Zurik: $11 billion later, Louisiana’s incentives fail to deliver
NEW ORLEANS (WVUE) - The head of one of the nation's biggest energy companies got a $57 million payday. And at least one watchdog thinks Louisiana taxpayers helped fund it.
"That looks awful, frankly," says Greg LeRoy, executive director of the nonprofit Good Jobs First. "It looks like hell."
In 2011, the state approved a big incentive package for Cheniere Energy - over a 10-year period, a $1.5 billion package. The next year, 2012, Cheniere CEO Charif Souki received a large stock award, $49 million. His total income jumped from $6 million to $57 million. In 2013, he received an even larger payday, almost $142 million. In the two years following the incentives, Souki and five other executives took home $300 million in compensation.
Are state taxpayers footing the bill for these huge incomes?
"When a CEO gets a bump, a 900-percent pay bump, right after getting a billion-plus dollar subsidy award, that's a totally natural question," LeRoy says.
In the last six years, Cheniere Energy has received more subsidies than all but one company - $1.6 billion.
"It's hardly a unique thing to do in Louisiana, to get showered with a big tax break," LeRoy tells us.
As the head of his Washington, DC-based nonprofit. LeRoy watchdogs hundreds of thousands of lucrative deals between state governments and private corporations. His data helped show that, since Bobby Jindal became governor in 2008, Louisiana has handed out more incentives than any other state - $11.1 billion – followed by the states of Washington, Michigan and New York.
"That's a huge amount of money," LeRoy says.
Remember: Louisiana has spent the past several years slashing its operating budget. For example, since 2008, the higher education budget has been gutted by $673 million. With a $1.6 billion budget gap projected for the 2015-2016 fiscal year, yet more cuts are expected for higher ed, not to mention other critical budget priorities.
But none of that has curbed the state's business incentive programs.
A large number of Louisiana's incentives are handed out through the Industrial Tax Exemption Program. It waives property taxes for 10 years when a manufacturer makes a capital investment.
State records show, since 2008, Valero Energy has received $315,514,865 in those exemptions, ExxonMobil $263,647,394, and Cleco $180,603,508.
But Stephen Moret insists that ITEP is really not an "incentive."
"They're not getting anything from the state," says Moret, who heads the Department of Economic Development. "You're looking at it as an incentive. What I'm telling you is the Industrial Tax Exemption Program in Louisiana is part of the basic tax structure of the state. It's no different than saying this is where we set the tax brackets for families and what the tax rates are. "
His department's own website has a different take, however. When you look up that site and you click through to the "Incentives" section, industrial tax exemptions are one of many incentives listed there.
"Because it is managed by the Department of Economic Development," Moret explains.
In fact, here's the first sentence that describes the program: "The Louisiana Industrial Ad Valorem Tax Exemption Program (ITEP) is an original state incentive program which offers an attractive tax incentive for manufacturers within the state."
Whether they're called incentives or not, such programs as ITEP are very expensive for Louisiana taxpayers and draw millions each year away from other public spending priorities.
At its Michoud plant in New Orleans East, Entergy has an industrial tax exemption. That means this year, the utility company won't $142,527 in property taxes. That's enough money to fund extra police officers, or fix potholes or streetlights.
"And a lot of the money is a windfall," LeRoy says. "A lot of money is being paid to companies to do what they would have done anyway."
In 2013, Entergy laid off 240 employees in Louisiana. But that year, the state approved $114,167,632 in subsidies. Since 2008, Entergy has received $221 million in incentives - without promising one new job. During the same time period, they reported a profit of $6.8 billion.
Entergy told us in a written statement, "State and local tax benefits are just some of the tools Entergy uses to keep customer bills among the lowest in the country."
Entergy is not the only company with this storyline.
Moret says the increase in incentives is related to what he calls the biggest industrial boom in the state – according to his numbers, more than $60 billion in capital investment.
"It's one of the things that has enabled the state to attract a lot of manufacturing investment over the years," Moret says.
Many observers would counter that it's Louisiana's resources that truly attract industries.
"Yeah, it's made a difference," Moret acknowledges. "But we're not the only state that has, you know, these features. We certainly have the Mississippi River but there are other states that have Mississippi River as well."
Tab Troxler has his own unique perspective on tax exemptions.
"We're simply not collecting property taxes on these exempted properties," says the assessor of St. Charles Parish.
Troxler says industrial tax exemptions cost the parish as much as $60 million a year. That's about 43 percent of the total property taxes they collect.
