Louisiana Inauguration

Louisiana Gov. John Bel Edwards takes the oath of office with his wife, Donna, at his side during his inauguration for his second term at the State Capitol.

Gov. John Bel Edwards’ administration is pushing back against certain local rules for the state’s largest tax incentive program, in an effort to make it easier for companies to win tax breaks for work that has already started or been completed.

The new tweaks of the state’s Industrial Tax Exemption Program center around the role local governments play in handling the tax break, which exempts manufacturing companies from paying property taxes that would otherwise go to local budgets. 

For months, including during a heated reelection campaign last fall, Edwards has alluded to “process changes” his administration plans to make to the Industrial Tax Exemption Program.

Matthew Block, the governor’s general counsel, said in an interview those changes include an effort to prevent local governments from instituting blanket bans on exemptions for projects that are already completed or under construction. That has been a goal of business groups that have sought changes to the program since Edwards overhauled it in 2016.

“There might be some very good and legitimate reasons where an application would not have been submitted until work has already been completed or work has already been started,” Block said.

Among the local governments that have adopted guidelines that prohibit such awards include those in Baton Rouge and New Orleans, two areas that played key roles in delivering Edwards a reelection victory as the only Democratic governor in the Deep South.

Together Louisiana, the advocacy group that has pushed for local governments to disallow exemptions for projects that are already completed or underway, is negotiating with Edwards' administration, said the Rev. Theron Jackson, a member of the organization in Shreveport. 

"When something has already been done, we have a tough time seeing how you incentivize doing it," Jackson said. "The exemption was designed as an incentive and not as a reward system.

"We understand that politics is negotiation and it is a back-and-forth for the good of the people. But if there’s going to be any give there's going to have to be take as well." 

The Louisiana Association of Educators is also at the negotiating table, and its president, Tia Mills, said in a statement, “Approving ITEP exemptions for projects that are already completed does not meet the definition or intent of the ITEP incentive program. We are hopeful that local entities when considering ITEP applications will not relax the prohibition standard on completed projects.”

Block said the administration hopes to make the changes before the legislative session begins in March. Last year, Republican lawmakers, backed by industry groups, fought unsuccessfully against the governor to pass legislation curtailing his overhaul of the tax break program, and more legislation on that front is expected this spring.

The administration is discussing the issue with local officials but doesn’t have a final answer for what would happen if they couldn’t reach a “consensus," Block said. 

Louisiana Economic Development, which is part of the governor’s administration, has spearheaded tweaks to the program and is working on a formal resolution.

The agency's secretary, Don Pierson, said at the most recent Board of Commerce and Industry meeting, in December, that the agency will present a resolution at the February board meeting “providing for measures that will deal with rejections of exemptions by local interests that have established guidelines that are in conflict with the rules of this board.” Pierson declined to answer questions about the new round of changes.

Pierson added that although his agency has worked with locals to establish guidelines for approving or rejecting exemptions through the program, “this does not ... give the local interests the authority to act to supersede the duly established Board of Commerce and Industry rules for the exemption.”

At the meeting, Pierson also said his agency will work with the governor and lawmakers in “considering amendments” to the state’s public records law to shield certain “compliance communications,” or records that firms submit to the state to prove they are meeting their obligations.

“I think what Don is concerned about is making sure the local governments don’t put any restrictions that are any greater than what the state has,” said Jerry Jones, chairman of the Board of Commerce and Industry.

Block said the more “substantive” local rules — such requirements in New Orleans that companies pay an $18-an-hour minimum wage to get the tax breaks — are not the subject of tweaking, but he said the state is continually discussing those issues with parishes.

For years, Louisiana granted billions of dollars in property tax breaks to manufacturers through the program even as companies cut jobs. Local officials, whose revenue was being exempted, had no say in the program.

Shortly after being elected in 2016, Edwards overhauled the program through an executive order that gave local governments a say in whether to approve the tax breaks or not. The reforms, which have gone through multiple rounds of changes and sparked outcry from business groups, also required companies to create jobs in some cases and curtailed the amount of the exemption.

Local governments across the state have since adopted their own guidelines for when to grant the exemptions. The New Orleans City Council adopted some of the most stringent rules for the program in late 2018, requiring companies to pay workers $18 an hour and be located in a struggling area. Both New Orleans and Baton Rouge officials also adopted guidelines that prohibit exemptions for work that has already been completed.

“What we are certainly not trying to do … is take away the authority of the parishes to make decisions about the abatement of local property taxes,” Block said. “The governor feels those are decisions that should be made at a state and local level.

“What he does think is important is on the process, the timing of applications, the documentation that’s needed, those things should be consistent from one parish to the next and the state board.”

Baton Rouge Area Chamber President and CEO Adam Knapp said the business community has been pushing for months for a new round of changes to allow tax exemptions for work that has already been started or completed. He said he is unaware of what changes Louisiana Economic Development is working to make.

“This is kind of the core of the program design,” Knapp said. “Who’s in charge of the program?”

Knapp said companies often have already begun their projects by the time local governments give the project an up-or-down vote because of the way the state’s rules are set up. Firms first submit an advance notification to the state notifying them of the project before going to the Board of Commerce and Industry for approval, then finally to the locals.

Knapp said the business community also wants to make it clear that companies can win tax breaks for projects that create zero jobs under a provision of the state’s rules that encourage modernization projects. Knapp pointed to Georgia-Pacific, which laid off several hundred people at its paper mill last year. Some local governments, including Baton Rouge, require job creation for all tax breaks.

Still, although many local governing authorities have passed guidelines, they don’t necessarily vote with them. The East Baton Rouge Parish School Board passed rules for the program that prohibit exemptions for projects already completed. But at a meeting earlier this month, the board gave a small electrical repair company an exemption for a north Baton Rouge project that was already completed. The board rejected two requests from energy giant ExxonMobil last year mainly because Exxon had already finished the work.

Email Sam Karlin at skarlin@theadvocate.com