A mirage in the distance

The Port of New Orleans has boasted about the downstream benefits to St. Bernard Parish government. The Port of New Orleans has commissioned a report to demonstrate these benefits and the Port continues to tout these so called benefits.

Just recently, the Port posted the following on its page in an effort to persuade the public that this project is really a good deal for St. Bernard Parish.

In our prior post, we demonstrated how the estimates provide by the Port of New Orleans are inconsistent and ultimately unreliable.

Opponents of the LIT facility are quick to point out that there are no guarantees on many of the assumptions relied upon in the study. The study and the Port’s messaging relying on that report assume that the improvements of the Port’s prospective lessees will be subject to ad valoreum taxes. However, the structure of arrangements is not guaranteed.

A January 3, 2023 article on WWNO.org demonstrates the concerns of opponents of the LIT facility for where there is a will to avoid paying property taxes there is almost always a way, at least for large commercial operations. The article explains how an arrangement by the Port of South Louisiana resulted in a $200 million property tax break to the Port’s lessee, Greenfield Louisiana. Under the arrangement, Greenfield Louisiana would build a $479 million grain elevator. After completion of the grain elevator, Greenfield would then donate the property to the Port of South Louisiana (and probably take a tax deduction for a charitable contribution to the state) who would then lease the grain elevator back to Greenfield. Because the Port of South Louisiana is exempt from property taxes, the donated grain elevator would be exempt from property tax and therefore Greenfield would only have to pay rent to the Port to use its own grain elevator.

Thus, the concerns of opponents of the LIT facility are legitimate. While it is possible that the LIT facility could bring in significant property tax revenue to St. Bernard Parish, there is no guarantee that it would actually do so. And after the Port is no longer courting local leaders, it is difficult to understand why the Port of New Orleans would not avail itself of this benefit to attract large, anchor tenants to the LIT facility.

Particularly interesting to the arrangement described above is the method by which Greenfield was able to get a variety of local leaders (i.e. local taxing authorities) to sign off on this deal.

It’s called the PILOT program – Payment in Lieu of Taxes. Instead of paying the normal tax rate to be distributed to various St. John Parish taxing authorities, Greenfield would make a one time payment to the sheriff’s office of $4,000,000 and then $2,000,000 per year to be split between the sheriff’s office, parish government, and the school board. This agreement is for 30 years and, according to the WWNO article, Greenfield would be paying less than 25% than it would have normally owed. The Port would also receive an administrative fee of $300,000 per year for the first four years, then $200,000 per year for the remainder of the agreement.

While those may be the largest and most politically powerful parish taxing authorities, such an arrangement would deprive the public of significant funds. The sheriff, parish government, and the school board are not the only millages assessed in St. Bernard Parish. There are numerous millages for a host of other specific government services, such as:

The PILOT program bypasses almost all of these millages, but importantly funnels just enough money to the three taxing authorities most likely to otherwise object and who would otherwise have the political ability to stop such a deal.

Is this what they plan to do to persuade local leaders to drop their opposition or to intentionally tank their lawsuits trying to stop the LIT facility? It’s hard not to acknowledge that this would be a very good plan to sway most of our local leaders.

It seems like a fitting moment to remember the sagely observation that “the beginning of wisdom is to call things by their right name.” The PILOT program is not a payment in lieu of taxes, it’s a tax break.

With no enforceable guarantees, it’s hard to come up with a reasonable explanation why the Port of New Orleans wouldn’t do the same thing to St. Bernard Parish that the Port of South Louisiana did to St. John Parish.

After all, the Port of New Orleans was clear that all of their promotional material clearly stated that these were estimates. If the estimates turn out to be comically flawed, there is no repercussion to the Port of New Orleans, only the people of St. Bernard.