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Bill to make ITEP reforms permanent clears committee but faces long odds in pro-business legislature

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When Gov. John Bel Edwards came into office in 2016, he made sweeping changes to the rules governing the state’s largest tax exemption program, giving local governments more control over which businesses get massive property tax breaks. Now, with the end of Edwards’ time in office fast approaching, some state lawmakers are pushing to make the governor's reforms permanent, but they face an uphill battle in a pro-business legislature.

Capitol Access reporter Paul Braun discussed the effort with All Things Considered Host Karl Lengel.

Karl Lengel: Paul, explain what exactly we’re talking about here.

Paul Braun: This all has to do with ITEP – the industrial tax exemption program. This has been around for decades and through most of the program’s history, it gave businesses building new facilities — mostly petrochemical facilities — 100 percent exemption from local property taxes over a set term, in exchange for creating jobs in the community.

When Gov. Edwards came into office he changed the program through executive actions. He capped the property tax exemption at 80 percent and crucially, he gave local governmental entities – school boards, city councils, sheriffs’ offices – the authority to decide whether or not the businesses should get these exemptions or if they’d rather have that tax revenue to fund schools, and roads and other local services.

Sen. J. Rogers Pope, a Republican from Denham Springs and a former school superintendent himself, is bringing legislation that would make Edwards’ changes to the program permanent and would enshrine them in the state constitution.

That bill, SB151, cleared the Senate’s Revenue and Fiscal Affairs Committee without formal objection – but quite a few Senators on the panel expressed some reservations.

KL: Who’s for this and who’s against it? 

PB: This is interesting because it pits local governments, the state’s sheriffs’ association, in many lawmakers’ hometowns against the incredibly powerful business lobby. The business lobby, of course, has a lot of influence over Republican state lawmakers, but nobody likes voting against their sheriff or parish president back home.

Local governments are for this. Today in committee we heard from local officials from several parishes that are home to lots of these industrial facilities, like West Baton Rouge, St. John the Baptist, and St. Charles. Together Louisiana — a grassroots group that got its start fighting tax exemptions for Exxon in East Baton Rouge Parish — came out in favor of the bill. More than a hundred folks submitted cards and emails in favor of the legislation.

Locals say that they like having this authority. You know, before Edwards made his changes all of the ITEP applications were vetted by a state board that was basically just a rubber stamp approving pretty much everything that crossed their desk. And in some cases, the local governments felt resentful of a decision coming from above, saying they have to give up a huge chunk of their tax revenue.

Now, locals still approve most of the ITEP requests – a little over 80 percent. But they say the new application process, which has industry representatives present their development plans directly to the local school board or parish council, helps build relationships that can change the face and the tax base of their community.

The business lobby is opposed. The Louisiana Association of Business and Industry and the Louisiana Chemical Association voiced their opposition in committee. They argue that the changes make applicants jump through more hoops and the uncertainty over whether or not they get the tax breaks has a chilling effect on businesses considering development in Louisiana. They also argue that Louisiana has issues with infrastructure and workforce development that make these aggressive tax exemptions necessary to attract big businesses. They say that since the changes went into effect the number of ITEP applications – which they consider a good indicator of business development and growth in the state have dwindled.

KL: Paul, we’ve had six years to see how these changes would work. Has that been the case?

PB: This is a situation where we’ve had a six-year test drive. Louisiana Economic Development said that there was no evidence that there was a chilling effect. They found that yes, the number of applications decreased, but the total value of the tax exemptions applied for actually went up. They attribute this to businesses consolidating their requests knowing that they may be subject to more scrutiny by local officials.

And again, they found that local governments approved the ITEP requests about 84 percent of the time and they pointed to massive deals that Edwards inked with petrochemical and natural gas companies in the last few years.

KL: What’s the likelihood that these changes are made permanent?

PB: Well, today the legislation cleared just the first of many hurdles. SB151 now goes to the full Senate for debate. Then House lawmakers will have their chance to review it through the committee and floor debate process.

This is a proposed constitutional amendment, so it will have to win a two-thirds majority in its floor votes. That’s a high bar for any piece of legislation, especially one that goes against the wishes of some of the state’s most influential lobbying groups. And even if it wins a two-thirds majority of both houses, it would still have to win the approval of a majority of Louisianans in a referendum. You can bet that the special interests opposing this in the legislature would put on a full-court press to convince voters that this is a bad idea.

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