In early April, the Port of South Louisiana approved a deal that would allow an agriculture export company to avoid paying just over $200 million in property taxes on a grain terminal planned in St. John the Baptist Parish.
Under the agreement, Greenfield Louisiana, LLC would build the $479 million grain elevator and then transfer the ownership of that property to the Port of South Louisiana, which is exempt from paying ad valorem taxes. The port, in turn, would immediately lease the project back to Greenfield for its continued operation.
At the time, the deal moved forward with relative ease, but one local nonprofit has raised questions over the legitimacy – and legality – of such a tax break. In the latest effort by the Descendants Project to block the construction of the 54-silo, 275-foot-tall grain elevator near the community of Wallace, the challenge revolves around whether a court would view the transfer of property from Greenfield to the port as real.
The arrangement between Greenfield Louisiana LLC, the port and the St. John the Baptist Parish Sheriff’s Office requires the company to make a one-time payment of $4 million, then send $2 million annually that would be split between the three local taxing bodies: the sheriff’s office, parish government and the school system. The agreement will last for 30 years.
These payments are called “payments in lieu of taxes,” or PILOT, and amount to less than a quarter of what the company would otherwise have owed in property taxes most years, according to estimates from nonprofit Together Louisiana.
The port would also receive an administrative fee of $300,000 for the first four years, and then $200,000 for the remainder of the agreement – money it wouldn’t receive through the normal collection of ad valorem taxes.
If allowed to stand, The Descendants Project is worried the grain terminal could become a new model for industrial tax breaks across the state, especially in other economically-depressed areas like St. John’s west bank.
“In essence, Greenfield is paying the Port to rent its tax-exempt status. Such an arrangement, if allowed to operate, would incentivize any tax-exempt political subdivision in need of funds from following suit,” wrote William Most, the group’s attorney, in a Dec. 7. letter to St. John’s assessor.
To overturn such a deal, Most and the Descendants Project would have to prove that the property transfer between Greenfield and the port is what’s called a “simulation.” That’s when two parties only simulate a sale: pretending to sell something to the other, while intending for the original owner to retain possession.
In the agreement between the port and Greenfield, the port technically owns the land. But it lacks any control over the future of the property, unable to do anything with the land and grain terminal beyond selling it back to the company for $1.
The contract also gives the company the right to ask for the property back at any time, and the port doesn't have any oversight in how the property is used.
Most compared the situation to a car sale where the new owner doesn’t pay any money for it, but the new owner also can’t drive the car; only the previous owner can. Anytime the previous owner wants the title back, the new owner has to provide it.
“In what sense do you own the car at all? You do not. So too here. The Greenfield/port deal is not a sale of land to the port; it is a simulation,” argued Most.
Louisiana doesn't recognize fake sales, but the burden of proof is higher in certain cases: sale/leaseback agreements. When property worth more than $25,000 is sold and then leased back to the original owner, state law says the sale won’t be “presumed a simulation.” Instead, the accuser must prove the deal isn’t real.
The Greenfield-port agreement is far from the first PILOT program in Louisiana and is the second of its kind in St. John. The first benefited an oil and chemical storage facility calledPin Oak Terminals. Both Greenfield and Pin Oak have the same parent company, Medlock Investment, led by corporate climate activist Christopher Medlock James.
The Pin Oak PILOT agreement was hotly debated in 2016, when the storage facility wanted to pay $285,000 per year in lieu of property tax for 30 years — just a third of what it would have been paying in assessed taxes.
But when other agreements were challenged in the past, such PILOT deals are often upheld on appeal.
In one fight between an assessor in southwest Louisiana and an oil and gas company, the judges sided with the company. In the 2014 case, Evangeline Parish’s assessor tried to tax Pine Prairie Energy Center, a natural gas storage facility and pipeline, despite a PILOT agreement set in place five years prior. The agreement created a new public board specifically to acquire property from the oil and gas company, and then lease the property back to the company for the project in a similar effort to shield the industry from ad valorem taxes.
The parish tried to argue that the exchange was a simulation and unconstitutional, but the 3rd Circuit Court of Appeals found otherwise. Not only did they validate the sale/leaseback agreement, but they also found the use of the public property by a private oil and gas company to be for the public good because of job creation, sales and use tax payments, and contributions to the school system.
Greenfield and Port of South Louisiana officials argued the agreement was legal and that the grain elevator would result in a net benefit to the parish, despite sending fewer property tax dollars into coffers.
In an interview in August, Greenfield CFO Kyle Egbert noted that the agreement is better than if the project isn’t built at all.
“It's good to consider what it looks like without the project and then with the project,” Egbert said. “If this doesn't come in at all, what's our overall revenue for the region? And with that answer, you come back to zero.”
But when asked if Greenfield could afford to build without the tax break in August, Kyle Egbert didn’t answer, instead saying the company is excited about the long-term benefits that the project will bring, such as jobs and other tax revenue.
Greenfield Louisiana COO Cal Williams also noted that the PILOT payments are just one piece of the project’s benefits, estimating that the terminal will result in “more than $300 million in new local and state tax revenue over the next 30 years.” That will come largely through income and sales tax.
The terminal was projected to create 261 jobs, between grain terminal staff and contractors, in a Greater New Orleans, Inc. report, and the company has created a new foundation to support the community.
To St. John Assessor Lucien Gauff III, the previous Evangeline case means he doesn’t have the power to tax the property.
Without a trial court telling him otherwise, Gauff said he considers the agreement in its current form as law, despite any reservations he had about the terms before its passage in April. He would’ve liked to see Greenfield pay at least $1 million more annually over the course of the deal’s 30-year lifespan.
“With only one other PILOT deal in St. John Parish to reference, I thought this was a good deal that should be better for our taxing entities,” he said.
But sale/leaseback agreements aren’t always presumed legal. In his letter, Most specifically pointed to another case in Baton Rouge, where the 1st Circuit Court of Appeals ordered a trial court to take another look at whether a deal between a school and its nonprofit to finance its building was a simulation.
In the 2020 ruling, the judges said the intention of the two parties and how the agreement came about raised the possibility of the agreement being a simulation, deserving serious consideration from the trial court. It wasn’t immediately clear what the trial court decided after the ruling.
So if Gauff doesn’t challenge the legality of the agreement, Descendants Project co-founder Joy Banner said her group will.
The Descendants Project is already leading a lawsuit against St. John and Greenfield over the zoning of land slated development, asking the courts to overturn a decades-old switch from residential to industrial. But Banner said they’re not afraid to open another case against the company and are looking into their options.
“Depending on the response, we are willing to use whatever legal means we have to move forward with,” Banner said, who’s spearheading some of the residents' opposition to the terminal. “The lack of diligence and lack of urgency or scrutiny with a deal that’s hundreds of millions of dollars is really unbelievable and inexcusable.”
