For the second day in a row a Louisiana House committee narrowly advanced legislation that would minimize local jurisdictions' ability to decide whether a company should get a property tax exemption.
A similar third measure, Senate Bill 214, is on deck Wednesday before the Senate Commerce, Consumer Protection and International Affairs Committee.
Unlike the House resolution advanced Monday, the legislation approved Tuesday by House Ways & Means Committee has teeth.
House Bill 440, which advanced on a 5-4 vote, would change the state Constitution. If approved, then Louisiana governors would have no choice but to follow the protocols laid out in HB440, which limits local involvement in deciding which projects are approved under the Industrial Tax Exemption Program.
ITEP gives approved manufacturing facilities an exemption from paying local property taxes for up to 10 years.
After taking office in 2016, Democratic Gov. John Bel Edwards used his constitutionally granted authority to change the way the 80-year-old ITEP has operated for years. Instead a nearly automatic state approval to forgive property taxes local governments used to supplement schools and law enforcement, Edwards gave the locals a say in whether to grant the exemptions and more closely tied the incentives to job creation and retention.
Edwards’ new rules exempted 80 percent of the taxes for 10 years.
Last year the East Baton Parish School exercised its new-found right and vetoed a small ExxonMobil project that created only 18 jobs – prompting the multi-national corporation to withdraw its application. The business community, which at one time supported the new rules, howled that changes were needed.
Legislators responded with five bills that in one way or another trimmed the ability of local governments to decide what had been fairly automatic approvals that amounted to 10 years free of the property taxes.
About 75 ITEP applications have been filed since the new rules and only seven have been denied by a local taxing jurisdiction, said Louisiana Economic Development Assistant Secretary Mandi Mitchell. And the way it works is if, say, a school board says no, and other jurisdictions say yes then only the millage due the school board would have to be paid. The taxes owed the sheriff, police jury and other jurisdictions would still be exempted.
“Over the last three years, repeated ITEP reform efforts have fallen short of providing the uniformity, clarity and predictability necessary in all 64 parishes throughout Louisiana that are critical to optimizing capital investment in the state,” the Louisiana Mid-Continent Oil & Gas Association, which represents large oil companies and refineries, and the Louisiana Chemical Association, which represents large chemical manufacturers, said in a joint press release Tuesday.
The two powerful lobbying groups said they “are pleased that state lawmakers have recognized that there is ample opportunity for improvements in the administration of Louisiana’s signature economic development incentive tool, ITEP.”
Under House Concurrent Resolution 3, which was advanced Monday by the House Commerce committee, instead of the full school boards and local councils voting, three members would make up a “local review board” that would take up the applications. HCR3 was proposed by state Rep. Rick Edmonds, R-Baton Rouge.
House Bill 529 by Rep. Franklin Foil, R-Baton Rouge, which hasn't been considered yet, and Senate Bill 214 by Sen. Bodi White, R-Central, would rewrite the local approval processes by adding three officials from the local level to vote with the Board of Commerce and Industry.
Under the constitution only the governor can sign an ITEP application and Edwards' aides say he wouldn't under these procedures.
Ivey’s HB440 returned the local authority to the state but limited the exemption to 80 percent of the taxes owed for seven years, instead of 10. He also crafted the bill as a constitutional amendment, which would need two-thirds vote in both chambers as well as majority approval of the state’s voters.
But a change the constitution would require governors to follow the procedures set out in HB440.
Until then the ITEP rules can be changed by gubernatorial fiat. “We need to solve this issue permanently,” Ivey said.