Tax, tax, tax: Vital vessel tax could be under fire as legislators continue budget battle

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Louisiana’s efforts to clean up its own dire financial situation could leave a mess at the door of Lafourche Parish.

State legislators are searching every crevice of the state budget for savings or revenue to address its $600 million budget deficit for the next fiscal year. Fears are the watercraft vessel tax credit could enter their crosshairs, which could leave a $60 million revenue hole in Lafourche.

The watercraft vessel tax is a property tax on offshore watercraft levied by parishes. According to Lafourche Parish Assessor Wendy Thibodeaux, offshore vessel companies filed suit challenging the constitutionality of the tax, which tied up any collected tax money in an escrow account until the case was resolved. To form a compromise, state legislators agreed to give a 100 percent tax credit to qualifying vessels, ending the lawsuit, returning those collections to the parishes and easing the tax burden on the state’s maritime industry.

Over the last year, as the state’s budget woes have come to the forefront, legislators have looked to the vessel tax as a way to reduce state spending. One option considered would be to remove the tax credit, which means the parishes could still take in revenues, but the state would not have to pay out money in tax credits. The issue with this option would be the shifted cost onto the vessels, which could threaten relocation and thus less economic activity and vessel tax revenues for the parishes.

The other option legislators have examined is to exempt offshore vessels from having to pay the tax altogether. By exempting the vessels, the tax burden on the maritime industry could be reduced even further, while the state would have no tax losses to reimburse on the back end. However, the measure would leave an immediate hole in the budgets of parishes that could no longer levy the tax.

As a constitutional amendment, such a measure would require two-thirds approval in both the state Senate and House before the governor could sign it. Louisiana citizens would then have to vote to approve it into law. Senate Bill 177, which sought to provide exemptions to both the vessel tax and the inventory tax, was on the Senate’s calendar during last year’s regular session but never reached the floor for an actual vote.

Nowhere would adjustments to the vessel tax be felt more sharply than in Lafourche. Assessor Thibodeaux has made her way to Baton Rouge over the past year to testify against both exemptions and the repeal of the tax credit, as the vessel tax is the single most significant source of property tax money to her parish.

“They have other parishes that do watercraft, but not the extent that we are. I think we are leaps and bounds ahead of everybody else,” she said.

According to data provided by Thibodeaux, Lafourche Parish collected more than $60 million in vessel taxes last year, accounting for almost 48 percent of the parish’s entire property tax revenues. Thibodeaux broke down what full exemptions would mean for different parish entities. The Lafourche Parish School District received $20.1 million in vessel tax money in 2015. The Lafourche Parish Fire District 3, which covers Port Fourchon that houses those vessels, would lose $3.5 million, or 98 percent of its budget with an exemption.

State Rep. Jerry Gisclair (D-Larose), who represents most of central and south Lafourche, said a flat-out exemption would mean trouble for the parish, as government services would have to be slashed.

“I think we’re going to be in for a rough ride, and obviously next year you’re going to be operating on half of what you had before,” he said. “You do the math. There’s no way you’re going to be able to keep the same payroll and the same services.”

To maintain the same services without vessel tax money flowing in, Lafourche residents would have to open their checkbooks. According to Thibodeaux, residents in South Lafourche would see their property taxes triple if the parish had to recoup the missing vessel tax money solely through property tax hikes.

“It still costs ‘x’ amount of dollars to run government. And the only way to make it up is to raise taxes, in some way, shape or form. Either through property taxes, through sales taxes, through fees, everybody would pay,” the assessor said.

While taking away vessel tax collections would prove devastating for Lafourche, the budgetary impact on the state would not be as momentous. According to Louisiana Department of Revenue data, the state paid out $45 million in tax credits in 2014. Thibodeaux said Port Fourchon alone generated $46 million for the state treasury in 2013.

Thibodeaux views tax credits as investments in an industry, and the vessel credit has proven to reap benefits.

“Some of these investments they’ve made over the years are not generating a positive return on their investment, but the watercraft tax credit is. It is working,” she said.

Thibodeaux expressed concern that a repeal of the tax credit would result in both vessels heading east toward Mississippi and a revival of the lawsuits the credit originally nixed. If the lawsuits come back, Lafourche would be in dire shape, as vessel tax collections would be untouchable during the court proceedings.

Gisclair said he and the local delegation are still in the dark as far as other legislators’ plans for revenues during the expected upcoming special session. However, he thinks the tax credit will be targeted. The Larose representative said he could envision legislators coming to a compromise where vessels receive an 80 percent rebate instead of the usual 100 percent they have been enjoying.

“It’s still early, but I think there’s going to a compromise. I think it’ll stay in place. I don’t see it going away. We’re going to need Lafourche and Terrebonne to come out here and lobby, do their part. We’re going to do our part,” Gisclair said.

Thibodeaux understands the budgetary bind legislators are in, but she is doing what she can to represent Lafourche’s interests in not facing an even more drastic situation at the parish level.

“I’m not saying one deserves an exemption and one deserves a credit, and you do and you don’t. All I’m trying to promote is it’s working right now. It’s balanced. Leave it alone. Don’t throw the monkey wrench in it,” she said. •

Vessel Tax