Stephen Moret is not happy

By Robert Mann

Louisiana Economic Development Secretary Stephen Moret is not happy. He doesn’t like the fact that Engineering News has reported that the South African energy and chemicals group, Sasol, “has secured investment incentives collectively valued at around $1-billion from the state of Louisiana, in the US, to support its proposed development of an ethane cracker and a gas to liquids (GTL) facility in the Lake Charles area.”

LED Secretary Stephen Moret

The story quotes a Sasol official, who says, “We have estimated that [the incentives] are north of $1-billion in total value – so not net present value – over the life of the project.”

In my Sunday night post, I asked why isn’t it a scandal that Louisiana is “coming up with” a billion-dollar investment in a foreign company while we slash our state’s higher education budget?

Moret, in an email to me this morning, objects to that phrase. In fact, he objects to the whole post. So, in the interest of fairness, here’s his entire message to me,

Your post about Sasol is very misleading. Every manufacturer in Louisiana has access to a 100-percent industrial property tax exemption for the first 10 years of a new capital investment. That local property tax exemption has existed for decades. In fact, most other states have a similar, standard property tax exemption for manufacturing projects. I don’t know where the $1 billion number came from, but it most surely is primarily the result of the industrial property tax exemption. Because Sasol is a huge project, the value of statutorily exempted local property taxes is quite large.

Louisiana is not “coming up with $1 billion in incentives to attract one company”. That is simply false. In fact, the Sasol project will represent one of the largest sources of new funding for higher education in decades. Attached is a recap of the state tax revenues and state incentives associated with this project.

Moret says he doesn’t know where the $1 billion figure came from. Perhaps he doesn’t, although I find it hard to believe that the state didn’t spell it all out (including the local incentives) in a very persuasive letter. That’s what governors and state economic development secretaries do — add up all the incentives to make the package seem as attractive as possible. In fact, the New York Times reported last December that Louisiana was offering $2 billion in incentives.

The attachment Moret sent along (see the image at the bottom of this post) spells out the direct state incentives, which add up to $257 ~~$616~~ million. It’s not a billion, but it’s still a great deal of money.

Buried in Jindal’s own press release announcing the Sasol deal is this sentence: “To secure the project, Louisiana offered Sasol a custom incentive package that includes a performance-based grant of $115 million for land acquisition and infrastructure costs associated with the facility.” I wonder why Jindal didn’t tout the bigger ~~$616~~ $257 million figure in his press release?

But what Moret’s attachment reveals is that the $115 million will be paid in two, $57.5 million installments — in 2018 and 2019. That’s two years after Jindal’s tenure as governor will be over.

In other words, Jindal and Moret have cut a deal binding a future governor and a future legislature to come up with that money. You and I will be forced to pay their bills with funds that could be helping build a stronger higher education system or helping the working poor get health care.

So, again, I ask the question: Why is this not a scandal?

When it comes to supporting our colleges and universities, we’re searching under the sofa cushions to find enough money to keep the lights on.

When it comes to expanding Medicaid for Louisiana’s working poor, the state is too broke to afford even the 10 percent match to get billions for health care for up to 400,000 Louisiana citizens? But we can easily find hundreds of millions for Sasol?

There’s just never a problem coming up with the tax money if we want to shovel it to an out-of-state company so Jindal and Moret can have a press conference.

What this story says is this: if it’s important to us, we will always find the money to do it (even if we take it from a future governor). It’s just that Sasol reveals Jindal’s badly misplaced priorities in a very dramatic and expensive way.

Note: My thanks to an astute reader, who corrects an earlier version of this post, noting that I wrongly used the higher “cumulative state tax revenues in excess of costs,” as opposed to the lower and correct figure for “total state incentives,” which is $257 million. I apologize for my error.