Tuesday, December 22, 2009
Rep. Ben Rodefer Guest Blog on News that SunCal is Facing Foreclosure
This is a guest blog by State Rep. Benjamin Rodefer (D-Corrales 23).
I'm writing in response to a recent AP article reporting that lenders filed a foreclosure lawsuit against SunCal Cos. in state court in New Mexico last week to collect more than $180 million in outstanding loans the developer used to finance a property purchase on Albuquerque's West Side from Atrisco Land Grant heirs.
New Mexico nearly, within one vote, entered into a 40-50 year financial partnership with this company, one that would have diverted over a billion dollars from the state's general fund. This company was never financially stable nor sound. It was always my strong belief that passing the Suncal TIDD would cause significant and long term damage to our state, its finances, and our ability to provide the very fundamental services our people deserve.
Hopefully much more sensible opportunities for economic development and good jobs creation will come New Mexico's way, allowing us to more wisely invest our limited funds, and better support our people and our economy.
It was a true David vs. Goliath victory back in January to have stopped this taxpayer swindle. It was an improbable victory considering the strong support from the executive and legislative leadership, as well as the innumerable high-paid lobbyists working the Roundhouse on Suncal's huge dollar.
Remember this is the same company that spent hundreds of thousands of dollars in campaign contributions trying to buy the votes needed to pass their taxpayer giveaway.
This week's news further vindicates the hard work done by so many to protect New Mexico from such an egregious and possibly fraudulent misuse of tax dollars.
This week's news further illustrates the real difference each of us can make in building a better future for New Mexico.
As a state we face immense challenges, but today is a day we can all breath a sigh of relief. We avoided a monumental financial blunder, one we would have been paying for well through this century.
This is a guest blog by Rep. Benjamin Rodefer of Corrales. 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.
Thursday, September 03, 2009
Sen. Steve Fischmann Guest Blog: End Giveaways In New Mexico's Budget
This 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:
- Require periodic reports on the fiscal and economic impacts of all tax credits and deductions.
- Require sunset clauses on tax expenditures to insure periodic reconsideration by the legislature.
- Require public reporting of all state and local subsidies, tax breaks, and other incentives used to support individual private “economic development” projects.
- 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.
- 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 [email protected] 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 | Comments (4)
Thursday, August 06, 2009
ABQ Councilor Rey Garduño Moves Deferral of Impact Fee Reduction Bills to Get Economic Impact Analyses
At the August 3rd Albuquerque City Council Meeting, City Councilor Rey Garduño moved a deferral of the four Impact Fee reduction bills (O-09-69, O-09-70, O-09-71, and O-09-72). Councilor Garduño cited a memo from Council President Isaac Benton, Councilor Debbie O’Malley, and himself for justification of the deferral, according to a statement released by Garduño's office.
The memo requests an Economic Impact Analysis for the Impact Fee Reduction Bills in accordance with F/S R-09-176, which requires a fiscal impact analysis for Ordinances, Resolutions, Executive Communications and Other Communications considered by the City Council. That Resolution also provides that a more detailed Economic Impact Analysis (EIA) must be prepared for ordinances and resolutions that that have a regulatory impact on persons or businesses or an economic impact on members of the community.
The Councilors requested a rewrite of the Fiscal Impact Analysis for each of these bills that addresses, at a minimum, the following:
An estimate of the increase in the number of residential building permits that will be issued by the City month by month during the term of the reductions based solely on the proposed reductions in impact fees. This estimate should break out the number of Green Path (100% waiver) building permits and non-Green Path (50% waiver) building permits. The estimate should be at least partially based on the experience of other communities similar in nature to Albuquerque that have reduced impact fees.
An estimate of the increase in the number of commercial building permits that will be issued by the City month by month during the term of the reductions based solely on the proposed reductions in impact fees. This estimate should break out the number of Green Path (100% waiver) building permits and non-Green Path (50% waiver) building permits. The estimate should be at least partially based on the experience of other communities similar in nature to Albuquerque that have reduced impact fees.
An estimate of the fiscal impact to the City based on the gross receipt and property tax revenue gains solely from the increased number of residential and commercial permits issued as a result of the proposed reductions versus impact fee revenue lost as a result of the proposed reductions. Please include an estimate of the number of reduced fee permits that must be issued to reach breakeven.
A table showing impact fee waivers to date and estimated additional impact fee waivers as a result of the proposed impact fee reduction bills.
A plan, including the estimated amounts required and funding sources, necessary to offset the loss of impact fee revenues as a result of the proposed reductions.
An estimate of additional administrative costs to operate the reduced fee program.
A Fiscal Impact Analysis was submitted to the City Council along with each of the bills referenced above; however, those analyses contained mathematical errors, were unclear on the potential fiscal impact to the City in terms of lost impact fee revenue, incorrectly assumed that the total number of building permits issued by the City represented the number of building permits that would be generated as a result of the reduction in impact fees, did not provide an estimate of the number of building permits issued as a result of the incentive created by the impact fee reduction, and did not address the potential economic impact to builders and homebuyers.
As the initial Fiscal Impact Analyses were prepared by the Administration, the memo formally requests that the responsible party, in this case the Planning Department, prepare a revised Fiscal Impact Analyses for O-09-69, O-09-70, O-09-71, and O-09-72, as required in F/S R-08-176.
The City Council voted unanimously for a two-week deferral and expects the analyses to be done before the next City Council Meeting on August 17, 2009.
Monday, March 16, 2009
NM State Auditor Balderas Announces Audit Status on Existing TIDDs
State Auditor Hector Balderas announced in a statement released today that the Mesa del Sol Tax Increment Development District (TIDD) is required to submit annual financial audits for 2008 and 2009 because it began receiving public funding in January 2008. The State Auditor based his determination on information from the State Board of Finance and the Legislative Finance Committee. Sun Cal, Downtown Las Cruces, and the Winrock/Quorum TIDDs have not received any public funding but have been notified of their responsibility to conduct annual audits once funding is received.
“The four TIDDS have been notified that they will be required to provide annual audits to my office once they begin receiving any government funding,” Balderas said in a written statement. “Local, county, and state governments have made substantial investments in these projects and it’s my responsibility to ensure that taxpayer dollars are accounted for at every level.”
According to state law, a TIDD is a political subdivision. Under the Audit Act, a political subdivision of the state is required to conduct an annual financial audit if the political subdivision receives or expends public money from whatever source derived. Mesa Del Sol is required to select an independent public accountant by June 1, 2009 in accordance with State Auditor regulations.
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.