WHAT IS THE IDB
The IDB is a non-profit public corporation authorized to be created in 1972 by the New Orleans City Council for the purpose of stimulating economic development and improving the business climate of New Orleans, through the issuance of tax-exempt bonds and by providing other incentives as may be allowed by Louisiana law. The directors of the IDB are residents and voters of the City of New Orleans, who are appointed by the City Council, with one appointment by the Mayor, to serve overlapping six-year terms on a completely voluntary basis with no compensation.
HOW THE IDB FUNCTIONS
The IDB performs its tasks principally through the issuance of revenue bonds that are payable solely from private funds of the developer. There is NO obligation to pay these bonds from any public source of funds. Additional incentives may be offered through the use of a "Payment-in-Lieu-of-Tax" (PILOT) arrangement whereby the IDB can effect a freeze or a reduction / abatement of property taxes by virtue of its status as an entity whose property is exempt from property taxes. PILOT incentives may include an abatement or partial reduction of property taxes for a period of years. The decision to support a PILOT arrangement and terms of each PILOT depend on a number of factors, including the economic benefits of the project such as employment, ultimate increased tax revenues, improvement of the quality of life and other economic benefits, which benefits may include, for example, improving a targeted area or facilitating the development of targeted needs of the City.
With the exception of projects pursued by the City and/or the State and housing projects supported and promoted by HANO, very few projects have qualified for and have received a final contract providing a favorable PILOT arrangement. Although all projects coming before the IDB can ask for consideration of a favorable PILOT arrangement, only a small percentage of the projects that have come before the IDB have asked for, satisfied the strenuous requirements of the IDB for qualification, received a vote of approval from the IDB and accepted the clawback requirements to the extent necessary to actually receive a favorable PILOT arrangement. While the IDB welcomes consideration of favorable PILOT arrangements for worthwhile projects that provide a substantial positive return on investment, the IDB must be satisfied that the overall benefits received by the City from the project clearly exceed the costs of the incentive given to support the project.
IDB follows the highly successful Louisiana Department of Economic Development in its processes for reviewing and granting incentives such as PILOTs. If a PILOT appears supportable, then the IDB engages highly qualified consultants, including a senior Economics Professor from a local university, to perform a "cost-benefit" analysis and a "return on investment" analysis of the proposed incentives package. The IDB Board considers in detail these reports, which include many factors, including job creation and specific economic impact on the locale of the project. The IDB then makes its final decision regarding the PILOT and its applicable terms.
SAFEGUARDS IN PLACE FOR CITY
There are a number of safeguards in place to protect the City in connection with PILOT arrangements. In addition to the "return on investment" analysis, there are "claw back" provisions (both financial and in terms of Orleans employment levels) included in the PILOT agreement. The financial “claw backs” are based on the pro forma financial statements submitted by the project developer to their lenders and partners. If a PILOT-enhanced project is approved based on an accepted need, and should the project be more successful than anticipated, (as determined by audited statements submitted annually by developers to the IDB), then the taxing bodies, including the City, may receive increased tax payments. The IDB also strongly encourages the use of Orleans Parish residents during the construction phase of each project (and as permanent employees once the project is placed in service). The value of the PILOT is reduced in the event that developers do not meet the represented Orleans employment levels of total construction phase employment. The IDB also encourages small and disadvantaged businesses to contact the IDB for participation, with the recognition that they must be able to secure adequate financing for their projects and have the experience to successfully complete their projects as submitted.
AUDITED FINANCIAL STATEMENTS
The IDB's financial statements are audited annually by a leading local CPA firm. The annual financial reports are available as a public record on the IDB’s website (www.kibbepoint.com).
The IDB is working with the New Orleans Business Alliance, the Mayor's Economic Development Office and other economic development entities and partners to outline policies and guidelines that are intended to become a standard for all who wish to invest in the City. The IDB strives for New Orleans to be more competitive in order to foster recovery and strengthen the economic base and job opportunities for the City.
The IDB may be contacted through Ms. Sharon Martin, Administrator, at the IDB office. 658-4242.
Alan H. Philipson, President
Industrial Development Board of the City of New Orleans, Inc.