Two Republican state lawmakers plan to file legislation that would return sole authority of the Industrial Tax Exemption Program back to the state, essentially restoring the process in place before Gov. John Bel Edwards’ 2016 executive order gave local governments a say in granting the property tax exemptions.
Sen. Mack “Bodi” White, R-Central, and Rep. Franklin Foil, R-Baton Rouge, will co-file the bill in the upcoming legislative session, which begins April 8. They say it will restore a “consistent process” for manufacturers applying for the lucrative property tax breaks.
White, in a statement, specifically cites the East Baton Rouge Parish School Board’s recent rejection of two ExxonMobil ITEP requests, which prompted the company to withdraw the applications and question its future growth in Baton Rouge.
“The decision by the EBR school board to remove ITEP incentives from ExxonMobil is one of the most short-sighted actions I have ever seen from an elected body,” White says. “ExxonMobil directly employs nearly 7,000 people locally and pours hundreds of millions of dollars into our economy every year. We have to do something.”
Businesses must be confident that “we’re not going to keep changing the (ITEP) rules,” Foil says, in order for Louisiana to grow and remain competitive.
Meanwhile, the directors and officers of the Baton Rouge Area Chamber published a letter Sunday expressing concern over the region’s economic uncertainty following ExxonMobil’s decision to withdraw its 2017 ITEP requests.
The school board rejected the requests, saying the property tax exemptions in question were for projects the oil and gas giant had already completed.
Edwards’ overhaul of the 80-year-old program in 2016—enabling local taxing authorities a vote in whether to exempt its taxes—sparked widespread industry concern, and confusion followed as parishes struggled with the newfound power. So in 2018 the Edwards administration again issued new rules, this time giving the state authority to evaluate and conditionally approve exemptions, while capping the incentives at 80% for 10 years—down from 100%.
But local governments maintained the right to veto the tax breaks, which come out of their budgets. East Baton Rouge Parish has grappled over these decisions, and both the school board and Metro Council issued their own sets of ITEP-approval standards.
The ExxonMobil requests, though approved by the state, failed to meet the school board’s requirements. The rejection prompted industry leaders to rebuke Baton Rouge as an “unpredictable” environment for business investments.
“The impact this could have on our city, parish and state could be catastrophic unless we take immediate action,” Foil says.
White and Foil are still working through details of the bill, but plan to have a final version in coming weeks.
Together Baton Rouge, which has led the crusade to rein in ITEP, condemned the effort, declaring it would reinstate the old process of having the state decide whether to exempt local property tax dollars, with no say from local governments.
“The idea of giving that power back to the state is unconscionable and ludicrous,” says Dianne Hanley, a volunteer leader with Together Baton Rouge.
Hanley says just because local governments made a decision some don’t agree with doesn’t mean the new ITEP rules should be overturned.
Meanwhile, the governor’s office has not seen the bill, but says the governor “strongly believes local governments should have a say on how their local tax revenue is collected, which is why the ITEP rules were changed to begin with.”
ITEP in Louisiana remains “incredibly generous,” says Edwards spokesperson Christina Stephens. In other states, including Texas, local approval of these type of exemptions is required and property taxes for education are almost never part of the exemptions.
“When developing new ITEP rules, LED did incorporate comments from industry leaders,” Stephens says. “We continue to encourage local leaders across Louisiana to come up consistent standards for how their ITEP applications are reviewed and approved.”
The question for the lawmakers proposing the change is how will they do it? ITEP is created and authorized under the state constitution, which gives the governor and the state Board of Commerce and Industry control over the program.
Unless the legislators find another way around it, changes to ITEP could require a constitutional amendment, which must pass with a two-thirds vote of the Legislature and a simple majority vote of the public. The governor cannot veto constitutional amendments.