ven with an enviable
transportation infrastructure, the Bayou State has lost out on much
of the capital investment pouring into the South in recent years,
particularly with respect to automotive industry projects. The bordering
states of Texas, Arkansas (see the Spotlight on p. 528) and Mississippi
all have seen huge investments on the part of U.S. and foreign automotive
manufacturers. But, other than the just-completed GM expansion in
Shreveport announced a few years ago, Louisiana rarely makes the short
list. That could soon change.
Newly elected Gov. Kathleen Babineaux Blanco
intends to put Louisiana on site selectors’ short lists by creating
a business climate they cannot ignore. In office just a few short
months, Gov. Blanco has made it clear that economic growth and job
creation are possible, even likely, if the old ways of doing business
are left behind and the government gets serious about attracting industry.
Two areas need immediate attention: revising business taxes to be
more competitive with other states, and making the state more palatable
to corporate investors by enacting ethics laws that will put to rest
any qualms they may have about doing business there. The first is
done; the second is in the works.
In late May, Site Selection Editor Mark Arend
spoke with Gov. Blanco about her strategy for winning the confidence
of business and industry, and making Louisiana more competitive.
“My goal is to create an environment where our kids can come home and find the same opportunities that exist elsewhere in the country or around the world.”
Site Selection: Economic development
seems to be a priority of yours. What do you want the history books
to say about you and your administration in this area?
Gov. Kathleen Blanco: I want
the history books to say that I am the governor who brought opportunity
back to Louisiana for our young adults, our children. It’s a very
natural thing for young people to want to go explore the world, and
I encourage them to do that. But in many cases, those same young people
yearn to return home, and in more recent years, Louisiana has not
given them the same opportunities that they can find in other places.
So my goal is to create an environment where our kids can come home
and find the same opportunities that exist elsewhere in the country
or around the world.
SS: State tax systems around
the country are under increasing pressure to modernize, with the economy
becoming more and more service-oriented. Some point to state tax codes’
growing disconnect with the modern economy. At the same time, federal
aid to states is down, and the cost of entitlement programs is rising
all the time. In macro terms, do you see the need for a tax system
overhaul in Louisiana?
Blanco: Yes, I expect we will
probably need to do such a thing. I used to have a point of view that
maybe we should move away from one or another tax and focus on a limited
number of taxes. But now, I think that the best system is to have
a combination of taxes, because if you’re sales tax heavy and your
economy goes south, you lose your tax base. If you’re property tax
heavy, the taxes can get so high that it begins to hurt families.
You need a modest income tax, but the ideal is to have a balanced
approach. Certainly Louisiana does need to have a little more equity
in its tax system.
That’s one of the reasons why I went forward
in the very first special session, early in my administration, to
push forward the phase-out of two business taxes that Louisiana was
imposing — the corporate franchise tax on debt, which very few states
apply, and the machinery and equipment sales tax, which many states
do not apply. One reason is that other states don’t impose these particular
taxes — they may impose some that we don’t — but our competitors
were using them against us. And after seven years, this will have
phased out $1 billion worth of taxation on the business community.
I am expecting to see that $1 billion re-invested in Louisiana businesses
— in capital investments and in jobs.
SS: Which other taxes would
you like to see reduced or eliminated?
Blanco: In Louisiana,
we gradually need to rebalance
. We have a very
high property tax exemption — the first $75,000 of our homes’ value
is not taxed. One of the things that we have to do before anything
else can be done is make sure our properties are on the tax roll at
the proper value, so they more closely resemble market value. That
has been one of the questionable pieces of our tax base. Those taxes
are only the local governments’ right now. The state does not collect
property tax at all. The point is to strengthen local government so
they can become less dependent on the state.
SS: You have identified the
state’s Rapid Response Fund as needing to be more competitive with
neighboring states. What needs to happen there?
Blanco:We’re being very aggressive
and trying to seek businesses of all kinds and sizes. In some instances,
we need to be able to move very quickly. On some very large projects,
you have to go back to the legislature and work the deals out in a
special setting. But on some of the smaller ones, we want to be able
to move quickly and make firm commitments without having to jump through
hoops. So we’re trying to develop a larger Rapid Response Fund available
for that.
SS: Are there other hurdles
to overcome in order to make Louisiana more competitive?
Blanco: In this session, I
have focused on an ethics package. Louisiana has suffered from a negative
political image for a number of years now. We are moving into this
modern economy, and we are definitely trying to improve the state’s
image as a good place in which to do business. In this legislative
session, I have made it my highest priority to present a package of
ethics bills that are intended to clean up the image of Louisiana
both internally, so our people feel better about the state, and for
the benefit of those we are inviting to come do business here. We’ve
had some pretty rotten politics in the past, and it’s always hard
to overcome that kind of reputation.
