The top 10 emitters of greenhouse gasses in Louisiana have paid more than $200 million in taxes to local jurisdictions, to which they would not have otherwise been subject, because of the state’s decision to reform its industrial tax exemption program (ITEP) in 2016, according to data shared with The Lens by Together Louisiana, the statewide network of nonprofit and community organizations responsible for pushing the state to reform ITEP.
That figure represents more than a quarter of the increased tax revenue local jurisdictions have been able to collect, $760 million in total, due almost entirely to ITEP reform, according to a joint report the Institute for Energy Economics and Financial Analysis released with Together Louisiana earlier this month. Together Louisiana and IEEFA presented the findings of the report earlier this month in Baton Rouge.
‘When you see how many of these are the major emitting facilities that we’ve been treating like hospitals or soup kitchens — that has started to change,” Broderick Bagert, lead organizer at Together Louisiana, told The Lens after the report was released.
Those facilities include ExxonMobil’s East Baton Rouge refinery and chemical plant, Shell’s Norco Manufacturing Complex, Entergy Louisiana LLC’s Ninemile Point plant, CF Industries’ Nitrogen Complex, and Cheniere Energy Inc.’s Sabine Pass LNG Terminal. Natural gas is primarily composed of methane, a powerful greenhouse gas that’s contributing significantly to climate change.
ITEP has been around since 1936 and, prior to the state’s reforms, offered a maximum property tax exemption of 100% on capital investments for up to 10 years, making it one of the nation’s largest industrial subsidy programs, according to Tom Sanzillo, director of financial analysis at IEEFA, who authored the report released earlier this month.
The program had historically been “extraordinarily generous to industry compared to other states,” Sanzillo said in the report, documenting instances in which the state’s own economic development authority concluded as much.
“Louisiana’s competitor states have often been able to forego less in local revenue while remaining just as competitive,” the Louisiana Economic Development said in a 2016 report, referring to states like Texas, where local jurisdictions possessed the discretion to either offer generous exemptions in order to attract industry, or to offer no such exemptions.
One of the key dynamics behind that phenomenon was that the state had essentially preempted the authority of local taxing jurisdictions to issue tax abatement incentives, Erin Hansen, an analyst at Together Louisiana, told The Lens. And the state’s Board of Commerce and Industry, which is the unelected body charged with approving exemptions, rarely said no.
The board, for instance, approved 99.5% of the 12,000 applications it received between 1998 and 2016. And during a string of four meetings in 2015, the board approved exemptions for more than 600 applications without reviewing a single one individually, according to the report.
But in 2016, Governor John Bel Edwards began the process of reforming the state’s ITEP by way of executive order. The new rules, in part, eventually lowered the maximum exemption rate from 100% to 80%, and mandated that local taxing authorities must approve new exemptions in addition to the state board.
Edwards, for his part, touted the report’s findings.
“Giving local governments a say in whether their property taxes are exempted was simply the right thing to do,” he said in a statement earlier this month. “But this report proves what we said all along when we reshaped ITEP to become a jobs program.”
Those reforms have resulted in adding more than $16 billion in new taxable property since 2016, which represents an increase of 13%, according to the report. Local jurisdictions, as a result, collected more than $280 million in revenue in 2021 that would not have been available under the previous framework. Tax revenue specifically from the state’s top 10 emitters of greenhouse gasses represented nearly a third of that total in 2021, clocking in at nearly $84 million.
The lion’s share of the increased revenue has flowed to local jurisdictions that are home to the highest concentrations of industrial facilities, according to the report. More than 90% of the increased revenue went to the 15 parishes with the highest concentrations of industrial manufacturing, the report found.
“It’s just a huge deal, because those are the communities that have largely been bearing the environmental impact in terms of pollutants, and not really not really seeing any tax benefit from it,” Hansen told The Lens. The trend “represents a movement towards allowing these facilities to bear their own costs,” she said.
Correspondingly, the top 10 emitters of greenhouse gasses in the state saw an increase of $4.6 billion worth of industrial property subject to taxation, which represents a 17% increase, according to data shared by Together Louisiana.
The reforms have resulted in more than $113 million for schools, $55 million for law enforcement and $115 million for other services, in annual revenue, according to the report. The Orleans Parish School Board denied its first ITEP request in 2018 from a local shipping company. The New Orleans City Council and other agencies have followed in the years since, adding thousands of dollars annually to their coffers.
And far from discouraging industrial investment in the state, the ITEP reforms have coincided with increased capital investment in the state. Investments in ITEP-eligible property have increased 50% since Edwards implemented the reforms, compared to the five years preceding those reforms, according to the report.
Greg LeRoy, executive director at the nonprofit organization Good Jobs First, which is dedicated to responsible economic development, told The Lens the fact that increased business investments occurred in concert with increased tax revenue doesn’t represent a contradiction. LeRoy also spoke during the groups’ presentation in Baton Rouge earlier this month.
When you “start to restore better schools, better infrastructure, better public health, better public safety, that’s good for the business climate – that’s a confidence builder for investments,” LeRoy told The Lens. “I think it’s no accident that the economy’s been doing better since the reforms kicked in.”
Failure to capture
To be sure, there’s still a considerable amount of potential tax revenue that’s left uncaptured by the state’s reforms, according to the report. In 2021, for example, there was more than $130 billion in tax-exempt industrial property in the state, which meant local jurisdictions missed out on $2.3 billion in potential revenue.
One illustrative example is the Sabine Pass terminal in southwestern corner of the state. In 2016, none of its industrial property was subject to taxation, and in 2021, that figure increased to just 3%. As such, the facility accounts for nearly $420 million in local tax revenue lost to ITEP annually.
Taken as a whole, the state’s top 10 greenhouse gas emitters in the state account for nearly $526 million in lost revenue annually, which represents nearly a quarter of the state’s total annual loss of $2.3 billion.
And the program’s future is less certain today than it would have been had the constitutional amendment introduced by State Sen. Rogers Pope, Republican from Denham Springs, to enshrine local control over industrial tax exemptions into the state constitution succeeded. As it happened, the state’s business lobby pressured lawmakers to kill the measure in the Senate this spring, arguing that such a constitutional amendment would have tied the state’s hands.
The fact the reforms were implemented by executive order means they could easily be rescinded by a future governor.
For its part, the Louisiana Legislative Auditor released its own report earlier this month, which found that local governments missed out on more than $1.5 billion in property tax revenue due to ITEP in 2021. The report also concluded that parishes with the highest totals of ITEP-exempted property per capita tended to collect more property taxes overall – a phenomenon driven by the fact that those ITEP recipients possessed property that wasn’t exempt from the program.
Still, the IEEFA/Together Louisiana report clearly demonstrates that the reforms have made a positive difference and are worth defending, Bagert said.
We’re at “the very beginning of this,” he said. “But if we stay on this road, that’s a lot of resources that we can start investing in things we all know we need.”