For a while, Louisiana’s business leaders were worried about a “pause” in the job-creating industrial construction sector. Now, as economist Loren Scott and his colleagues report, the pause appears to be over as billions in new petrochemical manufacturing projects gear up for construction.
But the pause had political implications, too.
Over the months of the current campaign for governor, challengers to Gov. John Bel Edwards have called for changes to the 10-year industrial tax exemptions that the incumbent reduced, also giving local governments more say in the economic development process.
Perhaps people thought that the pause in construction was cause-and-effect of the Edwards changes to the tax exemptions. We don’t think so, and the statistics seem to bear that out.
The Scott team projects Louisiana will add 24,700 jobs, up 1.2%, in 2020 and another 28,800 jobs, or 1.4%, in 2021. Eight of the state's nine metro areas show growth, with Alexandria projected to be flat.
The industrial construction boom — even with some industrial exemptions reduced to 80 percent of pre-Edwards values — is very much a major part of this growth. The governor said The value of approved exemptions for new plants and equipment during his three-plus years in office are expected to be twice those in the last four years of former Gov. Bobby Jindal’s terms.
Both Jindal and Edwards pursued industrial construction projects. As should be expected, objective factors like the low price of natural gas — a feedstock for petrochemical manufacturing, an energy source for electricity — have contributed more than politicians to this result.
But Edwards’ change, giving local governments a say over the exemptions paid from their property tax revenues, for projects in their jurisdictions, has not had any obviously deleterious impact on growth.
Rather, as Edwards argued, property tax revenues will begin earlier to generate revenues for police, fire, schools, libraries — the fundamental services that are necessary to support growth.
The industrial tax exemptions were once almost totally rubber-stamped by a board in Baton Rouge. Now, local governments — like those in Texas, a major competitor for industrial facilities — are more broadly included in decisions. Few have rejected exemptions totally.
Further, Edwards has required job creation criteria be part of the industries’ applications, and the process of filing for the exemptions has been reformed to reduce what insiders knew was a notoriously gamed system. That’s a positive, not a negative.
At least one challenger, Republican U.S. Rep. Ralph Abraham, said he would seek to revoke immediately the Edwards decision. We don’t know if local governments would be very happy with that idea, but there seem to be good reasons to wonder if such a drastic remedy is needed at all on economic grounds.