By Dr. James “Jim” Kadlecek
Tax Increment Financing (TIF). Tax Increment Development Districts (TIDD). What do these terms mean? Who cares?
Answer: These are economic development “incentives” – essentially subsidies to private developers. Obviously the developers care about these, as do public officials who must sign off on them. Members of the general public should care, since it has to do with their future prospects and their tax money.
TIF is an old method of public finance that pledges future growth of public revenues (the increment) to pay off bonds that paid for public infrastructure. The state Legislature passed a 2006 law establishing the guidelines for TIDDs, which are specific geographic districts, and the law allows the pledging of a portion of property or gross-receipts taxes collected within the TIDD.
What brings this matter to the fore here in Doña Ana County is the request by the developers of Santa Teresa (west of Sunland Park) for county commission approval of three separate TIDDs. Two TIDDs are for industrial park developments and a large one is for a mix of residential and commercial development.
Essentially, the developer (The Verde Group of
The proceeds of the bonds would be used to pay back the developer for part of the cost of developing the infrastructure. The bottom line is that the estimated cost of all this development is about $217 million, and Verde is asking to be reimbursed for about $113 million of that cost. That’s the amount of the “subsidy,” or the “incentive” if you prefer. Of note: The majority of the GRT revenue would be generated in TIDD No. 1, the 1,240-acre area planned for residential and commercial development (Rialta Mesa). If you aren’t familiar with the location, all three proposed TIDDs are adjacent to the Pete V. Domenici Highway, near the Mexico border just west of Sunland Park.
Should county approve these TIDDs?
With me so far?
So, should the county go along with this proposal? What are the pros and cons?
The arguments being made in favor of the proposal are the usual ones: new jobs, more economic activity, more tax revenue. As someone who has been involved in community development for over 25 years, I certainly favor increases in the availability of good, well-paying jobs, offered by industrial or technology companies that bring in new money to the area by selling a product or service to exterior markets. To those types of companies, offering economic incentives makes great sense.
But does it make sense to offer subsidies to real estate developers for doing market rate housing, shopping centers or other retail and office projects?
I don’t think so. Especially in this case, I don’t think it’s justified.
First of all, the Santa Teresa area has already received substantial economic incentives. The federal government built a port of entry there and then constructed the Domenici highway linking it to Interstate 10. The county has extended utilities to the area. The county operates an airport nearby. Several industrial projects received the benefit of industrial revenue bond financing that carries with it an exemption from property taxes. The county has already authorized various improvement districts in the area.
In short, there has already been a substantial public sector investment and involvement in the development of the Santa Teresa area. Finally, because of the location, it is obvious that much of the economic benefit of any project in this area will accrue to
Having said all that, I’m under the impression that the county manager and the county planning staff have already been sold on approving the Verde request. If so, then the county commission needs to step up to the plate and at least alter the proposal as follows: Approve the Industrial TIDDs with no more than 50 percent of the GRT pledged to the bonds.
And do not approve the residential TIDD. Residential-commercial development will happen anyway because of the expanding growth of the
Developer needs to step up
I note that the commission chair wants more time to study this matter. I recommend a thorough cost-benefit analysis, beyond the evaluation presented to the commission at their recent work session. What is needed is a total community perspective, not just the areas that comprise the TIDDs. In other words, how will this project and the use of the GRT impact south county overall?
I also recommend commission examination of TIF studies that have been done by reputable policy groups such as the Heartland Institute. Most objective studies show that TIFs can be a very useful tool in improving the economy in communities, but only if their use is appropriate and targeted toward the creation of base industry-technology jobs, or toward the redevelopment of blighted areas.
When the current developers purchased all the land in the area, we were led to believe that they had the resources to take the area development to the next level. They produced some well-conceived plans and gained county commission support. Great. Now they need to perform. To be blunt, they should not need the county to mitigate their risk with TIDDs. They are risk-taking capitalists and they have an opportunity to profit immensely from a development that has been long in the making.
It’s a good and logical project, and it would be good thing. But it doesn’t make sense for
Kadlecek is a citizen of