Was a Caddo industrial development board warehouse exempt from property tax while leased to a private developer, and could the board require a payment instead?

Plain-English summary

The Caddo Parish Industrial Development Board planned to finance a warehouse and distribution project with revenue bonds, keep title to the property, and lease it to a private developer for use tied to Libbey's Glass. In 2005, the Attorney General concluded that the board-owned property would be exempt from ad valorem property tax while leased to the developer. Private occupancy did not by itself eliminate the exemption: the opinion relied on the board's public ownership and the legislature's stated public purpose of industrial development and job retention.

The AG also said the board could negotiate an annual payment in lieu of tax during its ownership and the developer's lease. R.S. 51:1160 capped that payment at the ad valorem tax the lessee would have owed had it owned the project. The exemption did not remove the separate constitutional constraint on giving away public value: the AG said the board had to receive a benefit reasonably equivalent to the leased property's value, such as rent, jobs, or retained industry.

Currency note

This opinion was issued in 2005. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Did leasing the warehouse to a private company make board property taxable?

The AG said no for the described Caddo project while the industrial development board held title. It found that a private lease did not automatically defeat the public-purpose basis for the ad valorem exemption.

Could local taxing authorities still receive a payment connected to the project?

Yes. The board could require the lessee to make a payment in lieu of tax through the normal collecting agency, subject to the statute's cap at the tax the lessee would have paid as owner.

Was there a cap on the payment in lieu of tax?

The AG said the payment could not exceed the ad valorem tax that would have been owed if the lessee had owned the project during the relevant period.

Could the board give away a valuable lease simply because the project promoted jobs?

The opinion said the public-purpose designation did not displace La. Const. (1974) Art. VII, Sec. 14. The board had to receive value or benefit reasonably equivalent to the value of the leased property; the AG listed rent, new jobs, and retention of enterprises as examples.

Background and statutory framework

The proposed financing used board revenue bonds to acquire land, build a warehouse, and buy equipment for a Caddo Parish project. The developer's rent would cover bond debt service, and the project would be used by Libbey's Glass or an affiliate. The AG read La. Const. (1974) Art. VII, Sec. 21 as requiring public title and public purpose for the relevant property exemption, citing Slay v. Louisiana Energy and Power Authority, 473 So.2d 51 (La. 1985). It then relied on R.S. 51:1152's legislative public-purpose findings and R.S. 51:1160's board-property exemption and payment-in-lieu provision. Its separate constitutional discussion required a reasonably equivalent benefit under Article VII, Section 14.

Citations

• R.S. 51:1152 (industrial development board purpose and powers).
• R.S. 51:1160 (board-property tax exemption and payment in lieu of tax).
• La. Const. (1974) Art. VII, Sec. 21 (public property tax exemption).
• La. Const. (1974) Art. VII, Sec. 14 (public-value restriction).
• Slay v. Louisiana Energy and Power Authority, 473 So.2d 51 (La. 1985) (public title and purpose requirements).

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/05-0301

Original opinion text

November 15, 2005
OPINION NUMBER 05-0301

122 TAXATION – Exemption from property taxes; new industry
Mr. Francis M. Gowen, Jr. 148 TAXATION – Property taxes – liability of
persons & property
Pierremont Office Park Phase II
La. Const. (1974) Art. VII, Sec. 21
910 Pierremont Road, Suite 107
La. Const. (1974) Art. VII, Sec. 14
La. R.S. 51:1152; R.S. 51:1160
Shreveport, Louisiana 71106
Industrial Development Board property which is leased to
private company is exempt from ad valorem taxation.
Dear Mr. Gowen:

On behalf of the Industrial Development Board of the Parish of Caddo, Inc. (the “Board”) requested an Attorney General’s opinion regarding the ad valorem tax exemption of property owned by the Board. You indicated the Board is working with Libbey’s Glass Inc. to encourage the plant to remain in Shreveport. The Board, created under Chapter 7 of Title 51 of the Louisiana Revised Statutes of 1950, as amended, (the “Act”) plans to issue revenue bonds pursuant to the Act and use the proceeds to acquire land, construct a building, purchase equipment and related facilities to be used as a warehouse and distribution facility in Caddo Parish (the “Project”). The Project will be leased to FR Caddo Parish, LLC (the “Developer”) for payments sufficient to pay debt service on the revenue bonds. The Project will be leased to Libbey’s Glass Inc. or an affiliate or related company.

You question whether the property owned by the Board pursuant to the Act will be exempt from ad valorem property taxes and whether the Board may require a payment in lieu of taxes in an amount not exceeding the amount that would have been paid in ad valorem taxes.

La. Const. (1974) Art. VII, Sec. 21 provides a list of property that shall be exempt from ad valorem taxation. "Public lands; other public property used for public purposes" is included within the list of exempt property. Article VII, Section 21(A), when referring to the tax exempt status of public property, other than public lands, imposes a two-fold requirement that:

(1) Title to the property must vest in the public; and

(2) The property must be used for a public purpose.

See Slay v. Louisiana Energy and Power Authority, 473 So.2d 51 (La. 1985).

