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Thursday, September 03, 2009

Sen. Steve Fischmann Guest Blog: End Giveaways In New Mexico's Budget

SFISCThis is an op-ed by Democratic State Senator Steve Fischmann of Mesilla Park, who represents District 37 in the Las Cruces area.

As October and January legislative sessions approach, I am constantly on the lookout for long term solutions to New Mexico’s fiscal crisis. The most recent meeting of the Economic and Rural Development committee generated useful ideas, but only via a rude reminder of how large economic interests have come to treat government as their private piggy bank. Let me give an example from the committee meeting, and then suggest potential solutions for New Mexico’s larger budget planning.

An outfit called Sun Cal was pitching a $408 million taxpayer funded TIDD subsidy to help them develop industrial lots on 1400 acres just outside Albuquerque – the same proposal that failed on a tie vote in this year’s legislature largely due to heroic efforts by Representative Ben Rodefer. The Sun Cal proposal is a complicated deal that committee members spent two hours asking detailed questions about; and for which many professed support on the grounds that it would promote economic development.

When a deal is complicated, I get to the heart of the matter by setting aside the details, and focusing on what each party puts in, and what each party receives when everything washes out. Using the company’s own numbers, here is what the Sun Cal TIDD deal boils down to.

SunCal contributes $5.6 million. (Land costs of $4,000 per acre for 1400 acres.)

New Mexico taxpayers contribute $408 million, ($291,000 per acre of the development – more than enough to cover all of Sun Cal’s development, infrastructure and project management costs.)

SunCal gets 100% of the proceeds from the sale of the lots.

Taxpayers get 100% of the ongoing costs of maintaining roads, sewers, water.

Why would the State of New Mexico (90%) and Bernalillo County (10%) put up virtually all the money, but then give all the revenue to Sun Cal? Sun Cal proponents claim the development will attract new and out of state businesses that will contribute to our tax base. This logic escapes me. If I were an out of state business, the $408 million given to Sun Cal would mean nothing. I would ask for my own subsidies and tax breaks. Based on experience at the Mesa Del Sol development this is exactly what will happen. Bottom line, the Sun Cal TIDD is one of the most outrageous giveaways of taxpayer money ever conceived in New Mexico.

Take a step back and it is clear Sun Cal is only part of a bigger picture. Layers of subsidies are handed out by counties, cities, improvement districts, and the state, often times without each being fully aware of what the other is doing. There is no mechanism in the State of New Mexico to track how much is being given away and whether we are getting a financial return on these subsidies.

Take another step back, and we see more considerations to special interests in the form of “tax expenditures.” These are essentially tax breaks given to specific industries and groups to support public policy goals. Many of these expenditures serve a valid purpose, but the logic behind some of them is no more compelling than what we see in the case of Sun Cal. As with economic development subsidies, there is no mechanism in New Mexico to analyze whether the expenditures are achieving what they were meant to - and to terminate them if they are not. There are approximately $10 billion in annual expenditures in the form of credits, deductions and exemptions from State Income and Gross Receipts Taxes. To put this number in perspective, net annual state revenues come in at about $5.5 billion.

With a budget crisis staring us in the face, now would be a good time for New Mexico to stop flying blind and begin managing our full fiscal picture. That means strategic cutbacks in operating costs to be sure, but it also means managing the hidden expenditures that dwarf our annual revenues. Various tools are used in other states. Ideas we should consider include:

  1. Require periodic reports on the fiscal and economic impacts of all tax credits and deductions.
  2. Require sunset clauses on tax expenditures to insure periodic reconsideration by the legislature.
  3. Require public reporting of all state and local subsidies, tax breaks, and other incentives used to support individual private “economic development” projects.
  4. Require public votes to approve bonding of private “economic development” projects using state tax revenues; the same kind of votes that are currently required for bonding of publicly owned projects.
  5. Treat taxpayer money with the same respect afforded private capital. If public money is to be invested in a private project, taxpayers should enjoy either a debt or profit sharing interest until the investment is repaid. While reduced returns for public policy purposes may be considered, flat out giveaways must stop.

I fully support sound economic development investments that create industrial expertise and well paying jobs. That does not permit New Mexico to sit idly by while selected private interests break the state’s bank.

This is a guest blog by New Mexico Senator Steve Fischmann. He can be contacted at steve@stevefischmann.com. 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.

September 3, 2009 at 11:55 AM in Business, Economy, Populism, Finance, Investments, Guest Blogger, Land Issues, Local Politics, NM Legislature 2008, Real Estate Development, Sun Cal | Permalink


This is an excellent and easy to understand explanation about the bad consequences of the Sun Cal Tidds. Thank you for making it clear.

Posted by: Robert S. | Sep 3, 2009 2:14:11 PM

Maybe Senator Steve Fischmann should worry about his area of southern NM which has the high rate of jobless in the state.

Posted by: Frank | Sep 3, 2009 4:46:39 PM

A bad deal is a bad deal. I'm glad Sen. Fischmann is pointing that out. If all those tax dollars go to Albuquerque there is less for the South and other areas.

Posted by: Lee | Sep 3, 2009 4:59:52 PM

I would add something like a lien on the property and all improvements until the LOAN is payed back, with interest!

Public-private partnerships have turned into 'take the taxpayers' money and run' deals for corporations.
Alamogordo: Sunshine Biscuits
Roswell: Dean Baldwin painting
Albuquerque: Eclipse Aviation.

More examples anyone?

Posted by: Ellen Wedum | Sep 4, 2009 9:10:10 PM