Here’s an interesting headline from Channel 33 news in Baton Rouge: “Together Baton Rouge” looking to take down ExxonMobil…
Members with “Together Baton Rouge” say ExxonMobil’s request to keep more than $50 million worth of property tax will hurt Baton Rouge.
During a free and public event, members said these tax exemptions won’t create jobs and it will cost East Baton Rouge schools nearly $7 million for the next ten years.
Reportedly, Louisiana teachers have not seen a raise in at least ten years.
“These tax exemptions that Exxon and other plants are asking for could fund our school system to make sure our co-workers receive a raise,” said Angela Reams-Brown, with the EBR Federation of Teachers Association.
Governor John Bel Edwards released changes to the rules of governing the state’s industrial tax exemption program, or ITEP, on local property taxes.
We’ve talked about this ITEP thing more and more lately, including in this morning’s post about John Bel Edwards’ re-election chances. The ITEP debate is one of those in-the-weeds policy issues which will give you a migraine the more you examine it, but the upshot here is that Louisiana is generally regarded as a terrible place to do business and that’s why you don’t see a lot of high-tech industries or finished goods manufacturing setting up shop here. The state’s public education is awful, the tax code isn’t competitive and the politicians are generally regarded as crooks – not to mention Louisiana is crawling with plaintiff attorneys who have sued us into oblivion, so much so that most of the billboards on the highways don’t advertise cell phone service or restaurants or tourist attractions but instead have some guy’s smirking mug next to an unforgettable phone number you can call to get rich as soon as you wreck your car.
Because of that intolerably bad business climate, and because the politicians lack the will to junk our putrid tax code in favor of something that would compete with Texas, Florida or Tennessee, ITEP is Louisiana’s workaround to get and keep the large employers, the plurality of which are in the petrochemical industry, from taking their capital investment dollars across the Sabine.
Say what you want about the tenure of Bobby Jindal as governor, and there is a lot you can complain about where Jindal is concerned, but one thing you can’t attack Jindal on was economic development. Jindal’s administration leveraged ITEP to unleash a boom in capital expansion in Louisiana – better than $150 billion was spent in the state due to some aggressive work by Louisiana Economic Development while he was governor. That boom is still spitting out economic development wins Edwards frequently attempts to take credit for, though it’s rapidly petering out, and mostly because of what Edwards did to ITEP.
Specifically, he took a program which was run solely at the state level through LED and the Board of Commerce and Industry and he then cut local governments in on the deal. So now every time an ExxonMobil, Chevron, Dow Chemical or some other industry player is looking to spend money on a capital project at one of their Louisiana facilities and they apply for an incentive through ITEP, the application then gets washed through not just LED and BCI but the local parish council and school board – and thanks to the clowns at Together Louisiana and its local politburos in Baton Rouge and elsewhere, those applications invariably become food fights just like this one with ExxonMobil is.
It’s a real problem, and because of this disaster noted Louisiana economist Loren Scott has said that with respect to site selection and capital investment in Louisiana, corporate bean counters no longer even factor ITEP into their calculations. They just value it as zero, because any tax benefits they might win after descending into the local government rabbit hole and fighting off the Together Louisiana cretins are completely impossible to predict with any certainty.
And there’s a real effect of this. In December, when LABI president Stephen Waguespack got together with Louisiana Chemical Association president Greg Bowser and Louisiana Mid-Continent Oil & Gas Association head Tyler Gray to pen a scathing letter to the BCI complaining about what ITEP has become, they offered some pretty stark statistics on what’s happening to economic development in the aftermath of the decision to turn the program into a free-for-all…
Consistency and predictability are key to the ITEP’s value and success. Without these, manufacturers are discouraged from considering Louisiana for siting and/or expansion of their plants.
The impact of the uncertainty created in 2016 is clear in the LED’s own ITEP data. In the six years preceding the executive orders and subsequent rule changes, the number of projects coming to Louisiana averaged 684 annually and the anticipated new jobs they were to bring averaged 3,335. In 2017, the number of projects in Louisiana collapsed precipitously (72% from the average) to 192 and anticipated new jobs fell (45% from the average) to 1,850. These declines occurred during a year when our national economy saw a robust re-emergence of manufacturing activity of which Louisiana should have been a significant beneficiary.
The thing you’ve got to understand about these big companies like Dow, BASF, ExxonMobil, Chevron and Marathon who operate large facilities in Louisiana is that they’re not really run by some rich guy with a watch on a chain in some fancy New York office. ExxonMobil, for example, is really more like an economy in itself. And in fact, ExxonMobil’s facilities in Baton Rouge are in their own right a mini-economy. That company has several different businesses operating in those facilities, making various product lines – and those businesses not only compete with the other companies globally who make the same products, but they compete with other facilities ExxonMobil has around the world which make the same things.
