A partial shutdown and layoffs at the Georgia-Pacific paper mill is expected to hit the Zachary Community School District with an annual deficit running just under $1 million annually starting in 2021 that will be have to covered by surplus funds until the district's operational budget gets back in balance in 2028, a study shows.
That's because Georgia-Pacific accounts for about 40 percent of the total property taxes collected by the school district, according to an economic impact study commissioned by the Bank of Zachary and conducted by LSU, based on 2017-2018 fiscal year data, and presented to the public Tuesday evening.
The school district would be hurting more for revenue if it had not shored up its books in the mid-2010s and built a $20 million surplus in its general fund for several months of operating expenses, to counter the operational deficit, said J. Matthew Fannin, professor at LSU who co-authored the report.
The report also notes that the Georgia-Pacific layoffs in a worst-case scenario would amount to less than a 1 percent decline in Zachary's sales tax revenue, which totaled $15.2 million in the 2016-17 fiscal year.
The mill, which has been the largest taxpayer to the school district since its inception in 2003, shut down its office paper-making machines and pulp assets in Port Hudson earlier this year, eliminating 650 jobs at the mill. About 50 have found other jobs. Also, some hourly and salaried employees are still assisting with the shutdown, but will leave when that work is done, said Kelly Ferguson, spokesperson for Georgia-Pacific.
About 300 people continue to produce toilet tissue and paper towels at the mill for retail purchase.
"At the beginning of the decade, (the school district) had multiple years where their expenses were exceeding revenues and running a deficit, but they got that in line and restructured," Fannin said. "A 50 percent reduction to the school district in property tax revenue is a little over $3 million (each year), but when you have $20 million in the fund balance you have a few years to manage that."
The district, which had about 5,300 students in 2018, has seen tax revenues from other property owners rising at a rate that could help keep the surplus above $20 million, if that pace continues.
Hubie Owen, a school board member and local housing developer who is a lifelong resident of Zachary, said he was glad to hear that some laid off workers have already found new jobs and the school district is prepared to absorb the shock.
“We’re in great shape at the school system financially because we were very thrifty with our money,” Owen said. “We’re seeing a lot of growth right now in Zachary, there are several new subdivisions.”
But more houses doesn’t necessarily mean crowded schools because average families are smaller in recent years, so schools now can collect from a bigger tax base and have lower enrollment, he said.
Georgia-Pacific employed some 2 percent of Zachary's residents, with roughly one-third of the mill's workers living in Zachary, the report says. Zachary had about 17,268 residents in 2018, according to U.S. Census data.
LSU estimated that $26.3 million in annual payroll losses are expected in the Zachary area, which includes Baker and Central. Another $10 million is expected not to be spent in the local economy by former workers of the plant in a worst-case scenario, the report says. The average Georgia-Pacific salary was $80,000.
Factoring in indirect jobs within the economy supported by the lost employment at Georgia-Pacific, a total of $52 million in annual payroll is expected to disappear. In 2017, Georgia-Pacific contributed $100 million in annual payroll.
It was not immediately clear what impact the reduction in manufacturing would have on subcontractors or suppliers.
"We have a number of contract companies working on our site at any given time and we will continue to have contractors working with and supporting us for specialty jobs," Ferguson said, but declined to offer more scope because the numbers "ebb and flow with the work that needs to be done."
In addition, the Port Hudson plant was the biggest purchaser of hardwood pulpwood in the area. The closest plant of similar size and scope is several hours away. This may reduce the price of pulpwood since there will be less demand, according to the report.
Koch Industries is the parent company of Georgia-Pacific. It’s one of three companies which decided to shut down plants around Zachary. Those included German chemical maker BASF, laying off 54 workers, while Thompson Pipe Group accounts for another 120 people caught up in layoffs.
Zachary sits inside of East Baton Rouge Parish. Georgia-Pacific is the third-largest taxpayer in the parish, which paid $4.7 million on $90.6 million worth of market value in 2018, records show.
About 50 residents attended the economic impact report meeting at Zachary High School's Visual and Performing Arts Center.
For Tracy Bethley, who moved back to Zachary about a decade ago but is a native of the region, said the report was an "eye opener."
“It was a scary outlook with 650 jobs (lost) but now we see the reality,” Bethley said in an interview.
Bethley, who is starting a new career in real estate after working in corporate operations, said she has relatives who were laid off from Georgia-Pacific but they have already found new jobs at other plants in the region.