Wednesday, November 28, 2007
Guest Blog: ABQ City Council to Reconsider Public Subsidies for Large Developers at December 3 Meeting
This is a guest blog by Gabriel Nims, the Executive Director of 1000 Friends of New Mexico. He does a great job of explaining public financing tools for development called TIFs and TIDDs -- and how they are being used in ways that can be damaging to our communities, water supplies and economic future. He asks us to join 1000 Friends of New Mexico, the SouthWest Organizing Project, AFSCME , New Mexico Voices for Children and others in pushing for a reconsideration of the TIDD concept, as well as a proposed ban on their use in what are called 'green fields'.
The issue is on the agenda at the Albuquerque City Council meeting on December 3, 2007 in the form of amendments sponsored by Councilor Michael Cadigan. Please contact your City Councilor, State Legislator and Governor Richardson to weigh in on this issue.
The debate over growth and development in the Albuquerque region has taken a turn to the absurd over the past year with the emergence of a new set of crazy acronyms: TIF and TIDD.
Many will remember the political uproar over the Planned Growth Strategy, better known as PGS. The ire of development interests in the city was raised to the point where they felt compelled to create a political action group called CGA, or Citizens for a Greater Albuquerque, with the sole purpose of denying “no-growth” and “anti-Paseo” candidates seats on the City Council during the 2003 municipal elections. And lest we forget the infamous and now seldom-mentioned ABQPAC scandal.
But Tax Increment Financing, or TIF, and its little spawn, the Tax Increment Development District, TIDD, opens a new chapter in the book of urban growth-related acronyms. What these new acronyms mean and do is a very complicated story, which is why you may just be hearing about this for the first time. But allow me to explain as best I can. For deeper understanding of how TIF works check out publications from Good Jobs First Good Jobs First and the studies by FRESC in Denver.
What Is TIF?
TIF is an economic development tool available to developers in 48 states. TIF was originally conceived as a way to induce reinvestment in older, blighted areas deemed too risky or costly for private investors to improve.
It works like this:
- an area (the District) is defined for (re)development;
- a baseline of property and, as in New Mexico, gross receipts tax is established within the district;
- a deal is cut between the developer and the taxing agencies that allows the developer to receive up to 75% of the increase (the Increment) in tax revenue resulting from the improvements and new economic activity within the District;
- the developer is granted the Increment for up to 25 years to offset the costs of infrastructure (sewers, sidewalks, roads, etc) within the District.
Phew!-- Any questions?
New Mexico TIF law puts a new twist on this mechanism. Where other states try to limit the tool’s use to redevelopment by applying strict criteria for demonstrating blight, New Mexico, with some nudging from developer lobbyists, requires a developer to simply demonstrate increased economic development, regardless of where a district is created, blight or otherwise.
Therein lies the rub.
TIDDs in Greenfields
In New Mexico, greenfields are only green for a few weeks after intermittent monsoons, but it’s a commonly used term referring to the undeveloped expanses that surround our cities and towns. In Albuquerque, our greenfields of notoriety are Mesa Del Sol -- about 13,000 acres between the Sunport and Isleta Pueblo -- and Westland -- the whopping 55,000 acre former Atrisco Land Grant on the West Side. The developers, Forest City Covington and SunCal, respectively, are salivating over the chance to turn these greenfields into billions of greenbacks -- and they expect to use TIDDs to get as many greenbacks as they can.
The problem? Refer to step 2 above. In a greenfield, the baseline tax revenue is next to nil because nothing is out there. That means the Increment (step 3) is virtually the entire increase in revenue that will come from the District. For Mesa Del Sol, that translates to $500 million greenbacks from the state’s cut of taxes that will be generated in just the first phase of the development. Mesa Del Sol will also get percentages of the City and County’s gross receipts and property tax revenue. All of this cash to a developer for the next 25 years!
For perspective -- this represents the largest TIF arrangement ever allowed, in terms of land area and money, anywhere in the country. Wow. A new chapter in the urban development book, indeed! And a very dangerous one, too!
Why? First and foremost -- it’s the precedent this sets for how TIF is applied in New Mexico. You think Mesa Del Sol’s deal is big? One only needs to look across the river to SunCal’s 55,000 acres to anticipate TIDDs of even greater magnitude. And, not surprisingly, TIDDs are now popping up in other parts of the state.
