On Monday, the East Baton Rouge Parish Industrial Tax Exemption Committee will hold what likely will be its decisive meeting to establish parish policy for industrial tax exemption requests going forward. In the past, these exemptions have been approved automatically by a state board, without local input.
The exemptions are costing local entities in Baton Rouge nearly $70 million in lost revenue this year.
Governor John Bel Edwards restored local control over industrial exemptions through an executive order, and East Baton Rouge will soon establish its policy for local approvals.
Three competing proposals have been put forward by committee members embodying very different philosophies and approaches to the question of when and on what terms it is appropriate to award public subsidies to businesses making capital investments into their own facilities.
We’ve summarized the three proposals below and have created a policy brief, including the original proposals.
You can download that document by clicking here.
Proposal I: “Revised BRAC model”: Guaranteed public subsidy for annual capital expenditures
Proposed by School Board Member Michael Gaudet and Metro Council Member Matt Watson
This proposal is an amended version of the Baton Rouge Area Chamber (BRAC) model introduced at first EBR ITEP committee meeting, which would set exemption rates by the amount of capital invested.
Under this model, the majority of capital expenditures of EBR Parish’s industrial sector would receive annual public subsidies of up to a 100% property tax exemption for 5 years and an 80% exemption for an additional 3 years (the maximum allowable by the state). Investments by existing firms into long-standing establishments would receive exemptions on the same terms offered to new plants or competitively-sited expansions. Exemption tiers range from 50% to 100%, with higher exemption tied to larger investments.
Job creation would not be a requirement to receive the exemption.
Projects already complete and in operation when an exemption is being considered would be eligible to receive an exemption.
Proposal II: “Revenue breakeven model”: Exemption percentages to bring net positive revenue to public bodies at 10 years
Proposed by the City-Parish
The model establishes limits on the extent to which industrial tax exemptions can negatively impact the budgets of local governments, seeking to create a more predictable and stable revenue environment.
The proposal includes some provisions to limit “ITEP churning,” but regular annual capital investments, while not “favored,” would be eligible. The proposal similarly “favors” investments that create jobs, but does not contain a specific requirement for new job creation.
“Retroactive incentives” would be prohibited, meaning no project already under construction before local support is finalized could receive an exemption.
The exemption percentages would be set not by the amount of capital invested (the BRAC model) nor by the number of jobs created (the TBR model), but based upon the percent that would allow public entities to begin to see net positive revenue by the end of the 10th year after the investment.
Exempt percentages would be capped in two ways. First, a fixed maximum of an 80% exemption would apply both exemption terms.
Second, a project-specific exemption cap would be determined by a publicly available modelling tool, taking into account specific project details (e.g. investment amount, property tax rates, average economic life of the property, etc.). Based on this model, the exemption percent would be set such that public entities would begin to see net positive revenue after a maximum of 10 years. If a project’s specs end up differing from those projected, claw-back provisions would enact automatic adjustments to the rate to restore a net-positive revenue basis for public bodies by year 10.
In special circumstances, the exemption caps described above could be exceeded, for one of four established scenarios: 1) to attract a new manufacturer, 2) to attract an an entirely new facility of an existing manufacturer, 3) to prevent the immanent closure of a facility and 4) to encourage environmentally-positive investments. The environmental provision would allow a bonus of up to 5% above the normal cap, but only on the environmentally-oriented portion of the investment.
Proposal III: “New jobs model”: Exemption percentages set by job creation and in-parish hiring
Proposed by Metro Council Member Lamont Cole
This proposal draws from the tax exemption guidelines of most Texas counties to establish potential exemption percentages based on the standard of job creation.
Two criteria drive the exemption amount a company would receive: 1) the number of jobs the project creates (with differing standards for small and new businesses, on the one hand, and large existing businesses, on the other); and 2) the percent of parish residents hired to fill those jobs.
Eligibility would begin with a minimum requirement to create 3 jobs (for small or new businesses) or 5 jobs (for larger, existing businesses), with exemption tiers running from 20% to 100%. The highest exemption level would be reserved for companies that create 25 net new jobs (for small or new-businesses) or 100 net new jobs (for large existing-businesses). Half the exemption rate, therefore, would be established by the number of jobs created.
