Businesses that fall short on requirements for property tax breaks under a state program will have to get letters from local taxing bodies favoring any amendments to existing agreements, a state board voted Wednesday.
With economic repercussions from the global COVID-19 pandemic forecast to linger for years, businesses might need to change their plans for significant projects and want to change existing agreements under the Industrial Tax Exemption Program. Changes might include the number of jobs or amount of the capital investment promised.
The motion was overwhelmingly approved by the largely Gov. John Bel Edwards-appointed state Board of Commerce and Industry, which oversees the administration of the manufacturing tax break program.
The motion only applies to companies seeking amendments to existing ITEP agreements, which outline what happens if a company does not comply or does meet requirements, like terms and conditions.
The motion is retroactive but does not currently apply to new contracts, according to the Louisiana Economic Development department. The motion was put on the agenda at the request of consultants and industry representatives seeking a more streamlined approach.
"Since 2016, we've sought constant improvement of the ITEP program. … This is another way to provide some clarity to help guide staff through the process," said Don Pierson, secretary of LED. "In real life, sometimes you need to change (agreements)."
It was not immediately clear how many companies across the state would be in this situation in the coming months or how local officials can prepare for the change other than to be on the look-out for communication from corporations seeking to amend agreements. The onus is on the corporation to secure letters of approval from all the local taxing entities, such as the police jury or city council, sheriff and school board for any changes.
For example, if a sheriff's office approves an amendment for a business requiring five jobs and $250,000 in payroll, but the police jury or parish council members approve an amendment requiring 10 jobs and $500,000 in payroll, the larger requirement sticks, according to the motion.
Board members previously indicated that they were in favor of the move because it is another decision that puts more local control into the equation surrounding ITEP.
Only one board member out of nearly two dozen, Jan Moller, the director of the Louisiana Budget Project in Baton Rouge, voted against the motion.
"Why are we doing this by a motion that I saw for the first time a few days ago?" Moller asked. "This seems like a substantive change."
Moller was concerned that the motion for the new process was circumventing the regular "rule-making" process that allows for more public notice and input from members of the public, industry representatives and local officials.
If a company does not comply with the ITEP job requirements or capital expenses, the state board would still be responsible for potentially levying penalties, which are not open for local official interpretation.
Moller's concerns were echoed by Baton Rouge-based faith organization Together Louisiana, which regularly lobbies the state board against granting tax incentives, especially the ITEP projects.
The organization's attorney, Joel Waltzer, of Waltzer, Wiygul & Garside, claimed the motion is essentially a rule and beyond that is inconsistent with the governor’s executive order in 2016 that gave taxing bodies more control over local tax breaks.
“It allows people to do things without consequences in my opinion," Waltzer said. "I don't think that it's just a clarification,” he said. "There's going to be a wave a renegotiations, and then when the economy picks back up and all their businesses pick back up, they are not going to be coming in to ask to reinstate the old contract."
Together Louisiana admits that there is some local official input but contends that final say on projects seemingly remains under the discretion of the state board, which is made up of executives from across Louisiana, some of whom routinely recuse themselves from voting on certain contracts because those companies have been clients of theirs over the years. As such, while some board members are themselves local officials, there was not a statewide survey about whether local taxing entities would appreciate the change made Wednesday.
A state board that oversees billions of dollars in property tax breaks for manufacturers is considering taking another step toward giving more…