Industrial Development Boards are nonprofit public corporations organized pursuant to R.S. 51:1151, et seq. for the purpose of promoting the existence, development and

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Mr. Francis M. Gowen, Jr.
OPINION NUMBER 05-0301
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expansion of commerce, trade and industry in this state. With regard to Industrial Development Boards, R.S. 51:1152 provides, in pertinent part:

A. The legislature hereby finds and determines:

(1) That the existence, development and expansion of commerce and industry are essential to the economic growth of the state and to the full employment, welfare and prosperity of its citizens;

(4) That the present and future health, safety, right to gainful employment, and the general welfare of the people of the state merit and require the assistance of the state, its agencies, and political subdivisions in the development within the state and its political subdivisions of industrial, agricultural, manufacturing, and research enterprises ... and in the attraction and retention of sound business and commercial enterprises which contribute to the economic growth and vitality of the state and its political subdivisions;

(6) That the means and measures herein authorized by this chapter and the assistance provided in this chapter, especially with respect to financing, are in the public interest and serve a public purpose of the state in promoting the health, welfare, and safety of the citizens of the state ... by the securing and retaining of private industrial, commercial and other enterprises and the resulting maintenance of a higher level of employment and economic activity and stability.

B. It is the intent of the legislature by passage of this Chapter to authorize the incorporation in the several municipalities or in the parishes in this state of public corporations to acquire, own, lease, rent, repair, renovate, improve, finance, sell, and dispose of properties to the end that such corporations may be able to promote industry and develop trade by inducing manufacturing, industrial, commercial and other enterprises to locate in this state and further the use of its agricultural products and natural resources ... and to acquire, own, lease, rent, repair, renovate, improve, finance, sell, and dispose of properties to the end that such corporations may be able to attract and retain business and commercial enterprises in the municipality or parish to maintain and expand employment and the economy in the area.

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Mr. Francis M. Gowen, Jr.
OPINION NUMBER 05-0301
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Additionally, R.S. 51:1160 pertinently provides:

The corporation is hereby declared to be performing a public function on behalf of the municipality or parish with respect to which the corporation is organized and to be a public instrumentality of such municipality or parish.
Accordingly, the corporation and all properties at any time owned by it and the income therefrom and all bonds issued by it and the income therefrom shall be exempt from all taxation in the state of Louisiana; provided, however, that the corporation may require the lessee of each of the projects of the corporation to pay annually to parish or municipal taxing authorities, through the normal collecting agency, a sum in lieu of ad valorem taxes to compensate such for any services rendered by them to such projects which sum shall not be in excess of the ad valorem taxes such lessee would have been obligated to pay to such authorities had it been the owner of such project during the period for which such payment is made. (Emphasis added).

In Attorney General Opinion No. 77-916 our office concluded that, in accordance with the constitutional and statutory provisions quoted hereinabove, all property held in the name of Industrial Development Boards is exempt from all ad valorem taxation in the State of Louisiana. Additionally, this office previously recognized that the fact that public property is leased to a private entity does not preclude it from being used for a public purpose so as to be exempt. See Attorney General Opinion Nos. 93-392 and 89-599.

Our office previously opined that where property titled in an Industrial Development Board is leased to a developer or other private user, the property is exempt from ad valorem taxation. See Attorney General Opinion Nos. 88-454, 93-642 and 99-267.

While La. R.S. 51:1152 states that the means and measures authorized by that statute are in the public interest and serve a public purpose, please be aware that any project or development undertaken pursuant to R.S. 51:1152 must still comply with the Louisiana Constitution. Article VII, Section 14 of the Louisiana Constitution of 1974 provides, in pertinent part, the following:

“Section 14. (A) Prohibited Uses. Except as otherwise provided by this constitution, the funds, credit, property, or things of value of the state or of any political subdivision shall not be loaned, pledged, or donated to or for any person, association, or corporation, public or private…”

Article VII, Section 14 of the Louisiana Constitution clearly prohibits the donation of public funds. Thus the state or any of its political subdivisions may not loan, pledge or donate its funds or anything of value to or for any person when it is under no obligation to do so. See City of Port Allen v. Louisiana Municipal Risk Agency, 439 So.2d 399 (La.

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Mr. Francis M. Gowen, Jr.
OPINION NUMBER 05-0301
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1983); Beaird-Poulan, Inc. v. Department of Highways, 362 F.Supp. 547 (W.D.La.1973). In order to comply with Art VII, Section 14, the Board must receive a value or benefit (i.e. rents, creation of new jobs, securing and retaining private industrial, commercial and other enterprises, etc.) reasonably equivalent to the value of the leased property.

Based upon the foregoing, it is the opinion of this office that while the property is leased to the private developer and title to the property is held by the Board, the property will be exempt from ad valorem taxation. Furthermore, the Board may negotiate and require a payment in lieu of tax during the term of the ownership of the Project by the Board and the lease of the Project to the Developer in an amount not in excess of the amount that would be paid in taxes if the Project were subject to ad valorem taxes.

Trusting this adequately responds to your request, we remain

Yours very truly,

CHARLES C. FOTI, JR.
ATTORNEY GENERAL

BY: _________
KENNETH L. ROCHE, III
Assistant Attorney General

CCF, JR/KLR, III/mjb

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OPINION NUMBER 05-0301

122 TAXATION – Exemption from property taxes; new industry 148 TAXATION – Property taxes – liability of persons & property

La. Const. (1974) Art. VII, Sec. 21
La. Const. (1974) Art. VII, Sec. 14
La. R.S. 51:1152; R.S. 51:1160

Industrial Development Board property which is leased to private company is exempt from ad valorem taxation.

Mr. Francis M. Gowen, Jr.
Pierremont Office Park Phase II
910 Pierremont Road, Suite 107
Shreveport, Louisiana 71106
Date Received:

Date Released: November 15, 2005

KENNETH L. ROCHE, III
ASSISTANT ATTORNEY GENERAL