Thread by @Tog4LA

Beneath the controversy over ITEP, there's a basic constitutional question: Does the State Board of Commerce & Industry have the authority to give these exemptions? The answer is: Yes -- but not without limits.
That Board has been operating WAY outside these limits. THREAD

https://twitter.com/samkarlin/status/1230601865479454720

The State Constitution prohibits gov't entities from giving away something of value for a non-public purpose. A school board can’t allocate $10M to their Swiss bank accounts.

A State board can’t give away tax exemptions to businesses for nothing.

legis.la.gov/Legis/Law.aspx…

The Constitution does authorize the Board of Commerce & Industry (with the approval of the Governor) to give industrial tax exemptions as INCENTIVES. But it can't give exemptions as GIFTS.
Incentives vs. gifts. How do you tell the difference?

In a word: THE CABELA TEST -- the standard a tax exemption must meet to be an incentive (legal) and not a gift (illegal). (It comes from a lawsuit over incentives to Cabela Sporting Goods.

Read about Cabela here: app.lla.state.la.us/llala.nsf/9EB3…)

The Cabela test has 3 parts: Part #1) the exemption has to be for a legitimate public purpose that’s within the authority of the public body.

#2) The exemption does not appear to be gratuitous.

And #3) The public entity has to have a “demonstrable, objective, and reasonable expectation of receiving at least equivalent value in exchange for the expenditure or transfer of public funds.”

Here’s the Cabela Test per the Attorney General's office:

At its meeting tomorrow, the Board of Commerce & Industry will disregard and openly violate the Cabela Test, specifically parts #2 & 3. It will do so in giving away $150M+ in taxpayer funds that would go to public schools, roads, police, fire & other local services.

Here's the agenda so you can follow along from home:
opportunitylouisiana.com/docs/default-s…

The first ITEP the Board will consider is an exemption for capital investments by Bollinger Shipyard in St. Mary Parish. Sounds okay …

The problem is this Bollinger project was completed in
2018 – 2 years ago! There's a wrod for an exemption to “incentivize” an investment that took place 2 years earlier -- GRATUITOUS. It is not needed to motivate this project. This exemption violates Cabela Test #2.

The next agenda item is an ITEP for Calumet, an oil refinery in Caddo Parish. Calumet makes jet fuel. It’s got one customer – the Air Force base next door. Does a jet fuel producer with a single client really need an incentive to be located next door to that client?

While you’re wondering about that, consider this. Calumet *completed* the project for which it wants this incentive back in 2017.

On the 9 highlighted exemptions, the Board of Commerce & Industry will approve $29.9M in public subsidies. The companies are creating a total of 25 jobs. That’s $1.1M per job created.

Let's look at Cabela Test #3: Public entities must have a “demonstrable, objective, and reasonable expectation of receiving at least equivalent value in exchange for the expenditure or transfer of public funds.”

The Commerce & Industry Board simply ignores it.

All these exemptions will be approved without the Board or LED having conducted a single cost-benefit analysis. (Occasionally, LED slaps together a spreadsheet using a methodology mathematically incapable of producing a negative return. Usually, they don’t bother.)

All these exemptions are POST-ITEP Reform. The pre-reform exemptions are even worse. They’re a little further down the agenda. 255 renewals.

Here are the rest ...

13 exemptions for Cleco, a power plant? But power plants must demonstrate to the Public Service Commission that there is a “public necessity” for the proposed facility. And the utility companies are guaranteed a specific return on investment. How can THAT need an incentive?

It doesn’t. It’s gratuitous. There’s no cost-benefit analysis to justify it. But the Board will approve it anyway, in violation of the Cabela Test and the State Constitution.

What’s up with the 3 straight pages of exemptions for Genesis – 43 in total. The constitution limits the C&I Board to granting ITEP exemptions to MANUFACTURING facilities. Genesis is an oil STORAGE facility. It doesn’t manufacture anything. It stores oil and liquids.

These exemptions, too, are unconstitutional. They're costing East Baton Rouge Parish schools and other EBR services $2.4M this year.

Every meeting is like this. One grotesque, unconstitutional abuse of authority after another.

In 2016 Gov Edwards made some important reforms to ITEP. Modest reforms. But historic. They gave local entities authority to reject exemptions. Those reforms helped put some limits on the carnage, by requiring job creation and empowering local entities to reject exemptions.

Almost right away, LED created a loophole that swallowed the job creation requirement whole. It said you could get exemptions to RETAIN jobs, if you had a compelling reason. But it defined "compelling reason" so that EVERY investment in human history would be eligible. 👇👇👇

Tomorrow, the Commerce & Industry Board will water down the ITEP reforms even more by strong-arming local entities into getting rid of the standards they put in place to close LED’s loopholes that allow gratuitous exemptions and exemptions without job creation.

ITEP cost LA school districts $1.9 BILLION in 2018. That makes it the most expensive corporate subsidy program in the nation. All of Texas has $2.3 billion in property exempted under a similar program. Louisiana – which is 5 times smaller – has over $100 billion exempted.

If ITEP revenue went to schools instead of corporate welfare, it would increase public education funding in Louisiana by 20%! $720M in additional revfenue for schools. That’s 18 TIMES more than the increase Gov Edwards is proposing in his 2020-2021 budget.

Why isn’t every local school board member up in arms about this? Every sheriff. Every mayor, every city council member, every library board trustee. Every citizen.
They need to engage soon, because the corporate welfare lobby is trying to chip, chip, chip away at ITEP reform.

Winning those reforms is one of the most important changes that’s happened in the history of this state. If they stay in place, it will bring hundreds of millions in funding to local schools & parishes.