Avoyelles Police jury mulls Kerotest request for tax breaks

Everyone wants economic development. Everyone supports Kerotest’s proposal to expand its plant in Mansura and create another 50 jobs.

Then there’s the “big but” that is cause for pause.

Kerotest is seeking several tax “incentives” it says are necessary for the expansion project to be financially feasible.

The company wants to build a 30,000 sq. ft. addition to meet growing demand for its industrial valves. The construction will cost about $1.5 million and require another $2.8 million in new equipment. It will create 50 new jobs.

Kerotest has filed a preliminary notice with the Board of Commerce & Industry (BCI) that it intends to request 100 percent property tax exemption for five years -- and up to 80 percent for the next three years after that -- and a 50 percent sales tax rebate on construction material and new equipment related to the proposed expansion project.

Gov. John Bel Edwards recently changed the tax incentive process by noting the law requires the governor’s consent to property tax exemptions and sales tax rebates and he will not give his consent without input from local taxing authorities who rely on those taxes to operate.

PRESENTS CASE TO POLICE JURY

Attorney William Shockey presented the company’s case for those incentives to the Avoyelles Parish Police Jury at its July 10 meeting.

Jurors supported the project, but expressed concerns that their support of those incentives would open the door for other companies to expect similar considerations.

Central Louisiana Economic Development Alliance Vice President Larkin Simpson pointed out that CLEDA has worked to implement several such “incentive packages” to promote local economic development efforts.

He said many parishes actively recruit new industry and encourage expansion of existing industries by promising such incentives that are allowed by state law.

Police Jury President Charles Jones said a consortium of the taxing bodies has met once and will meet again to discuss Kerotest’s incentive package. That consortium includes the Police Jury, School Board, Sheriff’s Office and Town of Mansura.

The School Board is not affected by the proposed sales tax rebate incentive because state law prohibits public school sales taxes to be rebated to businesses. It would be affected by the property tax exemption.

Shockey emphasized the only tax revenues in question would be for the expansion. Kerotest would continue to pay the property and sales/use taxes on its existing plant.

LARGE EMPLOYER

Kerotest is one of the parish’s largest private sector employers and one of the largest property taxpayers. It has 154 employees with a payroll of almost $4.5 million.

Under the proposed tax incentive package, Kerotest would pay no property taxes on the 30,000 sq. ft. addition for five years. After five years, it could receive an 80 percent property tax exemption for three more years. After that period, it would pay the full property tax on the addition.

The company would continue to pay about $129,696 in parish property taxes and $10,449 in Mansura property taxes during that exemption period.

Under the sales tax rebate incentive, Kerotest would pay all sales taxes on its equipment and construction material upfront, but then receive back 50 percent of the state, Police Jury, Sheriff’s
Office and Mansura sales taxes.

The company would still pay sales and use taxes on its existing operations, which has average over $32,500 a year since 2009.

The sales tax rebate is conditioned on the company complying with the terms of the economic development agreement.

Shockey said the state can terminate the incentive agreement if, for example, Kerotest is unable to create the promised 50 jobs in the project.

VEILED THREAT

Shockey made only one comment that could be considered a veiled threat, saying if the requested tax incentives were not approved, Kerotest could choose to expand its plant in Pennsylvania -- where, he said, local governments are very willing to grant such incentives -- rather than the one in Mansura.

In an executive summary provided to jurors and referenced by Shockey during his presentation, Kerotest states it “cannot undertake the proposed expansion without the incentives available in Louisiana” -- the sales tax rebate under the Enterprise Zone Credit and the industrial property tax exemption.

“These incentives make the Mansura plant expansion project feasible when otherwise it may not be so.”

That summary of the proposal notes that much of the equipment being purchased for the expansion will be from out-of-state, making it subject to Louisiana’s higher sales/use taxes.

“Relief from that higher tax burden makes Louisiana more competitive for projects such as Kerotest’s proposed expansion,” the document added.

Jones said the consortium members need to get together to agree on their recommendation to Edwards. He said it would be best for all parties to agree rather than one say they agree with BCI and others say they want to grant less than the state board approved.

Shockey said Edwards requires local governments’ input before he will consent to the incentive package. If the local governments recommend adjusting the incentive package, the governor could still approve the full incentives or follow the local recommendations for a reduced incentive package.

Reducing the incentives would require Kerotest to re-evaluate whether the project would still be feasible.