So there will be a rush on creating TIDDs! From a state finance perspective, this is a very dangerous precedent. The state general fund, recently bolstered by oil and gas revenue, may soon find itself in a precarious position after millions in revenue from businesses and properties in these districts is captured by TIDDs, first in Mesa Del Sol, and likely by new developments all over. Even with the extra support from oil and gas revenue, the state can’t find enough revenue to meet its current obligations. Transportation funding dried up this year, health care costs continue to rise and we can’t find the money to build schools fast enough or pay enough to retain/recruit high-quality educational professionals.
Fast forward five years to this likely scenario: The state is strapped for cash -- the economy has slowed and oil and gas revenue declines. Oops! Millions of dollars of revenue needed by the state to cover the public’s shared needs is tied up for the next 20 years in TIDD deals for developers laughing all the way to the bank. Faced with such a predicament, the state must choose to cut back on services, raise taxes or both.
It gets worse. TIDDs in greenfields can really hurt existing neighborhoods, small businesses and any hope of managing growth in sustainable ways. Because TIDDs can be created just on the basis of economic development, there is no limit on their magnitude. Mesa Del Sol will be an economic giant, subsidized with public dollars, competing directly with Albuquerque. As will SunCal’s Westland, only a few notches bigger.
Imagine these areas as huge vacuums sucking jobs, economic activity, homebuyers and vitality out of the existing community. Recall one of the basic principles of the Planned Growth Strategy: to reinvest and revitalize the existing community as a priority over building brand new at the fringe. The PGS pointed to a $1.7 billion backlog in basic infrastructure needs within the city as justification for this approach.
Tell me how diverting the city’s tax revenue to private mega-developers on the fringe will help us address this backlog, when what we currently receive is already not enough? When the city can’t reach a 1000 officer police force because money is tight, how will we find the public safety professionals for these new fringe developments that, combined, are projected to grow the city from 550,000 population to 700,000 or more over the ensuing decades? Never mind all the other services the public expects to maintain a reasonable quality of life.
Oh yeah -- and where is the water?
By and large, developer requests for TIDDs have sailed through elected bodies at the state and in Albuquerque and the same will likely occur at Bernalillo County. Mesa Del Sol was the first out of the gate securing approval from the City and State for the creation of five TIDDs earlier this year.
With SunCal in the batter's box, West Side City Councilor, Michael Cadigan, was the first to decry “buyer’s remorse” on the Mesa Del Sol deal and he quickly introduced a bill prohibiting the creation of TIDDs in greenfields last Spring. A series of deferrals and compromise drafts have led to final action on his measure at the upcoming City Council hearing on Monday, December 3rd, 2007.
Many groups including 1000 Friends of New Mexico, SouthWest Organizing Project, New Mexico Voices for Children, and AFSCME strongly favor prohibiting TIDDs in greenfields.
The development community stands by their arguments that TIDDs are a necessary ‘incentive’ to creating jobs and high-quality “new urbanist” communities. The developers have carefully constructed smoke and mirrors to demonstrate how wonderful and safe TIDDs for their developments will be. They’ve spared no expense hiring the best consultants, lobbyists and PR machines in the business, while placing sizable political contributions in the coffers of key office holders as extra insurance.
The reality is simply that state lawmakers have opened a Pandora’s Box, with little idea of the long-term consequences of allowing TIDDs in greenfields.
What You Can Do
If you are outraged, confused and concerned all at the same time, then you know more than the majority of our lawmakers about the pitfalls of these seemingly harmless acronyms: TIF and TIDD.
If you have any questions contact me at 1000 Friends of New Mexico.
Again, please take action by contacting your officials. Urge them to consider the consequences and keep the community’s, not the developers’, best interests in mind.
Editor's Note: This is a guest blog by Gabriel Nims, Executive Director of 1000 Friends of New Mexico. To learn more about this issue, watch KNME TV's show, New Mexico In Focus, this Friday night, November 30, at 7:00 PM, which will include a segment with Gerry Bradley from New Mexico Voices for Children discussing the issue of TIDDs and Councilor Cadiagan's proposed amendment.
Also see these informative posts on SWOPblogger that discuss the local TIDD situation:
- Forest City Covington and SunCal Early Favorites for Corporate Welfare IRBIE Awards
- TIDD's, TIF's, Taxes...We're all in bed with developers now
Guest blogging provides readers with an opportunity to express their views on relevant issues and may or may not reflect our views. If you'd like to submit a piece for consideration as a guest blog, contact me by clicking on the Email Me link on the upper left-hand corner of the page.
This is a very important issue! I hope people take the time to contact their councilors and legislators on this one. We can't let the big developers raid the state treasury this way.
Posted by: Old Dem | Nov 28, 2007 2:46:12 PM