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In Louisiana, are billions of dollars in corporate tax exemptions paying off?

Paul Solman
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Paul Solman

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Louisiana’s abundant natural resources represent enormous wealth, yet the state consistently ranks at or near the bottom nationally for many quality-of-life indicators. Like other states, Louisiana grants tax exemptions to businesses it wants to attract, but some are questioning whether its unusually high rate of corporate subsidy is really paying off. Economics correspondent Paul Solman reports.

Company Responses

In response to questions from the PBS NewsHour, Tellurian, the parent company of Driftwood LNG, provided this statement:

We are confident in the success of Driftwood LNG, and equally so in the long-term economic growth the project will fuel – in fact, we expect nothing less from one of the largest infrastructure developments of its kind in U.S. history.

Our $15 billion Driftwood investment is expected to generate tremendous tax revenue that will support Calcasieu Parish schools, safety and a variety of civic needs. As noted by numerous community leaders and public officials, we anticipate creating thousands of jobs during the construction phase and hundreds of jobs in the operational phase which would yield billions of dollars in payroll and, ultimately, as noted by the Parish, more than $700 million in sales taxes in the first 10 years alone. In addition, after the abatement expires, the project is expected to add an estimated $130-140 million each year in property taxes. These are dollars Calcasieu Parish and Louisiana can enjoy and direct toward the community, and funds that would not be available if Driftwood was not built.

We are dedicated to being part of the community for the next several decades, as a good partner and neighbor. We have invested in over a dozen projects and organizations, and will continue to do so in the years to come. One example of our local commitment is the new road we constructed for the Driftwood neighborhood, which provides much needed access to and from the nearby highway. We’re excited to support these and other community initiatives over time.

Let us also be clear: Driftwood’s future investment – and our community contributions that flow from it – would be impossible without ITEP. We are deeply thankful for support from local and state officials and business groups and appreciate their local input. The community and state’s continued encouragement is critical to bringing Driftwood online.

ExxonMobil also responded to the PBS NewsHour’s questions via email. Here are the company’s responses:

Does ExxonMobil in Louisiana pay any taxes after state credits and rebates?
Yes, ExxonMobil pays $100M annually in taxes in Louisiana after all credits and rebates. The assessed value of ExxonMobil’s properties in East Baton Rouge is the largest of any company in the parish. The tax revenue generated in 2017 from ExxonMobil was $32 million, three times larger than the second largest property taxpayer, Entergy. ExxonMobil pays about 7 percent of the total property tax in EBR Parish, and 9 percent of the property tax revenue for the school system, city and sheriff’s department. We want to continue to grow our tax base by bringing major projects here.

Growing the Gulf: Why Louisiana is competing for new investment
ExxonMobil is investing more than $20 billion in the Gulf Coast due to the demand for sustainable plastics worldwide, the low cost of natural gas and the development of the Permian Basin in Texas. While ExxonMobil recently announced a more than $500 million project in Baton Rouge, Texas has continued to attract many projects as part of this investment initiative. We want to help Louisiana win more projects. However, we need a business environment that encourages capital investment and job-creating activities. For this reason, a predictable, fair tax climate is a key consideration for future ExxonMobil investment. When considering investment, we also look at transportation infrastructure, workforce needs, and the regulatory environment.

Has ExxonMobil received approval for ITEP under the new rules?
Yes!  One major project that we recently received a final investment decision for is the polypropylene project that is beginning construction now at the Baton Rouge Polyolefins Plant. This project will double the site’s polypropylene capacity. Polypropylene is used in lightweight car parts to achieve better fuel efficiency and ensure safety and for 100 percent recyclable food packaging. The project will provide 600 construction jobs, 45 new employee jobs => $75K – $100K average salaries and 20 full-time contractor jobs.

In October 2018, the EBR School Board, Sheriff and Metro Council provided unanimous support in voting for an ITEP exemption for this project. The ITEP incentive is worth nearly $30 million. The project investment is more than $500 million. Even with an ITEP incentive, the project will bring $7 million in local property tax revenue over the first 10 years, an additional $21 million in property tax revenue until 2040 and $50 million property tax revenue for the expected life of the project. EBR will collect more than $30 million in total sales tax beginning with construction as soon as this year. So, our company continues to be in a position for growth in Baton Rouge, and that’s good for the local economy. But, the investment opportunity is competitive – we can’t assume projects will always come here.

Couldn’t local entities use the foregone property tax revenue to improve services?
ExxonMobil, like other companies, makes decisions to invest based on market conditions and return on investment. For our company, we have invested significantly in many of our Texas sites. Louisiana is in direct competition, even within our own company, to win projects. Without ITEP, project investment may slow down or be lost altogether. Thus, parishes run the risk of forfeiting both future and current property and sales tax revenue. In 2021, about $6 million in property taxes will roll back onto the parish coffers from the major, multi-million dollar ultra-low sulfur diesel project at the refinery in 2010. The Baton Rouge Refinery was selected as one of three sites in the world for this growth project thanks to an ITEP contract.

