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LCA Testifies at LED Hearing on ITEP Rules Changes

The Louisiana Department of Economic Development hosted a public hearing on December 29, 2016 to hear comments on proposed rule changes regarding the Industrial Tax Exemption Program.

The proposed rules changes were originally suggested in an Executive Order by Gov. John Bel Edwards back in June 2016. The governor holds executive authority on this issue, but LCA President Greg Bowser attended and testified at the meeting to put the interests of the chemical manufacturing industry on the record. The text of his testimony can be read below.

 

Louisiana Chemical Association Comments

Public Hearing to enact, amend and reenact Rules of the administration of the capital industrial ad valorem exemption program CAP (LAC 13:1. Ch. 5) to implement programmatic changes in alignment with executive orders 16-25 and 16-73.

My name is Greg Bowser, president of the Louisiana Chemical Association and the Louisiana Chemical Industry Alliance. The LCA represents the interests of more than 60 chemical manufacturing companies with more than 100 locations in Louisiana. The LCIA is a group of more than 800 businesses that support the state’s chemical plants with products, services and supplies.

We understand that the governor has the constitutional authority to determine how the industrial ad valorem exemption program operates. We understand that these rules proposed today are an attempt to enforce the mandates of his executive order.

We have a number of concerns about the direction of the program:

Based on our understanding of the major manufacturing facilities in this state, we are concerned that many of the large expansions and new plants that have announced over the last several years will go elsewhere in the future. Louisiana’s historic 10-year industrial property tax exemption program has been the economic difference in many competitions with other states and countries.

The elimination of miscellaneous capital expenditures limits opportunities for existing facilities to compete against sister plants in other states and countries for modernization and incremental growth. The fear is it will be more difficult to maintain the 40 to 60-year life of our manufacturing facilities without these incentives.

The program still does not take into consideration the retention of jobs or contract jobs. It is important to note contract workers at manufacturing facilities are, in many cases, permanent jobs. The additional contract workers that come onboard during turnarounds for maintenance and other regular functions and new construction migrate from one plant to another, up and down the Mississippi River and around South Louisiana. These are also full-time jobs.

Our greatest concern is how the Cooperative Endeavor Agreements are going to work with local government officials. We understand this is a work in progress. We understand that LED is attempting to develop a formula with the parish councils or police juries, the school boards and the sheriffs. However, we suspect this will not be an easy process. Hopefully, what is developed will be consistent throughout all parishes and not a patchwork system of different formulas.

For those companies looking to make large investments on major projects in Louisiana and other states, this new situation creates major difficulties. Confidentiality on projects and competition under consideration is critical. It will be important for all parties to recognize the actions of those bodies on CEAs will need to remain confidential.

For instance, An LCA member in Calcasieu Parish undergoing a major expansion reported when they went through the process they signed nondisclosure agreements with LED, the Port of Lake Charles and the Chamber of Southwest Louisiana. These groups have experience preventing external information leaks that could harm ongoing projects. This confidence is important to companies because economics are one of the first aspects of project development to be established and incentives are the key component in considering multiple site locations. This information, if disclosed, could cause changes, including stock price fluctuation that would leave the company at a disadvantage and in violation of federal Securities and Exchange Commission laws. These abuses are subject to insider trading rules and violation of those rules land people in jail.

Under these rules, our members will be required to negotiate agreements with more than three authorities: police juries or parish councils, school boards, sheriffs and other tax authorities totaling dozens of people. Upper management would be unlikely to approve disclosing information to groups of this size unprepared to handle the risks the companies face. In addition, public debate and disclosure of a site location could violate company rules and prevent progress on the investment decision.

These are major concerns. This ad valorem exemption program is one factor of many that influence the site selection procedure. As part of the greater development process, complications can have far-reaching consequences.

As stated, these rules create an environment that will further complicate and stall both new investment and routine improvements across the chemical manufacturing industry. These rules should be studied further and in the future crafted to achieve local access and input with guidance from the business community that must operate within them.

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