BATON ROUGE (AP) — Gov. John Bel Edwards is changing the rules for a lucrative property tax break program for manufacturing facilities that siphons millions of dollars from local government, announcing Friday that he intends to tie the tax breaks to job creation and retention.
New and expanding manufacturing facilities are allowed, under the state constitution, an exemption from paying local property taxes for up to 10 years through the Industrial Tax Exemption Program.
The Board of Commerce and Industry and the governor must sign off on the exemptions. But that often is seen as a rubber stamp, rather than a true review of the applications.
Edwards appeared at Friday's monthly board meeting to announce that would change.
"My (review) function will not be reduced to merely ministerial," the governor said.
Edwards issued an executive order adding more scrutiny to the process and bringing in local government agencies that stand to lose tax revenue to help make decisions on tax break requests.
The order spells out that tax exemptions are favored for new manufacturing facilities but that additions to existing plants would face a tougher ride and be required to "provide for new jobs or present compelling reasons for the retention of existing jobs."
Tax break recipients will have to enter into contractual arrangements that will allow the state to cut or remove the exemption if the job provisions aren't met. Local governing bodies, school boards and sheriffs will be asked to weigh in on the contracts.
Dan Borne, president of the Louisiana Chemical Association, said the governor's order will change the way the program has been administered for decades, causing uncertainty.
He said nearly 70 percent of the industrial tax exemption contracts involve chemical plants. The changes "could put many announced but not-yet-begun projects on pause" while the new regulations are clarified, Borne said.
"Some of these changes have the potential to materially affect new, major capital investments in the state as well as capital for expansions and modernizations," he said in a statement.
The Democratic governor said that although he knew the changes would create "anxiety," the program needed more accountability.
"If we're not creating or retaining jobs, then there is no rationale for this program," Edwards said. "I think the state of Louisiana will be much better served by this approach."
But he insisted the changes weren't aimed at stifling business development.
"We are going to be competitive, and we are going to remain very generous," he said.
Last month, at Edwards' request, the Board of Commerce and Industry stalled more than 300 applications from businesses aimed at claiming $200 million-plus in property tax breaks. Those applications were approved Friday, along with another hefty package of tax breaks topping $1.8 billion for projects estimated to create about 1,200 permanent jobs.
Edwards' order will affect applications going forward.
At Friday's meeting, Edwards appointee Robert Adley combed through applications to highlight what the administration sees as fundamental flaws in the former review process.
Adley said companies applied for tax breaks for projects that seemed to be repairs and replacements of equipment, and he questioned whether they truly qualified. He pointed out some manufacturers in line for millions in tax breaks didn't bother to show up. He noted many facilities applying for the tax breaks didn't indicate the projects would create a single job.
– by AP Reporter Melinda Deslatte
