Louisiana's LED Moret Says Mega Fund Raid Talks Are Hurting State
Written by  // Tuesday, 24 May 2011 15:35 //

Louisiana CapitolThe budget crunched State of Louisiana is going through some tough times lately.  Its legislature is trying to determine the best way to fix a 1.6 billion dollar hole for the upcoming fiscal year.  One idea that has passed the House Appropriations committee is to raid the state’s $82 million Mega-Project Development Fund which money is dedicated to lure big economic development projects into the state.

The Bobby Jindal administration is opposed to tapping into this fund as well as certain other budgetary measures taken by the House committee.  Specifically, the Louisiana Economic Development Secretary (LED), Stephen Moret has been very vocal about the consequences of using this dedicated money for filling holes in the budget.

Below is an Bayoubuzz e-mail interview with LED Secretary Stephen Moret regarding his concerns should the legislation proceed:

What would be your biggest concern if the Legislature raided the state's $82 million Mega-Project Development Fund?

First, Louisiana would lose several major competitive site-selection competitions in which our state currently is a finalist, which would result in the loss of thousands of good jobs at a time when the economy is the top concern of Louisiana citizens. That would include the loss of not only new companies but also lost expansions of existing companies in Louisiana. Second, by reneging on incentive proposals that already have been made, our state would lose a significant amount of credibility among national business leaders and site-selection consultants. 

It is important to understand that the House Appropriations Committee proposed eliminating money that already had been appropriated into the Mega-Project Development Fund a year ago; specifically, they are proposing to eliminate funds that already have been pledged for major business expansion and recruitment projects. This is an important distinction because LED’s proposals for large business expansions and recruitment projects typically are explicitly tied to the available dollars in the Mega-Project Development Fund. 

Very large, high-quality projects typically involve highly competitive, multi-state, site-selection competitions in which incentives are one important site-selection factor (along with workforce quality and training, business climate, business costs, proximity to key customers and suppliers, etc.). In years past, Louisiana used to lose out to other states in the South for major projects like automotive assembly plants because our state didn’t have the business climate, workforce development capabilities or incentives necessary to compete; accordingly, the vast majority of those projects historically went to other Southern states like Alabama, Georgia or Tennessee. Today we have the best state training program in the U.S., Louisiana FastStart; the most improved business climate in the U.S.; and a competitive suite of economic development incentives. To put it simply, we are in a position today to effectively compete with any state in the U.S. for highly attractive economic development projects. 

Some have argued that Louisiana should no longer compete for large economic development projects because the initial incentive requirements are difficult to fund (despite very positive return on investment over a period of years) during a challenging fiscal period for our state. That is a legitimate debate to have, but the debate should focus on future investments in the Mega-Project Development Fund – we should not renege on existing proposals that have been made with funding that previously was appropriated for that purpose. 

There are some who claim that most of the money, specifically, $67 million is not needed. They claim that amount dedicated for the Next AutoWorks operation in North Louisiana will not be spent because the Obama administration has not and will likely not lend $300 million to help fund the project which they say will nullify the state’s contribution. They further say that only $15M of the fund is really at risk once you subtract the $67 million. Is there any truth to these allegations?  

The U.S. Department of Energy provided Next AutoWorks detailed feedback on its application and encouraged the company to reapply for DOE’s ATVM (Advanced Technology Vehicles Manufacturing) loan program. The company’s ATVM loan application is now in the final approval stage of DOE’s process, which means that a decision should be forthcoming in the near future one way or another. With the potential for this project to create 1,400 direct jobs and approximately 1,800 indirect jobs in the Monroe area, we should wait for DOE’s decision before prematurely eliminating Louisiana from consideration for this major economic development project. If the DOE loan is approved, this project definitely will be developed in Louisiana. 

Thanks to policy reforms implemented by Gov. Jindal and the Louisiana Legislature over the last few years, we now have the strongest pipeline of mega projects that our state has ever had. Louisiana has been selected as a finalist state for 14 high-potential mega-projects, most of which will select a final site in the next two to four months. Unfortunately, the House Appropriations Committee’s amendment draining most of the remaining balance in the Mega-Project Development Fund puts all of these projects in jeopardy, especially those for which final site location decisions are anticipated in the next six to eight weeks, including projects considering locations in Alexandria, Bossier City, Lafayette, Monroe and New Orleans. 

You mentioned last week that damage has already resulted by the Appropriations committee’s action. Could you be more specific in terms of what damage? 

In order for Louisiana to continue successfully attracting business investment and jobs, business executives and site-selection consultants around the country must be confident that they can count on the state to follow through on its commitments. By taking a vote to renege on existing incentive packages, the House Appropriations Committee has weakened the credibility of our state even if that vote ultimately is reversed later in the legislative process. Already we have been contacted by companies considering major investments in New Orleans and Monroe that are concerned about the state’s willingness to follow through on its commitments to them. 

According to business climate rankings published by Chief Executive magazine, Site Selection magazine and Pollina Corporate Real Estate, Louisiana is the most improved state for business in the U.S. over the last few years. The last thing we need to do is to erode confidence in Louisiana as a good place in which to do business at the very time that our state has become competitive for a broad array of major economic development projects.

by Stephen Sabludowsky, Publisher of Bayoubuzz.com

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