Starbase Louisiana tax deal: $1,000 buyout option, job penalties and once-a-year audits

The payment-in-lieu-of-taxes (PILOT) agreement for Starbase Louisiana, the planned SpaceX site at Freshwater City in Vermilion Parish near Pecan Island, gives the company an option to buy out its part of the deal for $1,000, according to The Advocate, which obtained the agreement through a public records request (The Advocate, Oct. 7). The other party is the Industrial Development Board of the Parish of Vermilion (IDB), which took ownership of the site and leased it back to the company (The Current).

The $1,000 option

The Advocate reported that "the agreement gives SpaceX an option to buy out its portion of the agreement for $1,000" (The Advocate). The Lens, citing a copy of the lease it reviewed, reported that the company "can terminate its lease and agreement at any time for just $1,000" (The Lens, Oct. 8). An independent summary of the IDB records describes it as a purchase option of "$1,000 plus amounts then due" and says it is not the state land-sale price (records reference).

The Advocate also reported that the company can expand onto land not currently slated for development or hand the project to another entity without IDB approval, and that a force majeure provision allows certain deadlines to be extended without IDB approval. The current projected completion date is Dec. 31, 2044 (The Advocate).

Job-shortfall penalty

The agreement targets 3,000 new full-time jobs paying at or above 150% of the statewide average wage (IDB term summary). Louisiana Economic Development has said the project would create 3,000 direct jobs over 10 years at a $92,600 average salary and more than 8,100 indirect jobs, with a $100 billion investment.

Under the IDB's term summary, a penalty applies if actual employment is below target "for 2 consecutive calendar years." The payment equals the "Employment Shortfall Percentage," multiplied by "one and eight-tenths (1.8)," multiplied by "the Annual PILOT Savings for such calendar year." If the shortfall exceeds 50%, the company owes "the full amount of the Annual PILOT Savings" for that year. The summary's own example: a 10% shortfall with $100 million in savings equals an $18 million payment (IDB term summary; also The Current).

The Advocate reported that "the IDB can waive the penalty for any reason" (The Advocate). We did not find that waiver language in the documents we reviewed.

The Current reported that the job clock does not start until at least 12 months after all launch-pad permits are issued (The Current).

Local hiring

The Advocate and The Current both reported that the agreement does not require a share of local hires. SpaceX has discussed hiring about 60% to 80% locally, but The Advocate reported the agreement "contains no enforcement mechanism requiring the company to meet that goal" (The Advocate; The Current).

Audits

The Advocate reported that any audit "must be conducted by the IDB itself, without assistance from outside parties, and can take place only once every 12 months," covering only the period since the previous audit (The Advocate). The Current reported that the board "may audit the company once a year but isn't allowed to release that data to the public" (The Current).

Payments

The agreement calls for a $25 million PILOT payment in the first year, rising 2% a year over a 25-year term, plus a $20 million community infrastructure payment within 90 days (IDB term summary).

Independent. Not affiliated with SpaceX, Vermilion Parish, or the State of Louisiana.