What happened to the two 2017 ITEP applications filed in December 2018?
Like many other companies in Louisiana, ExxonMobil waited until after the new ITEP state rules were clarified and adopted before choosing to move forward with two applications from 2017 – one for our Refinery and one for our Polyolefins Plant worth about $6 million in total abatement for a total investment of $67 million. ExxonMobil made decisions to invest in these competitive projects several years ago under the old ITEP rules. Therefore, ExxonMobil made the investment decisions with the understanding that the project costs included an ITEP abatement. Advance applications were filed in 2016, before the ITEP rules changed and during a period of time when Baton Rouge was trying to create its own set of ITEP guidelines.

The ITEP incentive rules that were in place at the time of the project decision helped attract these projects to Baton Rouge.  An advance notification was filed on these applications in 2016, per the program rules at that time.  The applications were held until new ITEP guidelines were finalized and the governor promulgated the new ITEP rules. The Louisiana Board of Commerce and Industry unanimously approved these applications in December 2018, since they adhered to the state guidelines.

These applications represent $67 million in 2017 competitive expansion projects, 18 jobs, and about a $600,000 a year abatement request for 10 years. In January 2019, the West Baton Rouge Parish Sheriff, School Board, Parish President and Council provided a professional and public review of the pending 2017 application for our Port Allen Lubricants and Aviation facility. It was approved unanimously.

Across the state, over 50 other companies also held their 2017 applications and have received state approvals. Out of all these companies, only ExxonMobil’s 2017 applications were protested. In fact, a similar 2017 application submitted by Georgia Pacific was also approved by Baton Rouge taxing jurisdictions in late 2018, without any comment from Together Baton Rouge. The ExxonMobil Baton Rouge Refinery and Baton Rouge Polyolefins Plant ultimately did not pursue a 2017 Industrial Tax Exemption Program (ITEP) application due to ongoing, local uncertainty surrounding the program. Unfortunately, the perception of Baton Rouge has become one of inconsistent treatment from one company to another, a lack of predictability, and confusion among local elected officials, who are inundated with misinformation from activist groups. We question if anti-business activist groups are opposed to the state ITEP rules or just opposed to ExxonMobil’s participation in the program. With our decision to withdraw these 2017 applications, our company had to reassess previously-projected costs for these project investments. Our hope is that the current business environment will change to help us bring investment and jobs to this region when we need it most.

ExxonMobil’s commitment to North Baton Rouge
ExxonMobil Baton Rouge contributes about $4 million to the local community each year through grants and employee matching gifts. More than 60 percent of the annual Foundation contribution funds go directly to support North Baton Rouge social needs, schools and residents. While our Refinery was first built on farming land in 1909, the community developed around it through the years. The community has transformed from housing many of our site workers to becoming an urban area challenged by social needs. ExxonMobil is proud to lead in programs to directly support workforce development, local supplier/vendor engagement, and education in North Baton Rouge. Here are some recent examples:

  • We are committed to hiring local suppliers and workers from Baton Rouge area. We continue to work closely with our partners at Baton Rouge Community College, Louisiana State University and Southern University to assist in developing a skilled, locally-based workforce. Through a new GoLocal website, vendors and suppliers can learn about opportunities to support growth projects.
  • The growth of the free, fast-tracked North Baton Rouge Industrial Training Initiative to include 200 North Baton Rouge residents will help support our workforce for this project and other area opportunities.
  • Our new community investment, a North Baton Rouge Small Business Resource Center housed in the ExxonMobil Chemical Plant North property, is evidence of our commitment to provide increased capacity and support to local, diverse suppliers.
  • Recently, we funded repairs and renovations on many North Baton Rouge homes to ensure they were more energy efficient and safe.
  • Due to the industry growth across the Gulf Coast, ExxonMobil is currently hiring at peak levels for professional and operations job opportunities at all of our Baton Rouge area sites. We are working with the city and chamber to hire employees who recently lost jobs at Georgia Pacific.

ExxonMobil is the leading corporate donor to the Foundation for East Baton Rouge School System. In 2016, our company brought a three-year, $13 million grant to support teachers and students success in Advanced Placement courses via the National Math and Science Initiative. This program provides funding directly to students, their schools and teachers for strong AP growth and performance. It’s been deployed many East Baton Rouge High Schools.

ExxonMobil Baton Rouge is also the largest contributor to the Capital Area United Way campaign, representing about 11 percent of the campaign contributions each year.

 

Read the Full Transcript

  • Judy Woodruff:

    It's common for cities and states to provide tax breaks and exemptions in the hope of luring business and jobs. But in some places, there's growing pushback. Amazon and New York City is the most high-profile case recently.

