Incentive money also flows back to Louisiana Economic Development

Over the past 24 months Louisiana Economic Development has seen 15 companies have to pay back $8.3 million in reimbursements to the state for up-front business incentives they were provided to relocate to or expand here.
The money had to be returned to the state because the companies, most often due to unforeseen market conditions, did not measure up to expectations outlined in their cooperative endeavor agreements.
The issue made a splash in statewide news coverage last month as a handful of companies that had received incentives announced plans to make layoffs, shutter operations or abandon construction.
That’s why, Louisiana Economic Development Secretary Don Pierson said, that the state requires contract language, in the case of discretionary incentives, that compel companies to reimburse. For statutory incentives, or those established by law, the department also builds in performance-based rules.
The number of projects that have triggered clawbacks in the form of reimbursements or reduced payments so far this year has been four, valued at a total of $134,357. But more could be on the way as reporting deadlines draw near.
AAR’s aircraft maintenance operation in Lake Charles is one of the latest that has observers concerned. Expansion plans appear to be slowing and the department is evaluating the company’s performance — an analysis that may lead to a reduction of the state’s reimbursement of AAR’s capital expenditures.
“We are working hard to support AAR in its goal of continuing and expanding operations at its Chennault International Airport facilities,” Pierson said. “The company is actively pursuing long-term contract with major airlines and air transport companies. In the event that the company were to close its facilities before Sept. 30 — an outcome we are working hard to avert — the company would owe approximately $490,000 to the state for payroll under-performance in the project year ending Sept. 30, 2015. The company also would owe the state of Louisiana $2 million for unmet performance targets in future project years.”
Over the past couple of months, Bell Helicopter changed its jet production plans in Lafayette and Union Tank Car moved forward with layoffs in Alexandria.
Bell Helicopter is not in an under-performance situation right now, Pierson said, but the company would owe the state a reimbursement equal to 30.5 percent of any payroll shortfall should it not create 75 jobs by the end of the calendar year.
Union Tank Car did have payroll under-performance issues and has made clawback payments totaling $1.7 million.
Nucor announced plans in December to shutter its St. James Parish steel mill. Pierson said Nucor and the state “continue to maintain a positive dialogue about the company’s existing facilities and investment, as well as constructive discussions about potential future investment in Louisiana.”
To date, Nucor has received a $30 million performance-based grant. Due to the company’s decision not to move forward with another phase of capital investment, Nucor is repaying $30 million in state bond obligations.
Pierson said it’s important to note that sometimes clawback penalties are not fully invoked. If a company produces a portion of what they projected, LED will provide a portion of the incentive benefit at a reduced rate. Often a reduction is in a scheduled payment to the company, he added, because the company will typically have to demonstrate performance before gaining a benefit from the state.
U.S. Senate forums stacking up
There’s at least one televised debate already on the books for the U.S. Senate race. It’ll take place Nov. 2 in Baton Rouge and is being hosted by Raycom Media.
The carrying stations include WVUE-TV New Orleans, WAFB-TV Baton Rouge, KSLA-TV Shreveport and KPLC-TV Lake Charles.
In the event of a runoff, a second debate will take place on Dec. 8 in Baton Rouge. To participate candidates must be polling at at 5 percent or higher in a survey that will be commissioned by Raycom Media and its partners after qualifying. The debates will be broadcast live statewide and candidates have until June 15 to agree to participate.
Once again the Louisiana chapter of the National Federation of Independent Business will be partnering with the Restaurant Association and the Retailers Association to host a forum focused on small business issues this cycle.
The U.S. Senate forum will be held at Ruffino’s De La Ronde Hall in downtown Baton Rouge on June 29 at 11:30 a.m. Invited candidates include Congressman Charles Boustany, Public Service Commissioner Foster Campbell, Congressman John Fleming and Treasurer John Kennedy.
Study: Louisiana has money problems
A new study for the Mercatus Center at George Mason University has ranked Louisiana 33rd among the U.S. states and Puerto Rico for its fiscal health.
It found that the Bayou State has between 1.99 and 3.26 times the cash needed to cover short-term liabilities.
Among the other findings:
— Revenues cover 96 percent of expenses in Louisiana, producing a deficit of $216 per capita.
— On a long-run basis, net assets are 4 percent of total assets, and total liabilities are 44 percent of total assets.
— Total debt is $12.31 billion.
— Unfunded pension liabilities are $73.26 billion on a guaranteed-to-be-paid basis, and other post-employment benefits add $5.48 billion to unfunded liabilities. Together these three liabilities are equal to 46 percent of total state personal income.
They Said It
“This amendment makes me smell smoke and see my reflection.”
—Rep. Robert Johnson, D-Marksville, on an amendment he opposed in the second special session
“The wisdom of compromise is to know how to bend without breaking.”
—Ways and Means Chair Neil Abramson, D-New Orleans
For more Louisiana political news, visit www.LaPolitics.com or follow Jeremy Alford on Twitter @LaPoliticsNow.