May, 2002
  Incentives Deal of the Month
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New Orleans
Hotel-motel time: Much of the multimillion-dollar incentive packages for the Hornets and Saints will come from the special legislative session's authorization of using a penny of the hotel-motel tax for the city of New Orleans (pictured).
Hornets, Saints Get Multimillions, but Louisiana's New Incentives Have Far Broader Focus
By JACK LYNESite Selection Executive Editor
of Interactive Publishing

BATON ROUGE, La. – Louisiana's brand-new business incentives, approved last month in a special session specifically focused on economic development, have yielded two immediate, high-profile location decisions. Decidedly untraditional operations, both companies will receive multimillion-dollar packages.
        One of those enterprises is an existing business: the National Football League's New Orleans Saints, who've been in the Crescent City for 35 years. The other multimillion-dollar incentive recipient is a relocating business: the National Basketball Assn.'s (NBA) Hornets, a franchise that's been based in Charlotte, N.C., since its inception in 1988.
        Over the longer haul, though, Louisiana's new incentives will likely spur businesses of a much more traditional ilk to collectively create a far greater economic-development impact. The location inducements that emerged from the special session are aimed at a broad range of companies.
Gov. Foster
"These teams make us money and they create jobs," Foster (pictured) said of the Hornets and the Saints in his speech opening the legislature's special economic development session.

        For the immediate present, though, the sizable Hornets and Saints packages dominate the spotlight. The Saints, who'd been wooed by other U.S. cities, have secured a reported 10-year, US$186.5-million package to remain in New Orleans. For the Hornets, whose owners had very publicly shopped for a new location, the 10-year package totaled $40 million. (The move from Charlotte still awaits a final vote by the NBA Board of Governors.)
        The special legislative session provided the lion's share of the Hornets and Saints incentives by authorizing the use of one penny of New Orleans' hotel-motel tax. Critics of funding the two teams have charged that public funds will eventually have to be used to fulfill the financial obligations. Gov. Mike Foster, however, strongly backed the incentives.
        "We should want the Hornets, and we should want to keep the Saints," he said in a March 25 speech opening the three-and-a-half-week special session. "They can and do make money for our state.
        "The Saints contributed over $130 million to the Louisiana economy in 2000. Dr. Tim Ryan (dean of the University of New Orleans' College of Business Administration) projects the Hornets will contribute over $100 million [a year]," Foster continued. "The Saints are responsible for just under 3,000 jobs, and the Hornets will create as many as 1,200 jobs. These teams make us money, and they create jobs."

Quality Jobs Program Revamped

Louisiana's other new incentives lack the attendant flash of professional sports. Nonetheless, their impact will undoubtedly register over an exponentially broader business spectrum.
        "Today marks another step forward in attracting new industries and high-paying jobs to the state of Louisiana," Foster said in mid-April after signing the legislatively approved incentives into law. "These initiatives collectively and individually help move Louisiana in the right direction."
        A reworking of an existing initiative - the six-year-old Quality Jobs Program (QJP) - was the broadest-ranging incentive that came out of the special session.
        The revamped QJP allows companies with less than 50 employees to apply for 5 percent payroll rebates if they create new jobs with a collective gross annual payroll of $250,000. Larger firms must create at least $500,000 in new payroll to qualify for the 5 percent rebates. Previously, QJP rebates were awarded only to companies that added at least $1 million in new payroll. QJP qualifiers must pay at least $9 an hour, 1.75 times the federal minimum wage. Previously, the program's hourly pay qualification was set at $7.73.
        Companies that pay more may reap higher benefits. Businesses with an hourly pay scale of at least $11.59 can receive 6 percent rebates. Companies only qualify, though, if they're either in one of the state's target industries or if they're located in an economically disadvantaged area. (For a complete list of the state's target industries, go to the Louisiana Dept. of Economic Development Web site at www.lded.state.la.us.)
        QJP debate included repeatedly voiced fears that the reworked bill might omit the state's large oil and gas sector. Those fears ended after the Senate specifically included the industries in the final bill's language. Oil-field service businesses were also explicitly added; such companies will only qualify, however, if their newly created jobs pay at least $30,000 a year. NBA teams were another specific addition to the OJP-eligible list of industries. The final bill capped the Hornets' payroll rebate at $3.6 million a year. (Legislators in the special session also allocated $1.75 million to the Hornets to help offset the costs of relocating from Charlotte.)
        The final QJP legislation, however, specifically barred retail stores, casinos and real estate agents from program participation.

Don Hutchinson
"With this bill, we hope to encourage Louisiana companies to capitalize on that research by commercializing that technology within the state," Dept. of Economic Development Secretary Don Hutchinson (pictured) said of the newly approved 15 percent tax credit for commercializing research conducted at Louisiana universities.
'New Economy' Incentives

Louisiana's legislature also approved a number of other, more specifically focused incentives. All centered on what legislators characterized as "new-economy" businesses.
        "We must continue making these type of targeted investments in Louisiana's economy if we are going to continue moving the state forward," Foster said of the new-economy incentives. Industry segments and activities targeted by those new inducements included:
        Biotechnology: Louisiana's new law excludes biotech companies' capital expenditures for new research equipment from both state and local sales and use taxes.
        R&D: Increased expenditures for scientific and business research now qualify for an 8 percent tax credit, which can be taken against income or corporate franchise taxes.
        "Louisiana is currently 47th in the nation in private-sector research and development spending," said Rep. Gil Pinac (D), the House Commerce Committee chairman who co-authored the legislation.
        "With this new credit, we are attempting to encourage local companies to invest more of their capital into research and development, and that creates high-paying research jobs."
        Research commercialization: Louisiana entrepreneurs who commercialize research conducted at state universities qualify for a 15 percent tax credit. That credit can be taken against state income or corporate franchise taxes for equipment purchases. Qualifying investments must total $250,000 in the first year and at least $2 million after four years.
        "We have some tremendous research being conducted at our state colleges and universities," said Dept. of Economic Development Secretary Don Hutchinson. "The problem has arisen that companies are coming in, buying the rights to that research, and taking it, and the jobs that go with it, out of state. With this bill, we hope to encourage Louisiana companies to capitalize on that research by commercializing that technology within the state."

Financial Perks for Customized
Software, Film and Video Production

Customized computer software: New legislation will reduce by 1 percent a year the state's 4 percent sales tax on customized computer software. On July 1, 2005, the tax will be phased out altogether.
        "The previous lack of ability for Louisiana to offer this inducement has held our state back from attracting the types of IT companies that will help halt the state's brain drain," said Senate President John Hainkel (R). "Enticing these companies into the state will help keep the tech-savvy younger generations of workers from leaving Louisiana in search of high-tech software jobs.
        Film and video: The special session passed three bills aimed at attracting film and video production.
        One reduces movie or TV companies' total in-state spending from $1 million to $250,000 to qualify for a state sales tax exemption. Another bill gives firms that tape or film nationally distributed commercials, movies, TV shows or music videos in the state a 10 percent tax credit on the salaries paid to Louisiana residents. The third bill gives in-state residents or companies a 10 percent tax credit on investments of $300,000 to $1 million in the production of a movie or TV show; the tax credit rises to 15 percent if total investment tops $1 million.
        Louisiana legislators also extended the sunset date for the $5,000-per-job Enterprise Zone tax credit for Shreveport-area auto and airplane operations. The extension, said the bill's sponsors, will ensure the completion of General Motors' $800-million expansion of its Shreveport operations.


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