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Incentives drive industrial growth

Posted by: George Swift on Tuesday, December 18, 2018

The mission of the SWLA Economic Development Alliance is to improve the economy in our five-parish region and increase the quality of life for all residents.

One of the major ways we work to accomplish this is to attract new industry to the area.

With economic incentives for industry receiving a lot of attention lately, a few facts are worthy of review. For over 50 years the state of Louisiana has utilized the Industrial Tax Exemption Program, known as ITEP, to compete with all states in securing industry. Industries factor in these long-term incentives when preparing their business plan. These incentives make the difference in determining if Louisiana gets the project.

Many announced projects are awaiting final investment decisions. At any given time, there are very few active projects under consideration and competition is fierce. In 2017, there were 545 industrial projects in Texas and 155 in Louisiana. Thirty nine states including Texas offer property tax exemptions for industries.

Industries do not automatically come to Louisiana and there is heavy competition even within the state.

Until the election of Gov. John Bel Edwards, the decisions granting these exemptions rested entirely on the Louisiana Board of Commerce and Industry (C&I). Governor Edwards shook up the process by issuing an executive order which would require local taxing jurisdictions to approve the exemptions. As the agency for regional economic development, the Alliance helped initiate a process to review the industrial projects with financial officers of the local taxing organizations, usually the Police Jury, School Board, and Sheriff, because they each collect property tax.

The financial officers of those entities then make a recommendation to their respective bodies in open, public meetings. The local recommendation then went to C&I, then the Governor for signature. After many parishes around the state couldn’t come to agreement on a process, the Governor changed the procedure. Now a project will first go to C&I, then to the local bodies for action, and finally to the Governor.

Tax incentives are granted only to manufacturing companies because each manufacturing job has a multiplier effect and creates at least five to six jobs in the area. New industrial jobs create more opportunity for our entire region, especially service companies and small businesses.

None of the exempted money is existing revenue. If Louisiana does not secure the project, then there is no new money. In years past, C&I regularly granted 100 percent tax exemption on industrial projects for 10 years. Under the new rules, only 80 percent of the tax exemption will be granted for 10 years. Therefore, the industries will pay 20 percent of their property tax for the first 10 years of their operation which provides money to local governments to fix our outdated infrastructure and other needs.

If the industry does not perform according to their contract with the state, then the incentives stop and there is a clawback provision, which means the company has to pay back the incentive.

The Alliance seeks to work with proposed industry and local taxing jurisdictions to make projects happen. Since the announcement of Sasol in 2012 and others, the regional workforce has grown 30 percent creating some 27,000 plus jobs. No other region in the state or nation comes close. Even more industrial expansion is planned which will continue to grow our economy and provide career opportunities for our children and grandchildren. We must remain competitive and utilize necessary economic incentives to keep the momentum going.

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