Lawmakers vote to give $157 million to oil companies and bypass school boards

Bill creates potential loophole in corporate tax credit law

Louisiana legislators convene in the House of Representatives chambers at the State Capitol during the 2020 special session. (Wes Muller/LA Illuminator. Wednesday Sept. 30, 2020)

A Louisiana House of Representatives Committee narrowly passed a bill Monday that muddies the state’s corporate tax exemption laws by creating a potential loophole that could allow companies to bypass some local entities when seeking property tax credits. Furthermore, in a separate bill, the same lawmakers voted to give away $157 million in additional tax credits to oil and gas companies.

House Bill 78, filed by Rep. Gerald “Beau” Beaullieu, R-New Iberia, passed the House Ways and Means Committee in an 8-6 vote. The legislation was supported by oil lobbyist Tyler Gray, president of Louisiana Mid-Continent’s Oil and Gas Association.

The bill would allow manufacturing companies to seek nine-year ad valorem property tax exemptions from any political subdivision independently.

In 2016, Gov. John Bel Edwards signed an executive order that ushered in reforms to Louisiana’s Industrial Tax Exemption Program, which was the most lucrative tax credit program for businesses in the United States. Prior to 2016, a single state board, the Board of Commerce and Industry, had the sole authority to dole out property-tax credits to companies all across the state. Edwards’ reforms gave local entities such as school boards and sheriffs the authority to reject the commerce board’s decisions.

Under the current program, each political subdivision that would lose revenue from a tax exemption can reject that exemption and protect its share of revenue. For example, a manufacturer in Hammond would have to apply not only to the Board of Commerce and Industry but also to the Hammond City Council, the Tangipahoa Parish School Board, and the Tangipahoa Parish Council. The application would go through four public meetings and four different votes. 

With HB 78, the bill might limit a local government’s authority by requiring several different local entities to appoint a single entity to act on their behalf: “If more than one political subdivision enters into the agreement, the political subdivisions shall authorize a single political subdivision to act as an agent on their behalf.”

Rep. Buddy Mincey, R-Denham Springs, was particularly concerned with the word “shall” and thought it should be an option rather than a requirement.

“When you start talking about giving away public (money), and I say giving away — I use that very loosely — there’s a high level of scrutiny that should be on it,” Mincey said. “I think…I just have trouble with the ‘shall.’ I really do.”

Rep. Matthew Willard, D-New Orleans, expressed some suspicion over the fiscal terms of the tax credit agreement.

In exchange for the nine-year exemption, the municipality or parish would receive a sum of payments that equates to no more than two years of the property taxes assessed on the company. “The exemption shall be for a term of nine years in exchange for no greater than two years of ad valorem tax payments,” the bill reads.

Willard said the exemption looks like it was designed to tempt local governments to accept a quick supply of cash but at a long-term loss. Both Willard and Mincey wondered why the bill was written to outright prohibit local governments from negotiating a better deal to get more than two years worth of payments.

“If you want business to come, it needs to be this,” Gray, the oil lobbyist, said.

HB 29: MORE MONEY FOR OIL COMPANIES

In other legislation, the committee passed another bill on behalf of the same lobbyist that proposes to give away $157 million in tax revenue to oil and gas companies over a five year period.

House Bill 29, filed by Rep. Phillip DeVillier, R-Eunice, seeks to suspend a 12.5% severance tax that companies pay on oil produced from newly-drilled wells or old shut-in wells that are enhanced to produce again. 

The exemption would last 24 months or until the company recovers the amount it spent to drill or enhance the well, whichever comes first. The bill passed in a 12-2 decision with Rep. Matthew Willard of New Orleans and Rep. Tammy Phelps of Shreveport, both Democrats, voting against it.

“If the price of oil stays low, why would they drill more?”

— Rep. Matthew Willard

When HB 29 first arrived in committee last week, the lawmakers requested that a fiscal note be attached before they voted on it. A fiscal note is a nonpartisan analysis of the financial impact a particular bill will have on the state. However, on Monday when the fiscal note revealed the bill would cost taxpayers $157 million, many of the legislators on the Ways & Means Committee ignored or downplayed it.

DeVillier, flanked by oil industry executives, argued that oil and gas companies are leaving Louisiana in droves and money must be given to bring them back.

“They’ll have a huge incentive to put people to work, which is our constituents, take them off the unemployment roll and put them back to work, which actually helps a lot of different ways,” DeVillier said.

DeVillier said the tax credit would incentivize oil companies to drill more. However, Rep. Matt Willard stumped Rep. DeVillier with a fundamental question about the logic of that incentive.

“Who would they sell the oil to?” Willard asked. “Why would (companies) do this if the global demand for oil stays low? If the price of oil stays low, why would they drill more?”

Struggling to answer the question, DeVillier responded: “I guess whoever has a demand for it, whether it’s locally or in another country, wherever it may be.”

Edgar Cage and Lady Carlson, both representatives of Together Louisiana, a grassroots community organization that advocates for equity in education, pleaded with lawmakers to kill the bill, but their pleas were ignored. Together Louisiana has continuously fought to stop governments from diverting tax dollars away from education. 

“At some time enough has to be enough,” Cage said. 

“This seems like the same old song: Poor businesses,” Carlson said. “What about our teachers who don’t make enough money for the classroom? We’re in a recession. We’re in a pandemic. When are we going to start talking about what’s good for our families?”

Committee Chairman Rep. Stewart Bishop, R-Lafayette, challenged Cage and Carlson by claiming he has 10,000 constituents who will be unemployed if the bill is not passed.

“I guess my question for you is what do I go back and tell my constituents, the 10,000 guys and women that worked in the oil and gas industry that no longer have jobs?” Bishop said.

Carlson shot back, pointing out that the bill doesn’t actually give jobs to anyone.

“You don’t know that this is going to create jobs, do you?” Carlson said. “All of this is speculation. You think it’s going to. You think it’s going to, but you’re not sure.”

HB 29 will next go to the House floor for debate. 

Fiscal Note

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Wesley Muller
Wes Muller traces his journalism roots back to 1997 when, at age 13, he built and launched a hyper-local news website for his New Orleans neighborhood. In the following 22 years since then, he has worked as a journalist for the Times-Picayune in New Orleans, the Sun Herald in Biloxi, WAFB-9News CBS in Baton Rouge, and the Enterprise-Journal in McComb, Mississippi. Much of his work has involved reporting on First Amendment issues and watchdog coverage of municipal and state government. He has received several honors and recognitions, including McClatchy's National President's Award, the Associated Press Freedom of Information Award, and the Daniel M. Phillips Freedom of Information Award from the Mississippi Press Association, among others. Muller is a New Orleans native, a Jesuit High School alumnus, a University of New Orleans alumnus, a veteran U.S. Army paratrooper, and an adjunct English teacher at Baton Rouge Community College. He lives in Ponchatoula, Louisiana, with his teenage son and his wife, who is also a journalist.