The remainder of the exemption percent would be determined by the proportion of new hires who reside in East Baton Rouge Parish. There would be no restriction or requirement for local hiring, but it would tie 50% of the maximum potential subsidy offered by parish tax-payers to the percent of jobs filled by residents of that parish.
A special “immanent closure provision” would allow exemptions at a higher rate, including on investments that do not create jobs, if a plant is facing a “real, concrete an immanent prospect of closure.” Enacting the immanent closure provision would require a two-thirds vote of the ITEP Committee.
Under this proposal, after-the-fact incentives would be prohibited, fast-depreciating property would be ineligible and caps on the exemption percent would be established to assure net positive revenue by the end of the life of the exemption (5 or 8 years).
To review original documents for all three proposals, click here.
The Advocate's 3-part series on Louisiana's industrial tax exemption program, "No strings attached," is being recognized as among the best reporting in Louisiana in many years. Links to the series below.
For the online version of each part, click its image below:
Advocate reporter Andrea Gallo called Gary Meise's testimony at the Baton Rouge police chief search hearing "one of the most emotional moments in a long time" at City Hall.
Watch till the end.
FOR IMMEDIATE RELEASE
City Hall rally urges Mayor & Council to "keep their word" on grocery gap funding
Monday, November 13th, 4:30pm
Outside City Hall, 222 St. Louis Street
"We believe our officials are sincere in their support. But it’s time we start saying, not just with our words but with our budgets and with our actions, that we value and prioritize addressing food access and economic development in our most neglected neighborhoods.”
Baton Rouge – Together Baton Rouge will hold a rally on Monday, November 13th at 4:30pm at City Hall to urge the Mayor-President and Metropolitan Council to fulfill their commitment to fund an economic development program to attract grocery stores to "grocery gap" neighborhoods.
As candidates during last year's elections, Mayor-President Sharon Weston Broome and a majority of the current Metropolitan Council committed to support city-parish funding for a fresh food financing initiative in the amount of $1.5 million.
The proposed city-parish budget contains zero funding to implement the initiative.
It is the fourth straight year that city officials have given verbal commitment to support the project, but not followed through with funding.
In 2013, the central recommendations of the EBR Food Access Policy Commission was to start a fresh food financing initiative to bring access to healthy food to the parish’s 100,000 residents who live in low food-access areas.
Together Baton Rouge is holding the rally to urge city officials to keep their word and finally get the project off the ground.
“Budgets are statements of a community’s values and priorities,” said Edgar Cage, who helps lead Together Baton Rouge’s food access work.
“We believe our officials are sincere in their support. But it’s time we start saying, not just with our words but with our budgets and with our actions, that we value and prioritize addressing food access and economic development in our most neglected neighborhoods.”
For full details on the Fresh Food Financing Initiative, click here.
EBR Food Access Facts
- Nearly 100,000 residents in East Baton Rouge Parish live in “grocery gap” neighborhoods –about 20% of the parish population.
- The national average of residents food deserts is 7%
- 32,753 of the EBR residents in Grocery Gap neighborhoods are children. 13,282 are seniors.
- The Grocery Gap affects all 12 Metro Council District.
- Lack of access to health foods is directly related to obesity and obesity-related illnesses
- Lack of access to grocery stores increases the cost of food by 7 to 25%, typically in the neighborhoods least able to pay more.
- New Orleans has had a fresh food financing initiative since 2011. It has funded 6 grocery store projects, creating 200 jobs and adding 179,000 sq. ft. of food retail.
- Fresh food financing initiatives are public-private partnerships. Public funds typically leverage 8 to 10 times as much private sector funding.
Note: Together Baton Rouge would not receive any public funds under this initiative. The organization does not accept funds from government sources, period. The funding for a fresh food financing initiative would go as incentives to grocery stores and to a community development finance initiative to administer the program. A budget is included here.
Here's how the Baton Rouge Area Chamber's "matrix" for evaluating industrial tax exemption requests compares to how Texas counties approach the same kinds of tax exemptions.
Click the image to open as a pdf.
Download the full study here.
Why this issue matters now
Since 1936, Louisiana has been the only state in the nation to endow a state-level board with the authority to approve corporate exemptions from local property taxes, without the approval, or even knowledge, of the local entities paying the cost of those exemptions. It’s called the industrial tax exemption program, or ITEP, and it is the largest program of state subsidies to corporations in the nation.
