists" have targeted ITEP and Exxon through "derision, attacks and misrepresentations."
"This toxic atmosphere led the school board to vote to oppose the company's recent applications for additional investments," BRAC President and CEO Adam Knapp said in a statement. "The tone has gotten to the point where this company has chosen voluntarily today to withdraw its application at a $6 million expense to the company, rather than continue to endure this circus."
The Louisiana Chemical Association, Greater Baton Rouge Industry Alliance and Louisiana Mid Continent Oil and Gas Association were among the industry groups that sent out statements similar to BRAC’s.
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