    What is less known are big breaks given in some states to traditional industries that don't quite get as much buzz. Welcome to Louisiana.

    Our economics correspondent, Paul Solman, visited there recently, as part of our regular series, "Making Sense."

  • Helen Frink:

    I think there's one thing that we can agree on as citizens of Louisiana– things are not great.

  • Paul Solman:

    One of YouTube's unlikelier hits, a slide show asking, how it can be that a state so rich in natural resources, can also be —

  • Helen Frink:

    Bottom of the list in all the important categories, when it comes to life indicators.

  • Paul Solman:

    One answer claims the advocacy group Together Louisiana — subsidies. Tax breaks state and local governments give companies to set up shop, or stay in the state.

    The national average of tax breaks? $291 per resident. Louisiana?

  • Helen Frink:

    We are spending $2,857 per capita in corporate subsidies.

  • Paul Solman:

    Eighty percent in the form of industrial tax exemptions, in which the state's industries, mostly petrochemical, are freed from the local property taxes that fund services like police, parks and public schools.

  • Unidentified Male:

    I'd like to welcome you to the Board of Commerce and Industry.

  • Paul Solman:

    For 80-plus years, a state board has approved nearly all of these tax breaks.

  • Unidentified Male:

    All in favor of approving these in globo indicate with an aye.

  • Paul Solman:

    A hundred percent exemption for 10 years.

  • Unidentified Male:

    Motion carries.

  • Paul Solman:

    Problem is, the local counties, called "parishes" in Louisiana, don't get the taxes the companies would otherwise pay.

  • Michael Tritico:

    They're being given billions of dollars in this Parish alone in incentives every year. Billions.

  • Paul Solman:

    In southwest Louisiana's Calcasieu Parish, environmentalist Mike Tritico showed us a coal-fired power plant built in the 1950s.

    That's a huge plant.

  • Michael Tritico:

    Yes, that's a huge plant. It produces a lot of electricity and it gets a huge set of tax breaks every year.

  • Paul Solman:

    Even though it's been there forever.

  • Michael Tritico:

    Yes.

  • Paul Solman:

    But isn't the idea that it'll keep them here, as opposed to —

  • Michael Tritico:

    Well, they're not going to go anywhere else. How can they pick up that plant and leave? They can't.

  • Paul Solman:

    The hot exemption of the moment is for a new liquefied natural gas company, Driftwood LNG, planning a terminal in Lake Charles.

  • Michael Tritico:

    Along this stretch here, between the Gulf Intracoastal Waterway and the opposite shore mouth of the industrial canal.

  • Paul Solman:

    For this, says electrician Heather Ames —

  • Heather Ames:

    We gave away potentially the largest tax exemption in the history of United States.

  • Paul Solman:

    To try to reverse the decision, Ames joined forces with schoolteacher Elizabeth Long, a Republican, and Democrat Georgina Graves.

  • Georgina Graves:

    No documents were provided for the public to see, not online or at the meeting itself.

  • Elizabeth Long:

    And the fact that we were not allowed that information and had to read in the paper that $2 billion was gone, people are very upset.

  • Georgina Graves:

    We've been insulted.

  • Paul Solman:

    Insulted how?

  • Georgina Graves:

    Libtards. Like, you're libtards, you don't know what you're talking about. We should be thankful for the amount of jobs that these industries are blessing you with.

  • Paul Solman:

    But at the cost of as much as $2 billion in taxes.

  • Elizabeth Long:

    Taxes that then our schools lose, our roads lose, our children lose.

  • Paul Solman:

    But, says Chamber of Commerce president George Swift, the Parish wins, because of the new jobs. And not just jobs at the plant.

  • George Swift:

    About 7,300 construction workers will be in the area building the plant for four or five years.

  • Paul Solman:

    But how many from the parish itself?

  • Heather Ames:

    There are absolutely no stipulations that anybody has to come from Calcasieu Parish, or the state of Louisiana.

  • Paul Solman:

    At a trailer park housing construction workers on other projects: license plates from Texas, Alabama, South Dakota, Alaska.

  • George Swift:

    Wherever they're from, they're going to be buying things locally– gasoline, food, all of that. And then the permanent jobs are created, and that's where we get the long-term growth for the area.

  • Paul Solman:

    And how many long-term jobs?

  • Georgina Graves:

    Their initial application was for 300 permanent, and then the application showed 200 for jobs, permanent jobs.

  • Paul Solman:

    Which makes the math pretty easy: $2 billion in local property tax relief; 200 jobs; $10 million a job.

    But wait a minute. Under Louisiana's new governor, John Bel Edwards, three local governing bodies now decide, and they approved this deal. But that's because, says Elizabeth Long —

  • Georgina Graves:

    The Chamber of Southwest Louisiana told three governmental entities what they were going to do.

