A state board that decides whether manufacturers are eligible for billions of dollars in property tax breaks from Louisiana sided recently with government bodies that had rejected tax breaks at the local level for several corporations — adding a layer of scrutiny rarely applied by the board to projects in the past.
The Board of Commerce and Industry voted in November against appeals by hydrogen plant operator Praxair in St. James Parish, the Martco wood products operation in Natchitoches Parish and the House of Raeford poultry farm feed mill in Lincoln Parish. All three companies had asked the board to overrule local-level rejections of property tax breaks for their businesses.
In two other cases, there was heated debate about whether Folgers coffee company owed money on potentially ineligible tax breaks and whether parts of a Genesis Energy pipeline logistics business, such as its rail yards, qualified for manufacturing tax breaks.
The commerce board considers highly sought-after tax breaks from manufacturers, which can be worth up to a 100% property tax abatement for deals struck before Gov. John Bel Edwards changed the rules in 2016. Newer agreements are worth up to 80% instead.
The state board, which historically has approved nearly all incentive applications, found itself in the position in November of being an alternative for appealing Industrial Tax Exemption Program rejections by local government bodies, such as parish councils, school boards or sheriff's offices, that don’t want to give up tax dollars.
Along with some local governments and communities, there also has been pressure from groups like Together Louisiana, a faith-based organization, that wants the board to weigh the cost-benefit analysis for every project.
While the commerce board has largely tipped the scales in favor of companies, that trend appears to have eased on some more recent cases. The November meeting was the first since Louisiana voters struck down a proposed constitutional amendment that would have enabled corporations to strike deals known as payment in lieu of taxes. In exchange for an overall discount, local municipalities would get checks for property taxes up front.
In November, the board upheld the Lincoln Parish School Board’s rejection of several million dollars in tax breaks over 10 years for the $39.1 million House of Raeford chicken feed mill. The school board did a financial analysis and estimated that in 2022 alone it was the difference between collecting only $73,052 in taxes versus $266,007 in taxes. The company promised to add 13 jobs to its 43-job workforce. The police jury and sheriff in Lincoln Parish had voted in favor of local tax breaks. The company pressured the Commerce and Industry Board to reverse the Lincoln School Board decision and claimed that the parish violated the rules of the Industrial Tax Exemption Program because it had not established public guidelines and voted against the tax breaks due to economic uncertainty stemming from the coronavirus pandemic.
“I think you’ve got a political problem with your school board that’s beyond the province of this board,” Jerald Jones, chairman of the Commerce and Industry board, said to a representative of Raeford Farms during last month's meeting.
Likewise, there was a similar sentiment after representatives of St. James Parish and Praxair spoke about their tax break dispute.
"I think St. James Parish has spoken clearly; they denied the 80/20 (tax break) and that's where we are," Jones said.
After the meeting, the board chairman said that he wasn't looking any more closely at applications than in the past, but did say that more information about whether an application meets the rules could impact his votes and that it doesn't matter which company is seeking incentives.
"I'm not looking at the applications any differently than I ever have, except that with every meeting I'm sure I learn a bit more, which may affect my decisions," Jones said. "Each of my votes were based upon my understanding of the rules and their application to the specific circumstances in each case. For me, the rules dictate my decisions, not the parties."
In the case of the Roy O Martin Martco wood products plant, the Natchitoches Parish council in August rejected tax breaks on $8.3 million of investment creating 44 jobs. Martco argued that it was not notified about the public meeting and that at the next parish council meeting elected officials had reversed their decision, which the company claimed should stand. In that case, the sheriff and school board had voted in favor of the tax breaks.
On a larger scale, the St. James Parish School Board, council and local sheriff rejected $24 million in tax exemption over 10 years for a $247 million chemical plant that would produce 170 million cubic feet of hydrogen each day. Praxair, which merged with Linde, expects to create 15 jobs when the plant opens in 2021. Lobbyists on behalf of the company pushed the state board to reverse the local decisions without success.
There were other contentious projects discussed as well.
Debate brewed among board members about whether The Folger Coffee Co. had failed to pay taxes owed on property in Orleans Parish and should be audited. Critics claim the company owes $12 million in taxes to New Orleans, but the tax assessor sent a letter to the board asserting the company doesn't owe money for the two years between when it upgraded facilities and its incentive application was approved by the board.
Between 2017 and 2019, Folger invested $161 million as it consolidated operations in New Orleans that could be eligible for several million dollars in property tax exemption in exchange for 27 new jobs. The facility already employed roughly 700 workers. Folgers had $59.6 million of its ITEP renewals for money invested in 2013 and 2014 approved but was penalized for two late applications for $6 million of investment.
More recently, the New Orleans City Council voted down two property tax breaks for The Folger Coffee Co., but punted its decision on four others into the new year. Hours later, the Orleans Parish School Board rejected all six of the company’s applications for exemptions that could be worth as much as $25 million over 10 years.
The City Council’s delay on four of the projects came as members were sharply divided between those seeking more time to bring in company representatives to explain the requests and those favoring an immediate rejection.
A key undercurrent was the question of exactly how much revenue City Hall and other taxing agencies would be giving up if the exemptions were granted. Tax break opponents argued that regardless of the amounts, Folgers’ requests should be shot down because they failed to meet criteria that the council set last year.
In response to state Commerce board member concerns that pipeline logistics business Genesis Energy did not have a manufacturing operation, the Louisiana Economic Development department sent employees to verify which sites would qualify as crude oil blending hubs. Genesis Energy invested $125 million in a new Baton Rouge pipeline and sells feedstock of blended crude oil to refinery customers.
Still, there was concern from the East Baton Rouge Parish School Board about whether some Genesis Energy sites previously exempt from tax rolls were rail yards and did not manufacture products, creating a situation in which some back taxes should be paid.
The Commerce and Industry Board ultimately approved all the Genesis Energy contracts presented to it in a split vote, but the vote did not include some tax breaks that were removed by staff because it was determined those sites did not qualify after further inspection.
Notably, the board chairman, Jones, who is an attorney and has represented manufacturers and the petrochemical industry over the years, voted against incentives for Genesis Energy over concern it didn't qualify as a manufacturer. Also, West Feliciana President Kenny Havard questioned whether the company's Port Hudson site was manufacturing. The Port Hudson location already had been removed from the agenda since it did not qualify.
Havard did not respond to requests for comment.
The Genesis contract was a renewal of tax breaks previously approved several years ago by a different board.
"Today, we have the engineer who has testified versus your view from Google; we had LED personnel on the ground at this location to verify that it's a blending operation but I don't know what more we can provide," economic development Secretary Don Pierson told activists who decried the application and asserted it was just a logistics hub.
Together Louisiana lobbied board members for more than six hours, requesting each incentive application be discussed in public rather than approved in bulk to curb potential mistakes or oversight.
"Many don't even qualify; they aren't manufacturers. We have rail stations, storage and transportation facilities," said Joel Waltzer, attorney for Together Louisiana. The board doesn't "even follow their own rules," he said. "There's been this culture of rubber-stamping in batches billions of dollars of exemptions."
For years, the organization has sought to pressure the board to weigh the cost benefit analysis for every project.
"It would make more sense to get the board to operate legally than it does to fight every exemption that comes before them. Then we're here all the time and we're winning battles but we're not winning the war," said Lady Carlson, organizer of Together Louisiana who lives in Baton Rouge. "The board should operate around its own legal limits. Before we started these reforms, they would take a stack of exemptions and say we approve all of these in globo. They didn't look at them; they didn't investigate."
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