New ITEP rules spark fear locals will lose say in granting tax breaks

Updated: Feb. 21, 2020 at 5:25 PM CST
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BATON ROUGE, La. (WAFB) - Gov. John Bel Edwards’ administration is amending the rules to the controversial Industrial Tax Exemption Program (ITEP) so that private businesses that are denied tax breaks by local government entities can appeal the decision to the state Board of Commerce and Industry.

Critics say the move is an about-face, again minimizing the say sheriffs, school boards, and metro councils have over the tax dollars they would otherwise collect by allowing a state board to override a local decision.

Companies can now “appeal the rejection of an exemption by a local governing body... upon grounds that the rejection is for reasons in conflict with the ITEP rules, including but not limited to alleging that a local governing body rejecting the exemption has guidelines that contradict the ITEP rules,” according to the new rule.

Through an executive order during his first term, Edwards reined in and changed the program to allow locals some say in the matter for the first time. Sheriffs, school districts, and councils could each decide to collect or forgive their share of the property taxes to be levied on the industry in their area.

Before Edwards’ executive order, the state board had complete authority to grant or deny ITEP tax exemptions. Critics say the Board of Commerce and Industry rarely denied applications, frequently forcing local entities to forgo collecting some property taxes in their area without any vote on the matter.

Now, they say they fear the latest tweak will rob locals of the control they were given after decades of what they call “rubber-stamping” by the state board.

“It sounds like local municipalities have a voice - unless the industry disagrees with their voice, and then they get to bring it back to you,” Shawn Anglim, an opponent to the change, told the Board of Commerce of Industry.

The governor’s office maintains the intent of the amendment is to create uniformity between state and local rules that dictate how or why an application is denied. Matthew Block, the governor’s attorney, stressed to lawmakers Friday the rule does not strip local entities of their say in the process.

Though the state board retained its vote under Edwards’ executive order, it was the first major tweak to the program designed to lure industry to Louisiana since its inception in the 1930s.

Representatives from Together Louisiana, the ITEP program’s loudest critics, say Friday’s adjustment opens the door for a larger appeals process that would all-but-eliminate local control.

“This is a move backwards on reform efforts that we have worked on together,” Edgar Cage, a Together Louisiana leader, said. “Should that state board, meeting in Baton Rouge, have the authority to overrule a decision of a local school board?”

The onus would be on the Board of Commerce and Industry to base its appeal rulings on whether local rules are not in conflict with the state’s rules. Gov. John Bel Edwards said he believes the bulk of denied applications will not be heard on appeal.

In January of 2019, the East Baton Rouge Parish School Board voted down a tax break for work Exxon had already completed in 2017.

“We were the only state where local governments didn’t have a say in how their tax dollars were collected, and my executive order fixed that," Edwards wrote in a statement after the EBR school board’s 2019 vote. “Louisiana continues to have one of the most generous ITEP exemptions because we know ITEP creates shared value for our manufacturers and our local communities — to grow together, with a certain path for the future.”

The EBR school board handed Exxon a rare defeat, and the company hinted they could locate a proposed expansion outside of East Baton Rouge Parish the following day. The decision sparked a dramatic debate in Baton Rouge that prompted Mayor-President Sharon Weston Broome to hold a public meeting with the city’s business leaders to express their support for ExxonMobil.

That local concern encouraged statewide fear that Exxon and other industry giants could leave Louisiana, taking their jobs and tax contributions with them.

The debate frequently pits K-12 education against the oil and gas industry.

Though some members of the legislature sit on the board, the Board of Commerce and Industry is largely un-elected.

The governor released a statement about the rule change Friday, Feb. 21:

“Louisiana took a huge step forward in 2016 when, for the first time, we granted local government leaders the ability to approve or deny ITEP projects in their communities, giving school boards, councils and sheriffs a say in their local tax collections related to economic development projects in their parishes. My commitment to local control over ITEP projects has not wavered.

The ITEP program has been incredibly successful over the past four years, approving projects that ultimately represented $104.5 billion in capital investment in Louisiana, even as we have improved the program to bring in local approvals of the exemptions.

Today’s action by the Board of Commerce and Industry simply clarifies rules in the ITEP program so local denials are in accordance with state program rules. In no way does this action take away the ability of local leaders to approve or disapprove of tax credits. In fact, in the vast majority of cases, I anticipate that the State will not entertain an appeal under this clarified rule at all.

The action clarifies that interested parties may appeal a local ITEP rejection to the Louisiana Board of Commerce and Industry if the party believes a local ITEP decision is based on a local rule that conflicts with the state rules.

Throughout the process of improving the ITEP process, I have spoken with local leaders, business and industry groups and community activists to hear their insights and concerns, which are sometimes in conflict. Just as we have worked to ensure local leaders have a fair role in the process, we must work to ensure local and state rules are consistent and fair to all concerned.”

The Baton Rouge Area Chamber (BRAC) and CEO Adam Knapp also released a statement Friday:

“On behalf of the Capital Region’s business community, we view today’s resolution as a step toward reestablishing predictability and consistency in the oversight of ITEP. Contrary to the narrative of Together Louisiana, today’s resolution does not change the program, or diminish the local role in the process. Rather, this new state guidance provides much-needed clarity and reestablishes that local approval cannot change the statewide program rules. Local bodies will continue to have the authority to approve or reject applications, but not the authority to invent new rules for the program. The program is, and has always been, a state program within the state’s jurisdiction to manage, as outlined in the Louisiana Constitution.

"The local benefit of greater revenue remains firmly in place. This resolution does not change the program’s design, but demonstrates an interest in ensuring that it remains competitive, and that it doesn't become unduly burdensome because of clear contradictions between state law and local rules.

“While questions still remain in terms of ensuring the smooth implementation of these updates across Louisiana’s 64 parishes, we are optimistic that the chaos and confusion of the past four years will be reduced.”

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