Was a Calcasieu industrial development board’s gas-storage project tax exempt while leased to a private company?

Plain-English summary

Calcasieu Parish's industrial development board proposed financing a natural-gas storage facility with revenue bonds, acquiring the project from Liberty Gas Storage, and leasing it back. The lease payments would cover bond debt service and board expenses. The AG concluded that board-owned project property remained exempt from ad valorem taxation while leased to the private developer. Private use alone did not defeat the public-purpose status recognized for industrial development board property.

The AG also said the board could negotiate and require a payment in lieu of tax during its ownership and lease of the project. That payment could not exceed the ad valorem tax the lessee would have owed if it owned the project. The answer depended on board title and the statutory industrial-development arrangement described in the request.

Currency note

This opinion was issued in 2006. 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 gas-storage project to Liberty eliminate the property-tax exemption?

The AG said no while title remained with the board. It treated the board's statutory industrial-development function as a public purpose despite the private lease.

Could the board ask Liberty for a payment even though the property was exempt?

Yes. The opinion applied R.S. 51:1160's authority for an annual payment in lieu of ad valorem taxes, capped at the amount the lessee would otherwise have paid as owner.

What ownership condition mattered to the AG's answer?

The opinion expressly tied the exemption to the board holding title while the private developer leased the project. It did not decide a different ownership arrangement.

Background and statutory framework

The opinion read Louisiana Constitution Article VII, Section 21 together with the Industrial Development Board statutes. It described public title and public purpose as the constitutional criteria for public-property exemption, then quoted R.S. 51:1152's industrial-development purpose and R.S. 51:1160's tax exemption and payment-in-lieu terms.

Citations

• La. Const. (1974) Art. VII, Sec. 21 (public-property tax exemption).
• La. R.S. 51:1152 and R.S. 51:1160 (board purpose, exemption, and payment in lieu).
• Slay v. Louisiana Energy and Power Authority (public title and purpose test cited).

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/06-0047

Original opinion text

September 15, 2006
OPINION NUMBER 06-0047

122 TAXATION – Exemption from property taxes; new industry
148 TAXATION – Property taxes – liability of persons & property
Mr. W. Brent Lumpkin, President La. Const. (1974) Art. VII, Sec. 21; La. R.S. 51:1152; R.S.
51:1160
Industrial Development Board of the
Parish of Calcasieu, Inc.
Industrial Development Board property which is leased to private
P. O. Box 2900
company is exempt from ad valorem taxation.
Lake Charles, Louisiana 70602

Dear Mr. Lumpkin:

On behalf of the Industrial Development Board of the Parish of Calcasieu, Inc. (the “Board”) you have 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 Liberty Gas Storage LLC (“Liberty”) to encourage the location of a natural gas storage facility in the Parish of Calcasieu. 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 finance the construction of a natural gas storage facility in the Parish (the “Project”).

You advise that simultaneously with the issuance of the bonds, the Board will acquire the Project from Liberty and lease the Project back to Liberty. The purchase price of the project will be the actual cost of the Project and Liberty will be required to repay the entire cost, plus interest to the date the bonds are paid off in the form of lease payments. The rental payments under the lease agreement between the Board and Liberty will be an amount equal to debt service on the bonds, together with certain fees and expenses of the Board and the bond trustee. Liberty will also agree to pay, in addition to the rental payments under the lease agreement, all costs of construction of the Project. The Board is not injecting anything of value into the transaction, other than the financing itself.

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

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Mr. W. Brent Lumpkin
OPINION NUMBER 06-0047
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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 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

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OPINION NUMBER 06-0047
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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.

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, 99-267 and 05- 0301.

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

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OPINION NUMBER 06-0047
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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/jv

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OPINION NUMBER 06-0047

122 TAXATION – Exemption from property taxes; new industry 148 TAXATION – Property taxes – liability of persons & property La. Const. (1974) Art. VII, Sec. 21; 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. W. Brent Lumpkin, President
Industrial Development Board of the
Parish of Calcasieu, Inc.
P. O. Box 2900
Lake Charles, Louisiana 70602

Date Received:

Date Released: September 15, 2006

KENNETH L. ROCHE, III
ASSISTANT ATTORNEY GENERAL