It’s not every day that a vote by the local school board gets characterized as akin to a bomb going off across Louisiana. But that’s how the New York Times described it in a lengthy analysis published in early February.
The reason: a seven-hour January meeting, during which the East Baton Rouge Parish School Board voted to reject two requests for industrial tax exemptions by ExxonMobil.
Such requests are usually greenlighted with little fanfare, and would have let the industrial giant forego paying about $2.9 million in school property taxes over 10 years. But the board, at the urging of local advocacy group Together Baton Rouge, argued the tax exemption would starve a school system already struggling with budget cuts and potential layoffs.
Almost instantly, the 5-4 vote sent shock waves across Louisiana.
“It’s unfortunate that one company is told ‘no’ once, and now the narrative is out there that Baton Rouge is not ‘open for business.’”
[Rep. Ted James, D-Baton Rouge, on Facebook]
Exxon leaders bemoaned the “lack of predictability” and pulled their requests. The Baton Rouge Area Chamber took out a full-page ad in The Advocate warning “radicalism” might cause the state to lose its competitive edge. Mayor Sharon Weston Broome held what some likened to a pep rally in support of ExxonMobil. And a litany of state politicians vowed to introduce legislation to prevent this from happening again.
Business and political leaders frequently caution that any slight to an oil and gas company might lead to the entire industry leaving the state for good.
But rather than pack up, ExxonMobil instead announced in early March that it’s investing even more into the city with an estimated $500 million expansion—its largest local investment in a decade.
So was this a “sky is falling” scenario, or will the school board’s vote really harm Baton Rouge’s industrial climate in the future?
We examine the controversy.
What’s ITEP?
The Industrial Tax Exemption Program helps the state attract big industry by offering tax incentives to companies if they commit to creating new jobs and investment in the state.
How did the school board get involved?
The state Board of Commerce and Industry used to be the one-stop shop granting these parish-level tax breaks, to the tune of $10 billion between 2008 and 2016. We were the only state operating that way. Gov. John Bel Edwards used an executive order to change the process for the first time in 80 years, handing the power to local governments. Industrial companies now have to plead their cases before the Metro Council, the school board and the Sheriff’s Office for exemptions from taxes levied by each.
“We have to stop this rhetoric that’s destroying our business climate. We think local input is good, but local input and chaos are two different things.”
[Stephen Waguespack, president and CEO of the Louisiana Association of Business and Industry, to the Baton Rouge Press Club]
What were the requests for?
ExxonMobil was looking for tax breaks for two improvement projects completed in 2017, one at its main refinery and another at its next-door polyolefins plant, which makes plastics for consumer goods. That these were submitted after the fact became a strong talking point against approval, though ExxonMobil noted the board had approved similar requests in the past. Another matter of contention was that the refinery improvements created only 18 new full-time jobs, and the plant project added no new jobs.
Together Baton Rouge’s role
The advocacy group and its sister organization Together Louisiana posted a video in November asking how a state that provides such a wealth of resources for the oil and gas industry could also consistently rank at the bottom for poverty, education and life expectancy. The video, which has more than 650,000 views, argues that local schools are missing out on about $28 million per year from the 59 industrial facilities that receive local tax exemptions.
Verdict on the new expansion project
Both sides applauded ExxonMobil’s March announcement of a $500 million expansion project. Together Baton Rouge called it an example of a project worthy of ITEP, while industry leaders and politicians warned that the ITEP process still needs improvement. The project, they say, isn’t comparable to ExxonMobil’s growth in Texas. The company had already received ITEP approval for this project in 2018, well ahead of the recent controversy.
What’s next
At least two state lawmakers, Baton Rouge’s Sen. Bodi White and Rep. Franklin Foil, have said they are working on legislation to change the ITEP process. LABI’s Stephen Waguespack has argued each parish should have a “single point of contact” to handle ITEP requests. Together Baton Rouge supports the current process and stresses the need for clear criteria that favor companies creating new, permanent jobs and filing requests before a project begins. The state gubernatorial election in October could ultimately determine ITEP’s fate—Gov. Edwards’ executive order could be quickly overturned if a new governor is elected.
SOURCES: Baton Rouge Business Report and other news outlets, Together Baton Rouge
This article was originally published in the April 2019 issue of 225 Magazine.
