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

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.

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11 Responses to Stephen Moret is not happy

  1. dakinikat says:

    The worse thing about this is there are also implied social costs from attracting ‘dirty businesses that aren’t included in the estimate. Dirty businesses that bring hazardous materials and waste products into a state create expenses for both states and municipalities because of the nature of the materials and the special handling, disposal and hazards they create. Will the fire departments need to get special training, chemicals, and equipment? How dangerous will it be to transport or store the materials and will the state need to monitor or provide special situations for transport or storage? This is not a highly desirable type of business since it creates all these potential for spillovers. That’s why most states try to go for corporate headquarters and avoid bidding for dirty businesses. If the state ignores the hazardous and dirty nature of the business, then you get situations where people’s lives are endangered. That is an entirely different set of social costs that also spills over to tax payers.

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    • Paul says:

      “It’s just that Sasol reveals Jindal’s badly misplaced priorities in a very dramatic and expensive way”… that’s all you conclude? i know this was just your closing line specific to this one instance. However, Sasol, Jindal, LED, the Koch’s, and what the current Republican party has devolved into is a perverted party which is pumping a hybrid economy that is Capitalistic Socialism in nature yet claims to have the pious economic high ground? I’m a center right souther white guy and i despise tea but how a center left candidate can’t crystalize this dichotomy and begin to nip at this new monster’s achilles saddens me.

      Besides, a government assisting it’s people AND ensuring it’s business base is robust and competitve is in line with what all center left and center right people agree on.

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      • Robert Mann says:

        If you read through my blog since I begin writing it in May of 2012, I think you’ll see that this is not “all” that I conclude. In way, you’re reading only part a conversation that’s been going on for some time.

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    • G. V. FOREMAN says:

      The issue at hand revolves not so much around the construction of the SASOIL plant but whether or not the “tax incentives” accorded SASOIL were necessary to attract the plant and/or justified under the revenue constraints placed on the state by Jindal. The SASOIL project is a multibillion dollar expansion of an existing facility in Lake Charles. The products, except for the GTL(gas-to-liquid) fuel, which will be produced by the SASOIL plant are already being produced at plants around the US. Whatever safety and disposal concerns have been addressed. This does not by any measure mean that additional review and evaluation of such protocol should not be conducted and maintained. However, from a production standpoint, the majority of the planned production is already occurring at the Lake Charles plant. The twist is that SASOIL will be producing an additional product from natural gas here to fore not produced in Louisiana or the United States, GTL. The product is a subsitute “type” of diesel fuel. The advantages to this fuel are many. First, the fuel is 50% less pollutant than diesel fuel. Second, the fuel will have a much higher “C-tane” rating than conventional diesel meaning vehicles employing the fuel will obtain better fuel mileage(additionally lowering pollution levels), better and cleaner engine performance from the product. SASOIL and SHELL OIL have been producing this product overseas for a number of years. The plant and the products it will produce are needed and justified. The revenue question is were such largesse tax incentives justified?

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      • dakinikat says:

        I am just saying those costs are most likely understated since the usually contain only explicit items. Another example of unstated costs is wear and tear on roads from trucks, increased volume in sewers and water plants, etc. These estimates generally don’t include impact on all infrastructure.

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      • G. V. FOREMAN says:

        Granted, any and all cost figures handed down by the Jindal are suspect and questionable. Whatever facts, figures, numbers presented by any DOA department head is automatically suspect. Because of Jindal’s enforcement of “deliberative process”, the DOA’s respective department heads feel no compulsion to validate publicly disseminated press with releases with hard documents and data. Jindal, by extension his administration, have adopted the stance the public has the right to know only what we, ie, the administration, wants them to know and the quality of what the administration is not subject to review or examination. As such, Jindal’s administration can be characterized as employing the “Charlie Tuna” approach to government. We all remember good old “Charlie Tuna” from the Starkist commercials. Very much like Charlie, what Jindal and the “Jindanista’s” tell us sounds good, looks good on paper but is really, really hard to stomach and digest. Because of this attitude and approach, Louisiana suffers from an institutionalized form of “informational food poisoning”. Because of Jindal’s censorship of any and all information coming out of the executive branch, we, those people truly concerned with Louisiana, have no way to verify, question or analyze any figures released. In fact, the DOA has not see fit to release the annual tax(revenue) collections report detailing the revenue collections for the state by source, parish, over all percentage of revenue and presented pro formally for the previous five years. The report which is normally released within a month of the end of the fiscal year has also fallen victim to Jindal’s “deliberative process” or like I prefer calling it, his “death star approach to transparency”.

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  2. Pingback: Jindal: Let’s give a billion dollars to Sasol, but cut our colleges and universities | Something Like the Truth

  3. flyingcuttlefish says:

    Reblogged this on The Louisiana Sinkhole Bugle and commented:
    oily hand washes oily hand . . .

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  4. G. V. FOREMAN says:

    FYI:
    Dr. Mann, Shell Oil has a similar plant GTL, gas-to-liquid, “on the drawing board” for Norco, LA. I’m sure the same, if not “better”, business incentives will be afforded Shell. What ever lost revenue the state and local governments will “suffer” because of such tax incentives could easily double with the addition of the Shell plant.

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  5. gage says:

    I wish I were a foreign investor with a big business to bring to Louisiana. This would be a great place to live, then. As it is, not so much so.

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