Monday, May 27, 2024

Governor rejects Folgers Coffee Co.’s tax exemptions in state’s final decision

by BIZ Magazine

By Wes Muller, Louisiana Illuminator

Gov. John Bel Edwards has rejected a state board’s decision to grant Folgers Coffee Co. millions in property tax exemptions, restoring the initial decisions local taxing authorities in New Orleans made.

Edwards issued a statement Monday saying his denial of Folgers’ applications under the state’s Industrial Tax Exemption Program (ITEP) will be made official after he receives them from Louisiana Economic Development, the state’s economic development agency.

The governor’s rejection negates a decision by the Louisiana Board of Commerce and Industry earlier this month and could prompt a judge to lift a court injunction that is currently blocking Orleans Parish from collecting on a multi-million dollar property tax bill that Folgers has so far avoided paying.

On March 2, the Board of Commerce overturned decisions by New Orleans officials to reject Folgers’ six ITEP applications.

Under ITEP, the company sought millions in property tax breaks for upgrades it completed at its Chef Menteur Highway and Old Gentilly Road plants. The tax exemptions would cover an entire decade on top of the roughly $121 million in exemptions Folgers had already received from 2000 to 2017.

All three local taxing bodies — the New Orleans City Council, Orleans Parish Sheriff’s Office and Orleans Parish School Board — denied all six of Folgers’ applications.

New Orleans officials then sent Folgers a $5.1 million bill for the unpaid back and current taxes. In response, Folgers filed a lawsuit and successfully convinced a judge to halt the tax bill and allow the company to appeal to the Board of Commerce and Industry for a new decision on its ITEP applications.

In a split decision, the board approved all six of Folgers’ exemptions for school board taxes and two of its exemptions for the city taxes. However, the board still needed Edwards to sign off on its decision, and the governor refused.

Together New Orleans, one of the advocacy groups that has opposed Folgers’ ITEP applications, said the board’s decision to single out New Orleans public schools for punishment was “particularly arbitrary and cruel.”

A status conference hearing is scheduled for Thursday in Orleans Parish Civil District Court. Judge Omar Mason could reconsider the injunction that Folgers won based on the argument that its ITEP applications were still pending an administrative appeal with the Board of Commerce and Industry. Edwards’ rejection of the Commerce Board’s action should effectively end the ITEP application process for Folgers.

“Our hope is that this lifts the grounds for the injunction and the judge allows the tax assessment process to continue,” Together New Orleans’ Erin Hansen said.

Hansen said her organization estimates there is roughly $4.3 million worth of tax revenue at stake for Orleans Parish public schools.

The governor’s action on Monday aligns with campaign promises and executive decisions he made nearly eight years ago to reform ITEP, and the Folgers case has become perhaps the most prominent example of the impact of those reforms.

The decades-old ITEP program once gave large corporations 100% tax exemptions on their properties with no requirements that they create jobs or show some kind of benefit to the community. Property taxes are a primary source of revenue for local governments to pay for public schools, law enforcement, road maintenance and other community services.

The Board of Commerce and Industry, composed of unelected appointees, had sole authority to decide on ITEP applications and often rubber stamped every application it received with little scrutiny or concern for the communities affected by the loss in tax revenue.

Scrutiny and outcry over the program began building among public education advocates, residents and local government officials. Together Louisiana decried the tax exemptions as “corporate welfare” that gave wealthy companies special privileges to avoid paying for the public services that most other businesses and homeowners pay for through property taxes.

During his first term as governor, Edwards issued executive orders to reform the program. He reduced the amount of the ITEP exemptions companies could receive, required the creation of jobs and — most significantly — gave local governments the authority to decide whether to approve or deny ITEP applications.

“I have always been clear that I believe local governments should have authority over exemptions to their own property taxes, which they use to fund priorities like roads, schools and law enforcement,” Edwards said in a press release Monday. “This revenue does not come to state government, so state government should not have all the decision-making power. That belief in local control of local money was the basis of the ITEP reforms my administration put in place in 2016. Therefore, I will deny the ITEP applications that were recently advanced by the state Board of Commerce and Industry after being rejected at the local level.”

The governor’s action had widespread support among Louisiana voters, and a recent study has since shown that the reduction in corporate tax incentives has not driven businesses to other states or hurt Louisiana’s business climate.

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