  • Paul Solman:

    To what extent were you involved with the three entities that had to approve, and did approve this project?

  • George Swift:

    We are the facilitator for the projects. We want the projects to come to our region.

  • Paul Solman:

    The bottom line, to the chamber's George Swift:

  • George Swift:

    Do we grant the tax exemption and get the industries and the jobs, or do we get nothing?

  • Paul Solman:

    But if you have the ports, the pipelines, the product, natural gas, why didn't you at least try to drive a harder bargain?

  • George Swift :

    We do have all the resources, but there's a lot of competition all over the United States.

  • Paul Solman:

    Driftwood's Texas-based parent company declined our interview request, but did issue a statement — that the project would generate more than $700 million in sales taxes the first ten years, and then, after the abatement expires, more than $100 million a year in property taxes.

    But a key question — would the company really not have come without the exemptions?

    Surgeon Alan Hinton, a lifelong Republican, doubts it.

  • Dr. Alan Hinton:

    Industries want to be in this area because of the ship channel, the pipelines, the rail system and the interstate system. And people here are willing to accept big, heavy industry in their backyard.

  • Paul Solman:

    Bridget Hinton, an engineer, manages her husband's practice.

  • Bridget Hinton:

    We ran our own business for over 11 years. We had approximately nine employees, and we didn't get a tax exemption.

  • Alan Hinton:

    I'm astounded that this program has been going on for 80 years, under the radar.

  • Bridget Hinton:

    No idea that that much money was being given away. It just takes a while for people to open their eyes.

  • Alan Hinton:

    My eyes were opened.

  • Paul Solman:

    How big is this facility?

  • Edgar Cage:

    Approximately three miles long and extends back another mile and a half to the Mississippi River.

  • Paul Solman:

    In East Baton Rouge, Edgar Cage is in the business of opening eyes as well. Consider Exxon Mobil, the biggest taxpayer in the Parish, and the largest tax break beneficiary, receiving more than 200 exemptions over the past two decades. Recently, the company applied for two more, retroactively, for projects completed in 2017.

  • Edgar Cage:

    An exemption is the incentive to bring either new business here or for existing company to expand. It is something put in place to change behavior. If the behavior had already happened, it's then not an exemption. It's a gift.

  • Paul Solman:

    Moreover, Cage's group, Together Louisiana, found that, despite all those tax exemptions, Exxon Mobil's Baton Rouge facilities collectively lost more than 2,000 jobs.

  • Edgar Cage:

    We're not against Exxon Mobil. They have fiduciary responsibility to reduce business costs as low as possible. But when they are exempt from paying property taxes, I have to pay more, and small businesses have to pay more.

  • Paul Solman:

    Meanwhile, just blocks from the refinery…

  • Edgar Cage:

    This community has been forgotten. It's been neglected.

  • Paul Solman:

    But I think a lot of people driving through here would be thinking, you know, it's the culture of the place. What could Exxon Mobil do to make t things better?

  • Edgar Cage:

    If more money is being put into school, put into workforce development, these people would have hope. These people would have opportunity.

  • Paul Solman:

    Exxon Mobil's response is that it contributes about $4 million to the community each year through grants and employee matching gifts.

  • Unidentified Male:

    The next item on the agenda: the ITEP application for Exxon Mobil Corporation.

  • Paul Solman:

    But this January, arguments like Cage's carried the day.

  • Unidentified female:

    Please vote.

  • Paul Solman:

    The local school board, strapped for cash, rejected the tax breaks.

  • Unidentified Male:

    The motion fails.

  • Paul Solman:

    Exxon Mobil blamed what it called confusion among local elected officials, inundated with misinformation from activist groups.

  • George Swift:

    I think it was a tremendously negative signal not only to Exxon but to other industry. And it just creates doubt as to, is this a good place for industry to locate?

  • Paul Solman:

    The Chamber of Commerce president doesn't support tax breaks for all energy firms, though.

  • George Swift:

    There was one project that we did not recommend, but the boards ended up approving anyway. It was a solar farm.

  • Paul Solman:

    A solar farm, with 200 construction jobs, but only one permanent one.

  • George Swift:

    If it doesn't create jobs, we don't think it fits in the industrial tax exemption criteria.

  • Paul Solman:

    Heather Ames has a different interpretation of the chamber's objection.

  • Heather Ames:

    I think that they're bought and sold by the oil and gas industry, and solar has no place in that.

  • Paul Solman:

    For the PBS NewsHour, economics correspondent Paul Solman, reporting from Louisiana.

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Paul Solman
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Paul Solman

Paul Solman has been a business, economics and occasional art correspondent for the PBS NewsHour since 1985.

@paulsolman

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