Judge rejects PILOT tax plan for Cameron LNG

Updated: Jan. 3, 2017 at 7:20 PM CST
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CAMERON PARISH, LA (KPLC) - The Cameron Parish Police Jury has lost round one in its attempt to have a so-called, "payment in lieu of taxes" deal, or PILOT,  approved for Cameron LNG.

In State District Court in Cameron, Judge Ward Fontenot refused to OK the agreement. He said the proposed plan for Cameron LNG goes beyond the authority of the police jury.

The PILOT deal would have allowed Cameron LNG to pay a negotiated amount instead of property taxes as determined by the tax assessor.

Attorney Brian Eddington represented the tax assessor and a concerned taxpayer opposing the PILOT agreement.  He argued it was illegal and unconstitutional.

"The entire taxing policy of the state - indeed, the country - is premised on the fact that all similarly situated taxpayers are going to be taxed on the same basis. And doing this special tax deal for one taxpayer is not just wrong, it's but indeed unconstitutional," said Eddington.

"Every other taxpayer in Cameron Parish and every other parish in Louisiana pays taxes based upon the value of its property. This one taxpayer, Cameron LNG, would have what they refer to as a payment in lieu of taxes, a negotiated payment, that by all indications would have been substantially less than the amount that would have been owed in taxes over time," said Eddington.

Some suggest Cameron LNG would save up to $1.5 billion in taxes if the PILOT had been approved.

"Based upon current millage rates over the 22-year life of the contract, about $2 billion will be owed, opposed to like $500 million over the same period.  That's a savings of $1.5 billion to Cameron LNG had the transaction been approved."

However, Cameron Parish Administrator Ryan Bourriaque said future taxes are uncertain, but the money from the PILOT was a sure thing and an immediate benefit.

"Around $9 million for these first two years and, in fact, in another two years, would have been a $24.5 million payment - a 67 percent  increase in parish tax revenue. So again, things related to our budget issues and tax revenue issues - we've had taxable values go down in the parish over the last four years; some taxable values have gone down $30 to $40 million," said Bourriaque.

He said approval would solve many current financial difficulties for local government.

"This all began with a goal in mind of trying to identify a dedicated tax revenue stream for the parish entities to assist in the growth and to assist in improving infrastructure parish," said Bourriaque.

Bourriaque said the top ten taxpayers in Cameron Parish in 2015 paid a total of $11.8 million. He compares that to the $24.5 million Cameron LNG would pay yearly in two years.

The police jury, school board, sheriff's office and some other taxing bodies want the PILOT as proposed.

Last October, when the proposed PILOT was made public, Cameron School Superintendent Charles Adkins said, if approved, the school board would no longer have to use reserves to balance the budget.

"It has the potential to make us whole and plug the holes in the budget and to allow us to deliver the same level of services that we're delivering currently, even though we've made a lot of cuts in the last two years," said Adkins.

Adkins said the school system's  $7 million yearly shortfall is because a property tax renewal failed a few years ago. He said if nothing changes, the reserve will be depleted in 2026.

Still, Judge Fontenot said the law does not allow the police jury to waive a company's current and future tax obligations.

Fontenot said, "I'm convinced the idea of a CEA (cooperative endeavor agreement) doesn't contemplate…authorization and waiver of taxes and substituting a continuing obligation."

The judge said the proposed PILOT goes beyond and doesn't conform to what's in the statute (dealing with PILOT agreements).

"The waiver of current and future taxes is beyond the authority of the governing authority," said Fontenot.

Earlier, the attorney for the police jury, William Schuette, told the court that Cameron was in financial distress and that officials from the Cameron Police Jury, sheriff's office and school board had analyzed the CEA and believed it would alleviate some or all of the economic distress, if implemented.

Eddington responded that the issue was purely a question of law.

"Whether it's good or bad is not relevant," Eddington told the court.

The technical name for the court proceeding was a "validation hearing," to determine whether the court would "validate" the cooperative endeavor agreement between the police jury and Cameron LNG.

Eddington argued that the "CEA" was not a true CEA and that they were "putting lipstick on a pig."

He said the document at issue was really a "waiver of taxes by contract," which Eddington said "locks in an alternative tax scheme for 22 years that would prevent taxpayers from challenging." He said it should be dismissed until there's a fully executed agreement (approved and signed by all parties) that has been published for public review.

Schuette said the agreement didn't need to be in its final form for the court to validate it.

He argued that the issues about whether the PILOT was in taxpayers' best interest involved challenges to political and economic discussions such as how to manage windfalls. Schutte told the court, "Citizens can vote out of office officials that make bad decisions."

He said the police jury had the right to get a judicial declaration of validation.

"The Cameron Parish Police Jury has the authority to implement a PILOT agreement for economic development. Because of uncertainty (regarding future revenue) they want the agreement.  It's of immense benefit to the parish and Cameron LNG," said Schuette.

The police jury plans to appeal. Due to industrial tax breaks, many companies wait years before they have to pay certain property taxes.

A traditional PILOT agreement allows local government to receive tax payments before they are due.

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