SADOW: Edwards’ ITEP Changes Solve Nothing

It’s what Democrat Gov. John Bel Edwards does best – says he’ll change something to make Louisiana less inhibitive of economic growth, only to produce a cosmetic result that does nothing substantive. This time he’s changing nothing with the Industrial Tax Exemption Program, or ITEP.

Until now, his best-known sleight-of-hand in this regard concerns the Supplemental Nutritional Assistance Program. He abandoned the requirement of his predecessor that able-bodied adults without dependents receiving it work, train for work, or volunteer, and replaced that with meaningless executive order that changed nothing about that while alleging it accomplished much the same thing as he had discarded. Fortunately, over these next few months SNAP rules changes by the Republican Pres. Donald Trump Administration essentially will cancel Edwards’ intervention and put the state back in the posture prior to his arrival.

Last month, Edwards may have topped that. During his first term, he changed the ITEP rules on a couple of occasions. This property tax break for major capital expenditures offset the confiscatory local levies on corporations, but had no local input. His new rules basically gave a veto power to major local entities, which disconcerted businesses who complained conditions sought by local governments to grant the credit could make the activities in question economically unviable and thereby would discourage investment.

A year ago, the starkest example of the Edwards rules backfiring happened. In Baton Rouge, when its school district shot down a pair of ExxonMobil requests, the company responded by announcing it wouldn’t expand facilities there, but at another location. Late last year, St. John the Baptist Parish’s Council and School Board rejected a large ITEP request, but controversy ensued when they failed to follow existing rules – up to an 80 percent break for up to 10 years without reporting of a veto in 30 to 60 days after the state’s Board of Commerce and Industry approved, unless it’s a sufficiently large project where the break can go higher and if urgent can skip some requirements – that resulted in the exemption going through. The Board rejected these governments’ subsequent appeals.

These events led to an Edwards Administration request to change rules again, this time to make it appear that the process would become more predictable. Business interests had articulated that the lack of uniformity in decision-making discouraged investors, fueled not only by these two incidents but another in St. James Parish. There, whether a concern could achieve the tax break for a billion-plus dollar project, in light of radical leftist groups who had prevailed upon the denial in East Baton Rouge Parish and promised more of the same in St. James, certainly added to a variety of factors that led the company to cancel the project.

So, the Board entertained a resolution to make it an appeal panel to vetoes of its decisions. This stated that if rules of local entities for ITEP conflicted with those at the state level and relying on those a local government vetoed an exemption, then the applicant could appeal back to the Board.

This, claimed bizarrely Edwards’ hapless Executive Counsel Matthew Block – summoning the same legal skills that have seen him lose all meaningful legal challenges to a series of extra-constitutional power grabs by Edwards – gave the program more predictability. He appeared to base this on defining “predictability” as congruence between state and local governments in rules.

However, he completely ignored that the whole thing was a sand castle to begin with. Acknowledging that local entities could deny requests for any reason – just not because of “conflicting” rules – meant their actions conveyed as much unpredictability as ever. Worse, “conflicting” rules remains undefined. The existing state rules define what is eligible, the information required, the process including the role of local governments, and applicant obligations. They don’t specify performance metrics, which some like Caddo and Orleans parish schools do in great detail and rigorous fashion.

Thus, do these detailed kinds of rules conflict? State rules neither embrace nor prohibit complicated local ITEP red tape, so deciding this becomes at the Board’s whim, introducing yet another layer of unpredictability that will induce even greater investor discouragement. It was telling that criticism of the resolution came from both supporters (read: leftist pressure groups) of giving local entities maximal veto power, because they thought the Board could use the ambiguity to override rejections, and opponents of that, because they knew the rules provided no more certainty than before.

The change, approved 17-3 with immediate effect, undoubtedly will become an Edwards talking point that this has fixed what ails ITEP procedures. It did nothing of the sort, and the Legislature still needs to intervene to curtail the negative impact the Edwards rules have had on economic development in the high-tax environment creators of wealth and jobs face in Louisiana.



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