Lawmakers delay approval of Sasol, Lockheed deals, citing tax incentive worries

08 10, 2013 by The Times-Picayune

Lawmakers in Louisiana decided Friday to delay approval for a multibillion-dollar deal with Sasol until more concrete tax incentive numbers can be provided. They requested Gov. Bobby Jindal's economic development head return next Thursday for another discussion on the deal penned with the South African energy company.

State Sen. Jack Donahue, R-Mandeville, objected to the agreement's approval during Friday's meeting of the Joint Legislative Committee on the Budget in Baton Rouge. He said he was opposed to rubber-stamping any project without knowing the possible dollar amount of the tax incentive package being offered.

"I have a problem with this because I don't know how many dollars you're asking for," Donahue, Chairman of the Joint Committee, told Louisiana Economic Development Secretary Stephen Moret on Friday.

He called the deal "open-ended" and mentioned some tax exemption programs have ultimately ended up costing the state much more than what was returned in new tax revenues.

Concerns over tax exemptions have increased in recent years as many of these deals have proven to be a drain, rather than a boon, on state coffers. For example, an audit released in April showed the state was in the red by $170 million on the motion picture credits in 2010.

Moret dismissed these concerns, saying the nature of the Sasol deal meant the state would never be in the red. While exemotions like those offered to the motion picture industry are based on statute, the deal being offered to Sasol is strictly controlled by Moret's department.
I have a problem with this because I don't know how many dollars you're asking for." -- Committee Chairman Jack Donahue, R-Mandeville

"We're essentially never negative on this," Moret replied, adding delaying the deal would "be sending a really bad message to (Sasol) for such a no brainer to the state."

After the meeting, Moret said, "I think there's a lot of confusion about how tax exemptions work as opposed to performance-based grants." He noted tax incentives controlled by his department are "the most carefully structured, heavily monitored" incentives the state offers and do not kick-in until certain targets are met.

He said he tried to introduce initiatives during the last legislative session that would have placed more oversight of statutorily-created tax exemptions in his office's hands, but these largely failed.

"They're essentially entitlements," Moret said of the thousands of tax exemptions over which his department has no control. He added the state is legally obligated to offer them if the companies are applicable.

Jindal announced the deal in early December, describing it as the largest manufacturing investment in Louisiana's history. Sasol has pledged to spend between $16 billion and $21 billion in Calcasieu Parish to build an ethane cracker and gas-to-liquids facility that turns natural gas into chemicals and fuels on-site.

In return, the state is offering the Johannesburg-based company a total incentives package that amounts to at least $257 million over ten years, Moret said Friday. These numbers are not included in the deal with Sasol, however, because they're subject to change depending on the company's performance.

According to an LSU study amended and re-released this week, the project is expected to bring add 8,394 construction jobs, 1,272 direct jobs and $873.2 million in tax revenues over 15 years.

State Sen. Robert Adley, R-Benton, sitting in for Sen. Neil Riser, raised concerns Friday that the Legislative Fiscal Office had contacted Moret in February for a breakdown on the incentives package but never received a reply. Moret said he was unfamiliar with the request and noted the LSU report had been supplied at that time.

Adley recommended to the committee that the deal's approval be delayed in order for Moret's office to provide more concrete numbers to the committee on the incentives package.

House Speaker Chuck Kleckley, R-Lake Charles, initially opposed the delay, calling for the deal to be OK'd.

By the end of the discussion, however, he had flipped. He said while Sasol had been "very good corporate neighbors," he understood others' concerns and the need to be consistent in project oversight.

The committee then unanimously approved the delay. Along with it, they decided to also delay an agreement Lockheed Martin to invest $3 million in building cryogenic tanks at the Michoud Assembly Facility in New Orleans.

Of the other lawmakers present weighed in on the issue, state Rep. Walt Leger, D-New Orleans and State Sen. Ronnie Johns spoke in favor of approving the deals. State Sen. Edwin Murray, D-New Orleans, was opposed.

However, Moret said after the meeting he would not be providing lawmakers with any more numbers next week, but hoped presenting the same information he did Friday in a "format that is easier to follow" would help clear-up confusion.

"We're going to give them a summary of what we shared with them verbally" at the meeting, Moret said, noting the Fiscal Office staffers could provide their insight as well. He said he has never before seen lawmakers ask for the office's approval over an economic deal.

Lawmakers will hold a special meeting of the joint budget committee next Thursday to discuss the Lockheed and Sasol deals, Moret confirmed Friday.