So when ExxonMobil starts to make decisions about how to invest money into their facilities, their Baton Rouge operation is out there trying to draw dollars from corporate headquarters in competition with operations in other states and other countries. And to do that they’ve got to show that money spent making polyolefins (and don’t ask us what polyolefins are, because we’d have to look it up just like you would) in Baton Rouge would generate a better profit than making them in Baytown, Texas, or Singapore, or Manaus or Dortmund. Or wherever.
And the basic calculation, based on Louisiana’s lousy tax code and other factors, is that Louisiana is just about the worst place imaginable to put down that investment. It’s workarounds like ITEP, which soften the blow of the state’s lamentable business climate, which make Louisiana competitive – or used to.
But instead of recognizing this, the Together Louisiana gang just wants to kill ITEP everywhere they can find it. So they’re now declaring all-out war on Baton Rouge’s number one private sector employer. How this doesn’t make Together Louisiana more toxic than anything that might come out of a smokestack in this state is beyond us, but perhaps all they need is a little more time.
Meanwhile, ExxonMobil put out a statement about this which reads as one of the ballsier items we’ve ever seen from a corporate PR department, and to which we offer a hearty attaboy…
1. ExxonMobil is investing more than $20 billion in the Gulf Coast due to the demand for sustainable plastics worldwide, the low cost of natural gas and the development of the Permian Basin in Texas. While ExxonMobil is deciding whether to invest a nearly $1B project here, Texas has continued to attract many projects as part of this investment initiative. We want to help Louisiana win more projects. However, we need a business environment that encourages capital investment and job-creating activities. For this reason, a predictable, stable tax climate is a key consideration for future ExxonMobil investment.
2. Like many other companies in Louisiana and in Baton Rouge, ExxonMobil waited until after the new ITEP rules were clarified and adopted before choosing to move forward with applications. These projects support product growth or diversification, add or retain jobs, position the site for future investment, or help the site to be competitive in the world market.
3. We are the largest property taxpayer in East Baton Rouge Parish and in Louisiana. ExxonMobil pays $32 million annually in property taxes and about $23 million annually in sales taxes after any ITEP abatements. All the $32 million in annual property tax payments made to East Baton Rouge Parish by ExxonMobil are used to fund schools, teacher salaries, police and fire protection, parks, street repairs and dozens of other important community priorities.
4. In 2017, we invested $269M in capital projects. The projects will generate $51M in tax revenue over 30 years.
Here are the facts of the two applications.
Refinery investment totals $64M. This includes 18 new employee jobs and 2,874 construction jobs totaling $1.9M in new employee payroll. Generates new revenue of $1.7M in new sales tax revenue and $21M in new property tax revenue over 20 years. Potential abatement of $600K a year over 10 years.
Polyolefins Plant investment totals $3M; Retains 244 employee jobs with a payroll of $25.6M and 150 construction jobs. These projects generate $52.5K in new sales tax revenue and $201K in new property tax revenue over 20 years. Potential abatement of $24.5K a year over 10 years.
5. We question why Together Baton Rouge continues to target just ExxonMobil’s use of the ITEP program when many other state and local companies are filing similar applications. ExxonMobil is the largest corporate contributor to the East Baton Rouge School System, the largest contributor to the Capital Area United Way, and has the ability to bring the largest projects to Baton Rouge.
6. ExxonMobil and contributions to the local school system
– ExxonMobil and its employees contributed nearly $4M to local nonprofit organizations and EBR schools in 2017 alone.
– In addition, ExxonMobil provided $13 million in advanced placement teacher support and program resources through the National Math and Science Initiative (NMSI). These funds go directly to local schools, teachers and students.
– ExxonMobil has donated $250,000 to the Foundation for the EBR School System over the past three years.
What we’re interested in seeing, particularly in the event that the ExxonMobil application gets voted down in two weeks (which isn’t what we expect, but these fights are becoming more intense each time), is whether Together Louisiana doesn’t become a major issue on the gubernatorial campaign trail. Certainly Edwards’ role in creating this mess should be a major piece of his economic record as governor, which isn’t a good one. But more than that, at some point Edwards either has to own or disown the Together Louisiana folks for having made them part of the state’s economic development debate, and that’s a no-win situation for him.
Particularly when the effect of these fights in the first place is that corporate site selectors increasingly just think to themselves “Louisiana’s a nice place to visit, but I would want to live there.”