By Carter Bundy
Politics is often called the art of compromise. This year, one of the most hotly debated, controversial and expensive proposals in state history, tax increment financing (TIF, whose vehicle is known as tax increment development districts, or TIDDs) is ground zero for New Mexico politics. So is there room for compromise?
On one side are developers, most of whom, to their credit, have outstanding plans for mixed-use, smart growth. These developers want taxpayers to foot the bills for the entire infrastructure costs of their developments. Normally, the developer pays for infrastructure within the physical boundaries of a development, so this is essentially a massive subsidy to out-of-state developers.
Their argument in defense of the subsidy is that their developments will attract thousands of new jobs and billions of dollars in new tax revenue, thereby “paying for itself.” The pitch is premised on the idea that we would be foregoing all of this “new” tax money if taxpayers don’t offer this massive subsidy.
Well-intentioned legislators on both sides of the aisle (this is an unusually non-partisan issue) disagree about whether the development would have happened anyhow, and they disagree about whether this is a tax giveaway or an investment to generate more tax dollars in the future.
One area they all agree on is that the tax revenues from the new developments don’t do the state (or cities or counties) any good at all if those “new” tax revenues merely cannibalize existing business.
The threat
Cannibalization occurs when a new retail development generates sales not from new population, but takes business from existing stores and shoppers.
The obvious danger to the state (and city and county) general fund is that if you divert the majority of new revenue in these new developments from the general fund to the out-of-state developers, you’ll leave the older parts of the state/city/county to pick up the tab for everything like police, fire, 911 services, corrections, courts, roads, parks, water, wastewater, CYFD, senior centers, the arts, general government — in short, everything that the rest of us already pay for.
What’s even more frightening is that if the revenue in the new areas is generated even in part by cannibalization, that means that the tax base in the older areas will actually decrease, leaving less revenue to cover more demands.
Common ground
Big developers have maintained that TIDDs don’t hurt the general fund because “it’s all new revenue.” While we can disagree on whether siphoning off even new revenue is smart when there are huge new areas to support, it seems that everyone agrees that future tax revenues should only be diverted if they’re truly new revenues, not cannibalized revenue.
There is one bill that has already been introduced this session — Senate Bill 576, sponsored by Sen. Steve Fischmann, D-Las Cruces –that limits TIDDs to new revenue. Of course, with all due respect to Sen. Fischmann, his bill doesn’t have to be the vehicle for this important TIDD parameter. The basic principle in SB 576 can be adopted into any and all pieces of TIDD legislation.
There is a strong and smart move toward fiscal responsibility in this year’s Legislature, and even the most ardent pro-TIDD legislators should embrace this simple anti-cannibalization protection.
This is true compromise legislation at its best, and while neither developers nor anti-TIDD advocates will get everything they want, this is targeted, common-sense, and hopefully common-ground legislation.
Bundy is the political and legislative director for AFSCME in New Mexico. The opinions in his column are personal and do not necessarily reflect any official AFSCME position. You can learn more about him by clicking here. Contact him at carterbundy@yahoo.com.