Louisiana lawmakers OK incentive packages despite concerns about costs to state

Lawmakers assembled in Baton Rouge approved two economic incentive packages Thursday for Sasol and Lockheed Martin, just one week after expressing concerns about their cost. Louisiana's chief economist said the projects would result in a net cost to the state, while legislators and development officials argued the projects would bring in billions of dollars in tax revenue. Most of...

Lawmakers assembled in Baton Rouge approved two economic incentive packages Thursday for Sasol and Lockheed Martin, just one week after expressing concerns about their cost. Louisiana's chief economist said the projects would result in a net cost to the state, while legislators and development officials argued the projects would bring in billions of dollars in tax revenue.

Most of Thursday's meeting was spent parsing out the incentive package being offered to South African gas company Sasol to build a multibillion-dollar project in Lake Charles, and how the package might be offset by incoming tax revenue.

Analysis by the Louisiana Economic Development office said the Sasol project would mean $616.2 million in state tax revenue in 10 years: The total tax revenues would be just over $873 million with the total incentive package costing $257 million in that same time, according to the LED numbers.

But Greg Albrecht, chief economist for the Louisiana Legislative Fiscal Office, said he doubts the overall accuracy of that analysis for budgeting purposes. "I think the costs here are a little bit understated, and I certainly know they're uncertain from year to year," Albrecht told the Joint Legislative Committee on the Budget, referring to LED's numbers as well as estimates provided by an accompanying LSU study.

"I don't think you can look at these kinds of numbers and say, 'That's reliable for budgeting. Take it to the bank'," he said.

Albrecht said he believes any project into which state funds are expended -- like building a school, hospital or prison -- will result in a net cost, but added that the impetus to approve such projects is a "political decision" and "that doesn't mean it's a bad idea."

"In my analysis, (the Sasol project) would not be a break-even or a gain for the state," he said.

Last week, lawmakers expressed worries about the incentives being offered to Sasol to build a gas-to-liquid facility and ethane cracker in Lake Charles, and to Lockheed Martin to build cryogenic tanks at the Michoud Assembly Facility in New Orleans.

But this week, the panel was void of such concerns, with lawmakers instead making arguments for why the two projects are vital for the economic development of the state.

"Clearly the driving force for us is jobs," state Sen. Conrad Appel, R-Metairie, told Albrecht. "The jobs generated indirectly for the exploration and transportation of gas needed to run the (Sasol) plant have to be a big element in the discussion."

The Sasol and Lockheed Martin projects are estimated to create 1,200 and 400 direct jobs, respectively. Albrecht took no issue with these numbers, but said estimates of "indirect" jobs could be inflated.

For the Sasol project, LSU estimates 1,272 workers would be directly employed by the company with an "indirect employment" -- positions created by other businesses in the region as a result of the project -- of 8,794 jobs. Albrecht noted that more than 85 percent of the total estimated jobs created were in this "indirect" category.

"That's a giant share of the total, is actually in the least reliable component of the whole analysis," Albrecht said.

State Sen. Mike Walsworth, R-West Monroe, however, noted that aside from the statewide economic impact analyses, the projects would bring local governments increased sales tax and occupational licensing fee revenues.

LED Secretary Stephen Moret agreed with Walsworth, noting the projects would result in "hundreds of millions" of dollars in local tax revenues.

"This project is the biggest single economic development project in our state," Moret added, referring to the Sasol project. The South African company has pledged to spend between $16 billion and $21 billion in Calcasieu Parish, the first major gas-to-liquids project in the United States. Lockheed Martin will invest $3 million in its project in New Orleans.

At the end of the meeting, the lawmakers voted without opposition to approve the incentive packages. Committee Chairman Sen. Jack Donahue, R-Mandeville, who last week objected to moving forward with the agreements, made the motion to approve and adjourn.