Tax breaks for manufacturers in Louisiana were scrutinized more closely by some members of a state board this week, with a split vote approving $1.2 billion of property tax relief over 10 years across five companies in exchange for $7.6 billion of investment in the state.
The first year of total property tax exemptions will be $139 million across the five companies on a 7-3 split vote, with two of the dissenters being new members on the state Board of Commerce and Industry.
The three board members voted against tax breaks for major petrochemical companies, such as Marathon Petroleum and Sasol, but also smaller manufacturers like Baton Rouge-based Pod Pack International and Epic Piping. The economic incentives for all the companies were approved, but there’s rarely any significant disagreement on the board on such votes.
Separately, the board deferred a vote on a tax exemption for Genesis Energy, a crude oil pipeline business that invested $125 million in a new Baton Rouge pipeline. The question is whether the company qualifies as a manufacturer. Board members pushed for more information about the business.
The three board members voting against other tax breaks were most concerned about Marathon Petroleum's tax exemption in St. John the Baptist Parish and somewhat about Sasol's tax break in Calcasieu Parish, but the agenda item clumped all the incentives together.
About a dozen members of the public, including many affiliated with Together Louisiana, urged board members to reject the Marathon Petroleum and Sasol requests, calling for more analysis.
“We are now four years into a new era and business as usual isn’t good enough,” board member Jan Moller said after the meeting.
Both Marathon and Sasol employ hundreds of workers each in Louisiana.
The Sasol application for a major petrochemical project in Calcasieu Parish was for $7.5 billion of investment and the first year of the exemption is worth $138 million tied to 78 jobs, according to its application.
Sasol noted a nearly $13 billion capital investment in its Louisiana complex.
"That investment has created hundreds of high-paying manufacturing jobs, and Sasol has paid millions of dollars in payroll, sales and other taxes to date," according to a statement from the company. "The returns for Louisiana are already there and will continue for decades."
Marathon's Garyville refinery has more than 900 employees and refines about 564,000 barrels of crude oil each year.
Marathon’s incentives were tied to a safety device upgrade, which cost $60 million and supported 73 construction jobs. The company's application dates back to 2014 and it has until 2027 to make its plant investment. The value of the tax relief in one year was $1.1 million and about $9.7 million over a 10-year period. The company was still applying for a 100% property tax abatement under old incentive rules, which Gov. John Bel Edwards has revised to up to a 80% tax break and allows local government decisions.
Marathon Petroleum previously faced local tax break opposition from St. John the Baptist school board and parish council members on another project. St. John the Baptist didn't have any public officials at the meeting but the board members said they knew about the previous project rejection.
In February, the Board of Commerce and Industry had denied an appeal by St. John the Baptist Parish Council to uphold a local decision not to award a $25 million Industrial Tax Exemption Program break at the Marathon plant.
The local school board had also voted down the Marathon tax exemptions but all the paperwork was submitted late to the state, and the default action is that incentives get approved.
Even Marathon, the largest property taxpayer in the parish at $20 million a year, didn’t oppose the local government’s appeal. Marathon declined to comment about its most recent tax exemption request.
The parish's head councilperson said in an interview that St. John the Baptist isn’t in a dire financial situation right now, but said companies are treated differently than local municipalities if they miss deadlines.
“Industry is given a grace period and not penalized for missing a deadline, whereas the parish is punished,” said Lennix Madere Jr., councilman at large in St. John the Baptist. “Industry gets all the breaks, but municipalities only get one chance.”
“The world has changed with COVID-19,” Moller said, addressing local input on tax breaks. “Local governments are seeing a dramatic erosion of their revenue base and need all the help they can get.”
For Kenny Havard, a former Republican state legislator and West Feliciana Parish president who is new to the board, said the issue in his vote against the tax breaks was about local governments having control over their own property tax exemptions.
“If we (on the state board) are going to override everything (local governments) do what’s the point of giving them the opportunity to vote,” Havard said. “We need to do a better job as a board to make sure we don’t give away the farm. We don’t just want to rubber stamp everything.”
Havard said he’s not opposed to offering incentives to companies if the business qualifies under the rules and local municipalities vote in favor of the decision.
For new board member Travis Holley, the decision against Marathon and Sasol's tax exemptions was for lack of economic analysis and study of environmental impact.
"There wasn't enough evidence there at the meeting that could calm my anxiety about the pollution that's already there and how this tax break may actually result in increasing pollutants," Holley said. "I look at (the applications) very seriously and I don't think we should give a tax exemption to every company that shows up and fills out the paperwork."
The lack of jobs at each site was a big factor in the decision, he said.
"I just think it was out of proportion," he said.