A controversial executive order signed by Gov. John Bel Edwards earlier this year imposing stricter standards on the state’s 80-year-old Industrial Tax Exemption Program will only apply to new applicants in Louisiana—not renewals, according to a series of rules hashed out last week by a committee of the Board of Commerce and Industry with the blessing of the governor, reported the Greater Baton Rouge Business Report.
The distinction is significant. On June 24, Edwards signed an executive order tightening the generous ITEP program, which for decades has provided manufacturers a five-year break with an automatic five-year renewal on local property taxes.
The governor’s order brings the program more in line with those of other states, tying the tax break to job creation and giving local governments more say over whether to grant the tax break to manufacturers in their communities.
But four months later, the Board of Commerce and Industry, which oversees the program, has yet to implement the changes. That’s in part because of questions over whether the order applied to renewals or only new applicants.
Some $11 billion worth of exemptions are currently up for renewal. At the board’s last meeting Sept. 12, industry representatives made the case that it isn’t fair to change the rules of the program midstream, while community activists from Together Louisiana argued that local governments desperately need the tax revenues from the program.
At the time, Edwards’ appointee to the board, former state Sen. Robert Adley, said he and the governor believed the executive order should apply to renewals.
After hours of testimony, however, the board deferred a vote on most of the applications. In the weeks since, the governor has been lobbied hard by both sides. Late last week, he met with representatives from Together Louisiana and explained that he is siding with industry on the issue of renewals.
“In the meeting, he made it really clear he agreed with them and that he would like this (change) to apply to renewals but he has to balance competing interests,” Adley says. “He told them he feels very strongly that based on what was told to these businesses, Louisiana has a commitment to them and cannot be perceived as not keeping its word and not being dependable.”
Also last week, the board’s rules committee met to clarify the new regulations governing the program. Though the changes with respect to renewals don’t go as far as some had hoped, Adley says several positive changes are codified in the rules that will make the program more accountable. Under the changes, applicants will be required to show job creation figures, local governments will have more say over whether to grant the tax breaks and by how much, and renewals will only be granted for three years and up to 80%. The rules will also crack down on the types of manufacturing activities that qualify for the exemption and will no longer allow the break for miscellaneous capital additions.
“There will also be a ROI report required with every filing and there will be added transparency in every meeting of the board,” Adley says. “Board and committee meetings will be live streamed.
Together Louisiana organizer Broderick Bagert says his group is disappointed the order will not extend to renewals, adding the group is satisfied overall with the reforms.
“Overall, we think this is a historic change in how the state of Louisiana does business,” he says. “We think it should have gone further but even without that, the changes have been significant.”
The changes proposed by the rules committee last week must be approved by the full board at its meeting on Friday. Adley says he expects the board to ratify the changes, though he cannot say with certainty that it will.