"The industry here is very valuable," Troxler says, noting that, even with ITEP incentives, businesses still pay the majority of property taxes in the parish - 88 percent.
"When a new project comes in, or even existing projects that are there that, you know… you get the 10-year exemption in revenues lost," Troxler tells us. "But the parish itself still has to provide law enforcement, fire protections, schools roads, drainage… all the little things that go along with operating a business."
Troxler says he sees both sides of the argument but admits, if the big businesses didn't get this tax break, it would reduce property taxes for homeowners and small businesses by about 35 percent.
"And I don't think, without exemptions, businesses are going to pick up and leave," Troxler says. "I mean, taxes are just one portion of a business's decision, obviously. Cost of goods, you know, raw materials and also, you know, fuel gas, natural gas, I mean. That's a big component of these industrial facilities. They've got to look at transportation, they've got to look at where their clients are located, you know, where they're shipping their materials, ease of shipping the materials, labor costs… there's a lot that comes into play other than taxes."
Valero Refinery receives a large number of subsidies in St. Charles Parish. Good Jobs First data tracks incentives from all 50 states. It shows Valero received 94 percent of its incentives from Louisiana, ExxonMobil 97 percent and International Paper 74 percent.
"You're going to have an oil and gas industry in Louisiana, because you've got so many reserves," LeRoy contends. "You're going to have fracking. You're going to have petrochemical processing and other chemical mills and things like that – as well you should, because that's where the resources are. Do you have to shower them with money and property tax exemptions and other things that undermine your schools and your other public services? Probably not."
FOX 8 News analyzed Good Jobs First's data, which it collected from the Department of Economic Development. They show that, since 2008, those subsidies have cost Louisiana residents about $2,500 each. That's more than similar subsidies cost the respective state taxpayers in Washington, Michigan and Kentucky.
"On a per capita basis, you're off the charts," LeRoy says.
While Louisiana has handed out those billions in business incentives, income tax collection from residents has basically been flat. In fact, data from the La. Department of Revenue shows that tax revenue has decreased slightly since 2008 and 2009.
"If you're spending $11 billion for job creation, you'd think you'd have a huge surge," LeRoy says, "not only in the number of people paying taxes but in the amount they were earning and therefore a big surge in income tax revenues. And you have a flat line."
Moret counters, "If you had strong growth throughout, the numbers would be higher. But remember that we're comparing ourselves to a period of time that many states in the country were actually in negative territory."
Moret says these incentives help lure companies to Louisiana and says it's often the difference maker when two states are competing. "I can assure you that these tens of billions of dollars in projects, we didn't have an Industrial Tax Exemption Program, would not be happening," Moret claims. "Some of them might have happened. But I think the vast majority of them wouldn't. "
Moret points to the state's job growth. According to the U.S. Bureau of Labor Statistics, Louisiana has gained 82,100 jobs since 2008. Other Southern states such as Mississippi, Georgia and Alabama have all lost jobs.
"I bet you'll find that the vast majority of job growth isn't attributable to the subsidized companies," LeRoy tells us, "but did come from smaller businesses, local businesses, young businesses, entrepreneurial businesses, high-tech startups… So the question is, what are you getting for that much? If these really were stimulating something to occur that wasn't going to occur otherwise, you should have had a huge surge in job creation. You should have an extremely low unemployment rate. You should be, you know, flagging people in at the state border, piling in for jobs like it's North Dakota or something… That's not what I've read is going on in Louisiana."
In fact, Louisiana's unemployment rate has actually risen since the end of 2007, from 4 percent to 6.7 percent. Only one state, New Mexico, has seen a larger growth in unemployment rate.
So while Louisiana has handed out its taxpayer billions to big businesses, more of its people are out of work. And for one year of work, Houston-based Charif Souki was the highest paid CEO in the country.
"If I were a Louisiana taxpayer, I would be demanding Plan B," LeRoy warns. "Way too much money is getting thrown at too few companies, with paltry results."
Different states have different laws on disclosing these incentives. In fact, Louisiana is one of the best in terms of transparency.
So LeRoy's Good Jobs First cannot certify that they have every incentive out there on their list. But they do feel they have the most complete database of state incentives available.
Since Moret doesn't consider the Industrial Tax Exemption an incentive, he doesn't think Louisiana belongs at the top of the list. Still, he admits that Louisiana is one of the top givers of incentives.
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