Bills aim to entice companies to move to Louisiana
A Senate panel approved three business tax breaks Monday that Gov. Bobby Jindal's economic development agency touts as ways to boost business activity in Louisiana, primarily by recruiting new firms to the state. The measures, which give wide latitude to the governor's economic development chief, are supposed to yield a net benefit to state coffers. But analysis by the Legislative Fiscal Office questions whether that will happen.
A Senate panel Monday approved three business tax breaks Monday that Gov. Bobby Jindal's economic development agency touts as ways to boost business activity in Louisiana.Senate Bill 548 by Sen. Neil Riser, R-Columbia, on Jindal's behalf, would allow a business -- selected only by invitation of the state economic development secretary -- to recoup up to 15 percent of certain payroll costs through a rebate paid by the Louisiana Department of Revenue. The selected firms also would qualify for some state rebates of local sales and use taxes.
Jindal's economic development director Stephen Moret framed the measure as a key piece in negotiations with at least two automotive firms that are considering sites in north and central Louisiana.
As it moves to the Senate floor, the bill intends the Competitive Projects Payroll Incentive Program to target clean technology, next-generation automotive, aerospace, destination health care, research and development, pharmaceutical and renewable energy firms that are considering Louisiana along with sites outside the state. Corporate headquarters for any kind of business, other than gaming, also would be eligible if the move adds 25 jobs in the state, and the measure includes the caveat that the governor's development chief could use the program for any "other business sector targeted ... as a focus of the department of economic development efforts."
To qualify, at least half of the firm's eventual sales originating from the Louisiana site must be out-of-state, though the bill gives the economic development secretary some leeway on that point. Riser's bill allows a five-year contract, renewable once. The design roughly follows the existing Quality Jobs Program.
A second Riser measure, Senate Bill 567, would reimburse up to 25 percent of certain costs tied to relocating a corporate headquarters or expanding an existing one, provided the project involves 25 new jobs. For firms that are moving, no more than 60 percent of the personnel relocation costs can be included in the calculation of qualified expenses, a figure intended to encourage firms to hire locally in their new location.
As with the payroll rebate, the economic development chief would control the benefit. Both Riser measures also would give Moret and his successors the power to negotiate the contracts, including any clawback provisions tied to performance measures.
A third measure from the administration would affect how certain firms calculate their net income that is subject to the state corporate income tax. Senate Bill 463 by Sen. Mike Walsworth, R-West Monroe, would allow Moret and his successors to grant certain firms the ability to use favorable methods in figuring their net Louisiana income subject to taxation. The measure again targets businesses that can demonstrate that half their sales originating in Louisiana are out-of-state.
At Moret's urging, the Senate Revenue and Fiscal Affairs Committee adopted amendments for the entire package of bills that state tax benefits should not exceed the quantifiable benefits to the state treasury. Moret said eligibility would be based on projections but that "rebates are only provided after the company has produced the intended results." The bills also preclude firms from double dipping on tax incentives, meaning factors used to take advantage of the package could not be used to claim additional benefits.
All three measures make any gambling operation ineligible for the proposed benefits.
The Legislative Fiscal Office fiscal analysis of the measures, which were completed based on the original version that tied the program more generally to a "significant positive economic impact," raised questions about how Moret's agency calculates benefits. LED methodology, analysts wrote, "implicitly assumes that each project occurs only as a result of the benefit provided by this bill, even though the bill's benefit will likely be one of a variety. ... (That) means that the return on investment analysis always begins in a positive position from which benefited costs are deducted."
Further, "the program's benefits reduce resources supporting government purchases in the economy with the resultant negative multiplier effects, offsetting the positive effects from the targeted project spending."
Bill Barrow can be reached at bbarrow@timespicayune.com or 504.826.3452.