In The News › Tax incentive programs face funding cunch

Jan 30, 2006

Source: New Orleans CityBusiness

Tax incentive programs face funding cunch

Tax incentive programs face funding cunch
by Deon Roberts

Hurricanes Katrina and Rita hit five months ago yet officials are still waiting to see if the destructive storms washed away Louisiana’s business incentives.

Louisiana provides grants, training, tax breaks and other incentives to encourage new businesses to establish and existing businesses to expand.

But as the battered, cash-strapped state rebuilds, some programs need refinancing to stay alive, officials said. Also, tax breaks might be shelved in cities and parishes where greatly reduced populations and tax bases leave little funding to provide basic government services.

Don Pierson, assistant secretary of Louisiana Economic Development, said the state agency has told the Louisiana Recovery Authority it needs $1.5 billion to address “critical needs to sustain business recovery for Louisiana.”

The LRA, a 26-member board, will advise the governor and Legislature on how to spend $6.21 billion in federal rebuilding grants announced Wednesday by Housing and Urban Development officials.

Pierson said he hopes the LRA and the Legislature approve LED’s funding requests.

It is not known how much funding LED incentive programs will attract. LED is vying with governments and planning committees across the state for funding.

Mixed reactions

Official opinions are mixed on Louisiana business incentives.

Pierson said two state incentive programs might not be around through the end of the year due to lack of funds.

The Economic Development Assistance Program, which issues business grants to make infrastructure improvements, is out of money and will need funding from the Legislature, he said.

Another program in serious need of a cash infusion is Incumbent Worker Training, which is underwritten by the state unemployment insurance trust fund. The program funds worker training, which results in raises and job security, said IWT director Michael Harris.

Last fiscal year, from July 1, 2004, to June 30, 2005, IWT awarded $82.3 million to employers, Harris said. The program’s funding now stands at $4.5 million and can increase only if the Legislature permits a surcharge to employers who contribute to the unemployment insurance trust fund.

The unemployment insurance trust fund could shrink if unemployment claims rise. Harris said the trust fund balance was a “hefty” $1.5 billion pre-Katrina but layoffs have dropped it to roughly $1 billion.

Pierson is optimistic about the impact the Gulf Opportunity Zone Act will have on businesses. The act, which President Bush signed into law Dec. 21, 2005, includes tax credits for retaining employees, deductions on cleanup costs and credits for rehabilitating buildings.

On the other hand, it is also not known what will happen to property-tax-based incentives granted by cities and parishes because governments will need taxes to provide services.

Tax debates

The state restoration tax abatement program, designed to encourage rehabiliting buildings in designated areas such as downtown or historic districts, is also in flux. The program allows a property owner to improve the structure without having to pay property tax increases for at least five years.

New Orleans City Councilwoman Renee Gill Pratt represents the Central Business District, an area where this incentive is used often. She said she would evaluate RTA applications on a case-by-case basis and would be willing to support them as long as Orleans Parish residents are hired to fill the jobs created, she said.

Bureau of Governmental Research President Janet Howard, who sits on the Government Effectiveness Committee of Mayor C. Ray Nagin’s Bring New Orleans Back Commission, said future city development should not involve incentives that take properties off the tax rolls. Funding city government post-Katrina is a critical issue and incentives should be used carefully, she said.

Others say business incentives are more important than ever as the state rebuilds.

“I think it’s very important that we remain as competitive as possible,” said state Rep. Steve Scalise, R-Metairie.

Susan Seip, director of administrative services for the Solutient Corp., a New Orleans software development company, agreed.

“We can’t keep up with all the states and all the other communities if we don’t have them,” she said.•

Jan 30, 2006

Source: New Orleans CityBusiness

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