Yesterday [May 26th], a bill passed unanimously
in the Senate that says that legislators and the governor will not
have fundraisers or raise money or accept money during regular legislative
sessions. Some states have been doing that for years. The legislature
here never thought there was anything wrong with that. But there is
a very strong perception that we needed to address. It passed the
House already, and now it’s passed the Senate. Sure there was some
debate, but it came out just the way we wanted it to. I’m extremely
proud of this legislature. I’m working with a group of people now
who understand the sacrifices they need to make in order to get our
image straight.
SS: For several years, Louisiana has had an industry
cluster program in place, which I understand is being decentralized,
and ultimately will be run on a regional basis rather than from Baton
Rouge. Is this the case, and what is your view on the state’s role
in fostering industry clusters?
Blanco: We have had this cluster model for a
few years now, and it’s beginning to mature. It’s based on some solid
thinking of trying to build additional value around core industries.
I like that idea. We also have regional directors who are out there
identifying opportunities and sending information to the cluster directors
who put the state in the mix. Anytime you try to put a new process
in government with a new team, it takes a little while for the synergies
to kick in, but we’re beginning to see that happen.
We are developing strong local partners with
our regional economic development organizations that emanate from
the local communities. After all, economic development is at the local
level. A company doesn’t exist in a vacuum called the state. It is
physically in a location within the state. Our regional partners are
getting more sophisticated, more business-oriented in terms of what
new businesses look for and how they expect to be treated. So we have
a lot going on here. We bring our local folks together on a regular
basis, and I interact directly with our local economic development
force. We act as a team in many cases. You have to have a partnership
to put the packages together successfully.
SS: With white collar energy
jobs leaving the state, what can be done to keep Louisiana’s energy
industry alive and well? What are the state’s chances of landing some
liquefied natural gas [LNG] terminals?
Blanco: Louisiana is extremely
well poised for the liquefied natural gas industry. We have this coastal
location — the LNG comes in by ship. We have several applications
on the table right now for regasification plants. Louisiana has the
internal structure — the pipelines that are already laid throughout
the state to channel it out to the nation. That is definitely one
of the petrochemical industries that Louisiana has an enormous future
opportunity to develop. And we have a lot of independent oil companies,
which are homegrown companies — some are service companies, a lot
of them are R&D. We’re growing our own. They still interface pretty
strongly with what we call the majors, who are mainly headquartered
in Houston.
Major energy companies’ regional offices also
are addressing offshore drilling opportunities, both deep water and
shallow. Companies are drilling deeper in the shallow waters. There
are many opportunities out there. Our oil and gas industries seem
to be very healthy now, but the cost of oil is so high now. And they’re
not going to go out and extend themselves beyond their capacity just
because the price of oil is up right now. They learned some difficult
lessons back in the 1980s, when the industry collapsed. We were moving
toward this $40 barrel back then, and then it went to $10. So I see
them approaching this in a very cautious and reasonable manner. We’re
working hard to attract investment from the majors, because they still
own a lot of our drilling opportunities. I am very optimistic about
the future there.
SS: Automotive projects are
going to many southern states, but not to Louisiana. Is this an industry
you would target, and if so, how?
Blanco: There are some opportunities for
us in the automotive industry, and it’s a matter of getting ourselves
site ready, a little bit better prepared and a lot more aggressive.
In the past, Louisiana was not aggressive in seeking out the automotive
plants in particular.
SS: Are there any physical
infrastructure projects — such as bridges, highways or port expansions
— that you feel should be fast-tracked in order to attract industry
to the state?
Blanco: We’re going to continue
to invest in our ports. The cruise line industry is building very
rapidly in the New Orleans area. I worked on that as Lieutenant Governor
and had a direct hand in helping to encourage more cruise lines to
come to the city. Because of our efforts, the port has outgrown its
capacity, and cruise lines are waiting to get berthing spots there.
Shipbuilding is still a very big thing here in Louisiana. I have spoken
with two groups recently interested in building ships — one in western
Louisiana and the other in eastern Louisiana. So that’s alive and
well, and we’ll be seeing a good bit of that. Aviation and aerospace
manufacturing are also important to us. Also, we are developing our
universities’ strength in information tecnologies, in the life sciences,
in advance materials and in micro- and nanotechologies. And our entertainment
industry is taking off as well.
SS: What impression do you want potential corporate
investors to leave with if they were to visit potential project sites
in Louisiana?
Blanco: That Louisiana is a business friendly
state, that it’s an honest place to do business and that it’s a state
committed to developing both our existing and emerging industries.”
