Two of every three property tax dollars collected in the Capitol Region come from industry and in neighboring parishes it’s even higher. In addition, business and industry pay 50% of all sales taxes collected in the state.
ITEP is crucial to the economic development of Baton Rouge. When businesses move to the area, they employ our citizens, contract with other Louisiana-based businesses, buy products from local shops and eat at our restaurants. Workers in ITEP-heavy parishes have incomes about 18 percent higher than the rest of the state. The economic input provided from this incentive pays for itself in dividends.
Manufacturing jobs everywhere have declined due to changes in technology and work processes. Many jobs that manufacturing company direct employees used to do are now done by contracted workers who also work in full-time jobs side-by-side plant workers. In fact, about half of the jobs at industrial plants are full-time contract jobs classified as construction jobs. In the Baton Rouge region there has been a 52% increase in contract industrial craft workers since the year 2000 and it’s mainly due to new capital investment (Source: Bureau of Labor Statistics and GBRIA Annual Headcount Collections).
Companies are under no obligation to bring new projects or expansions to Louisiana. Inside of companies, every large capital investment project is competitive about what states and what facilities will receive an investment. ITEP is used as a financial incentive to make our state more attractive to these businesses looking to invest. In fact, since ITEP has changed over the last two years and become more difficult for companies to obtain, announced capital investment and job creation in manufacturing has slowed dramatically.
Businesses consider incentives like ITEP when choosing which state, or parish, to invest in. Tax incentives provide monetary enticements that allow companies to lessen the financial burden associated with building a new business or expansion project. It’s simply a matter a math. If there were no exemption program, it would make it more difficult for businesses to choose Louisiana, as other states do offer these types of incentive and a more predictable tax structure.
Governments use programs like ITEP to incentivize the behavior they want to encourage: like industrial investment in our state. ITEP creates certainty for companies looking to invest and helps businesses estimate projected costs when determining where to locate potential projects. Companies need the assurance of these types of programs BEFORE ground-breaking to ensure they are making the best investments possible for their bottom line. Another example of this is the Homestead Exemption, which provides an incentive to encourage individuals in Louisiana to purchase homes. Often times companies do not actually receive the actual incentive until during or after construction as a matter of convenience, because all the costs aren’t known until after construction is completed, but they DO count on it to be there when they do the paperwork and they DO consider its availability BEFORE construction begins.
Yes, companies can use their savings from ITEP and other tax exemptions to invest right back into their company or the community. For workers in Louisiana, that could mean bigger paychecks and more benefits. For local communities, this could mean increased donations to schools, including technical colleges, or donations to local nonprofits and charities.
If ITEP becomes too difficult for businesses to obtain, project investments will drop more, which will result in more loss of direct full-time, high-paying jobs in the area. We will also lose sales and other taxes that come to our local economy, which will reduce funds needed for our schools, police force and social services. We must maintain ITEP and continue to bring investments into our community.
Yes, immediately, 20% of the project value is paid and only 80% is exempt. Once the contract for ITEP is concluded, the rest of the 80% industrial property will be paid onto the local tax rolls. Many times, companies that received ITEP become some of the biggest taxpayers in a parish. For example, even though ExxonMobil has been a beneficiary of ITEP for many years, they are currently the largest property taxpayer in all of East Baton Rouge Parish, paying over $13 million per year, a sum that pays for half of all the public school teachers.