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PREPARED FOR THE EAST BATON ROUGE PARISH SCHOOL BOARD PREPARED BY - - PowerPoint PPT Presentation
PREPARED FOR THE EAST BATON ROUGE PARISH SCHOOL BOARD PREPARED BY - - PowerPoint PPT Presentation
PREPARED FOR THE EAST BATON ROUGE PARISH SCHOOL BOARD PREPARED BY DR. JAMES A. RICHARDSON, LOUISIANA STATE UNIVERSITY Analysis of Agreements between the Louisiana Department of Economic Development And ExxonMobil Corporation December 2018
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LOUISIANA INDUSTRIAL TAX EXEMPTION PROGRAM (ITEP)
Agreement Between LED and XOM (Ultra-Low Sulfur Mogas Project)
Estimated Investment of $64.342 million to expand motor gasoline production capacity with $36.401 million on machinery and equipment
Labor and engineering costs to be $109.202 million
18 net new jobs with payroll of $1,890,000 or $105,000 per job
Construction and/or Installation completed 12/31/2017
Support Baton Rouge ExxonMobil Refinery to maintain role as 4th largest refinery in the United States
Secretary of LED projects return on investment to State and Local Governmental Entities will exceed benefit of Exemption focusing on multitude of factors including capital expenditures, direct payroll tax receipts, indirect payroll tax receipts, and other indirect tax receipts
Agreement Between LED and XOM (Polyolefins Plant)
XOM to spend $742,801 on machinery and equipment and $2,228,4904 on labor and engineering
Project creates no new jobs but retains 244 existing jobs with payroll of $25,620,000 or $105,000 per worker
Creation of 45 net new jobs with payroll of $4,725,000
Construction and/or Installation completed 12/31/2017
T
- upgrade nitrogen transfer systems components and
improvements to position site for future capital projects
Secretary of LED projects return on investment to State and Local Governmental Entities will exceed benefit of Exemption focusing on multitude of factors including capital expenditures, direct payroll tax receipts, indirect payroll tax receipts, and other indirect tax receipts
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$0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000
XOM (Mogas) EBRPSS Share of Net New Taxes and ITEP
Net New Tax Receipts ITEP $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000
XOM (Polyolefins Plant) Tax Collections and ITEP for EBRPSS
Net New Tax Receipts ITEP
Local Taxes Collected Due to XOM Investment and the Ad Valorem Taxes Foregone (Investment by Local Governments)
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COMPARING NET NEW EBRPSS TAX RECEIPTS TO TAXES FOREGONE DUE TO INDUSTRIAL TAX EXEMPTION PROGRAM
XOM (Mogas) XOM (Polyolefins Plant)
Benefit-Cost Analysis from 2018
through 2037 (20 Years of Production at facility)
1.6349 1.4218 Benefit-Cost Analysis from 2018
through 2027 (the ending date of the tax abatement program)
0.9592 1.0788
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Local Government Entities in East Baton Rouge East Baton Rouge Parish School System Benefit-Cost Analysis from 2019 through 2041 (20 Years of Production at facility)
1.8771 1.7903
Benefit-Cost Analysis from 2019 through 2031 (the ending date
- f the tax abatement program)
1.2516 1.1848 Comparing the Net New Tax Receipts as a Present Value Compared to Present Value of Taxes Foregone
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CONCLUDING REMARKS
Local governments, just like the state, want to see their economies grow.
Large investments by major firms, along with the ongoing production, provide overall support for this growth.
Local governments, just like state governments, have to be aware of the market place in attracting major investments to their communities.
Benefit-cost ratios provide information to the local governments regarding the return on their investment in granting tax abatement options to companies considering major investments in a community.
Several caveats about Benefit-Cost Estimates
If ITEP is the tipping point, then a Benefit-Cost Estimate
- f less than 1.0 may be a good deal. You may not get, as an
example, $2.5 million in ad valorem taxes over ten years, but you sacrifice the $2.0 million you would get from a variety of taxes.
Math is 50% of something is better than 100% of nothing
But limits to this saying as well: an industry may impose costs on local governments which must then be compared to the revenues that they will generate
If the company will make the investment without ITEP , but obviously will apply for it if available, then the local governments ends up with a Benefit-Cost Estimate of 0 since the company would have made all of the investment without any incentive.
The issue now becomes: is ITEP a long-term tax incentive that will keep an industry or company consistently interested in EBR as a place to do business
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