The St. Tammany Parish Council voted unanimously Thursday to give three businesses tax relief under the state’s Industrial Tax Exemption Program.
But one of the applicants, Diversified Foods and Seasonings LLC, got a somewhat chillier reception from the St. Tammany Parish School Board for a break on taxes for a $15.5 million expansion of its frozen foods plant near Madisonville.
As the main recipients of the tax money, the School Board and Parish Council have the authority to consider the exemptions under new rules for the program. They don’t have to weigh in at all, but if they wish, they can say yes or no to the companies’ requests.
The School Board, which held its monthly committee meetings Thursday, ultimately voted 10-5 to recommend approval of the Diversified Foods tax break when it takes up the matter for a final vote next week.
The vote came after Diversified President and CEO Peter Smith apparently swayed some opinions. He told the board that tax breaks the company received from the state played a large role in his decision to shutter a plant in Nebraska and move those operations to the company’s local facility.
A deal that makes Diversified the exclusive supplier to Popeyes restaurants through 2034 has sparked further expansion plans, he said, adding that the company is looking at an $80 million acquisition in a year or two that would make its current tax contribution to the School Board seem small.
“The benefits for the parish could be tremendous,” Smith said. “In millions. So if we’re worried about $200,000, $800,000 (today), that’s minutiae. The commitment is I am going to turn this company, within … five years to be exact, we’re going to be a $350 million company within the parish.”
The 10-year tax break that Diversified Foods is seeking would allow it to pay property taxes on only 20 percent of the $15.5 million expansion, a project that it says will add 44 jobs to its payroll.
Its request was by far the largest of the three before the local government agencies. Dependable Glass Works and Mechanical Equipment Company Inc. were seeking breaks on much smaller investments: $539,000 and $300,000, respectively.
The School Board is the largest tax recipient body in the parish with 65.41 mills, which generates about $132 million in revenue annually, according to the St. Tammany Parish Assessor’s Office website.
The exemption for Diversified Foods will cost the School Board about $802,000 over the life of the exemption, and several members were concerned about that loss in revenue.
Member James Braud said the necessary “return on investment” wasn’t there for him. “If we could offer a 60 percent or maybe a 70 percent (exemption), that would give us a positive return on investment based on our loss of revenue,” Braud said. “But it’s a yes or no. You can only go 80 percent. No options.”
Sharon Drucker noted that Diversified currently has eight other ITEP agreements. A spreadsheet provided to School Board members said Diversified received ITEPs valued at about $208,000 in 2018.
Shelta Richardson said she struggled with the proposal because she couldn’t justify “robbing our education system.”
In the end, Braud voted no, along with Matthew Greene, Mike Winkler, Dennis Cousin and Lisa Page. But Drucker and Richardson voted yes.
The Parish Council discussion, by contrast, was not contentious. The Finance Committee on Monday had grilled Diversified Foods about the safety of its operations, with members pointing out that an ammonia leak in 2015 had shut down Interstate 12 for six hours.
But on Thursday, officials seemed more concerned with whether the change in state law that for the first time gave local governments a say in approving the exemptions will remain in place.
Councilman Jerry Binder said council members have heard that the Legislature might take steps to change the program again.
Chris Masingill, CEO of the St. Tammany Parish Development District, replied that the council should wait to see what will happen. “It would take a lot to remove the local piece,” he said.
Parish President Pat Brister said, “I’ve talked to our delegation and let them know it’s very important to us to have a seat at the table.”
Councilman Mike Lorino noted that Fire District 13 had raised concerns about the exemption at the Finance Committee meeting, saying that the frozen foods plant represents a unique hazard for which other taxpayers are footing the bill. Committee members had urged Diversified Foods to meet with the fire district.
Masingill said he has scheduled a meeting on ITEP with all the parish’s fire chiefs.
Council members also questioned whether there would be a way to ensure that recipients of the exemption actually add the jobs they’ve promised. Masingill said there will be annual reviews and audits, and if a recipient is found to be in default of the requirement, it will have to make the normally required tax payment.
Masingill noted that there have been only 11 applications in St. Tammany Parish over the last decade. But he said the tax break is an 80-year-old program that is a critical tool for economic development and that 36 other states offer.