In the current fiscal year, local governments in sixty of Louisiana’s sixty-four parishes are losing $1.9 billion in revenue due to ITEP exemptions. The exemptions affect the budgets of cities, parishes, sheriffs departments, fire districts, libraries, parks — any entity that receives revenue from a local property tax millage. The entities hardest hit by ITEP are Louisiana’s public schools. In 2017, Louisiana’s school districts are losing $720 million in revenue due to ITEP, fully 20% of total state and local funding for public schools.
Due to an Executive Order signed by Gov. John Bel Edwards in June 2016, local school districts, sheriff departments, parishes and cities, for the first time in 80 years, will have the authority to determine for themselves whether to approve industrial tax exemptions and on what terms. The first ITEP applications subject to the Executive Order are going before local bodies over the next several months.
[Download a pdf of the entire study here.]
Baton Rouge -- April Blackburn voted for Bill Cassidy for his 2014 US Senate race. She met Senator Cassidy in person earlier in the year, where he assured her that he only would support a health bill if it assured that "families like hers would be taken care of" and would not "fall through the cracks."
April's three year-old daughter has leukemia. Her chemotherapy costs over $1 million. They are one of the families who could lose coverage from the proposed Medicaid cuts.
As the rubber hit the road on the Senate version of the federal healthcare overhaul, with an outline of the bill finally seeing the light of day this morning, April's worst fears for her family seem all too close at hand.
The hopes that the Senate version of the healthcare bill would be less "cruel" than the House version, to quote President Donald Trump, appear to have been wishful thinking. The bill's overall thrust is very similar to the House version. Its central function is not so much healthcare provision, but a swap of healthcare provision for tax cuts -- the scaling back of federal funds to states to pay for Medicaid, used mostly by poor people, would pay for tax cuts that primarily benefit wealthy, out-of state residents.
Louisiana would be one of the nation's biggest losers in this swap, according to data from the Louisiana Budget Project. The state, after all, has far more people who would lose coverage from Medicaid cuts than it does wealthy residents who would benefit from tax cuts.
April, for one, is fighting back. She worked with Together Baton Rouge to record one of the most powerful testimonies to come out of the health debate -- a simple statement of her family's situation and a challenge to Senator Cassidy to fulfill the commitment he made to her.
Download the study.
The Times Picayune, “Baton Rouge drug arrests disproportionately affect poor, blacks: report”
“We figured we could either sit around and wait for the Department of Justice to make some contribution, or we could start to act for ourselves at the local level,” said Rev. Lee T. Wesley, an Executive Committee member of Together Baton Rouge. “Our first step has been to take a close look at this very important aspect of policing in our community and how it can be improved.”
Inside the effort to win Congressional support for $500 million in flood recovery aid
#1) Wake up in cold sweat realizing what it's going to mean that 80% of your community's flooded homes don’t have flood insurance.
#2) Feel sweat get colder with realization that only path forward is major bi-partisan cooperation by Congress. In September. In the middle of Trump v. Clinton.
#3) Make 250 phone calls. Learn your friends in low places have some friends in high places.
#4) Marvel that members of Congress are not NEARLY as ideological and partisan as they act most of the time. Watch a deal come together where everyone wins.
#5) Watch that deal unravel into smoldering shards and ash. Change your mind on marveling from #4.
#6) Repeat steps #2 to 5.
#7) Resist INSANE temptation to let yourself get pitted against the people of Flint, Mich and their need for lead-free drinking water! (Louisiana supports Flint!!)
#8) Go to the sewer to get some fresh air, mumbling lines from Yates, “Things fall apart; the center cannot hold.”
#9) Learn what solidarity means, as people across the country work their own Reps and Senators to benefit people they've never met.
#10) EXHALE, as the Senate votes for you (72 - 26) and the House votes with you (342 - 85). Feel grateful that, sometimes, the center does still hold.
Thank you, America!
Read the official version from Politico here.
TBR and its sister organizations across the country worked hard with Governor Edwards and the Louisiana Congressional Delegation to win federal funding for flood recovery from the 2016 flood.
The video was created to spread awareness nationally.
So far, Congress has allocated $1.8 billion for the recovery.