New Mexico ranks 45th in report on incentive programs’ safeguards
New Mexico Business Weekly
Date: Friday, January 27, 2012, 4:00am MST
A new report by a national nonprofit think tank examining clawback and other safeguards in economic development incentive programs ranks New Mexico 45th among the 50 states.
In the report, “Money Back Guarantees for Taxpayers,” Good Jobs First examines five programs in the state the authors felt were the most significant in terms of cost and frequency of use. Its report does not include the Job Training Incentive Program, but Good Jobs lists that information in its Subsidy Tracker at its website.
The report examined how states monitor and enforce 238 incentive programs and whether they have requirements on jobs and benefits. It recommends that all recipients be required to report to agencies on job creation, wages, benefits and other benchmarks, with that data disclosed online.
The states with the best program scores were Iowa, Maryland, Nevada, North Carolina, Oklahoma and Virginia. The worst were Alaska, the District of Columbia, North Dakota and South Dakota.
“New Mexico is generally not good on subsidy disclosure at all,” said Phillip Mattera, one of the study’s authors.
He said it’s difficult to find which companies get incentives and how much they get. Mattera said enforcement in the film program was good, but it doesn’t have requirements for the number of jobs, wage rates or benefits. However, he acknowledged that film jobs are often temporary and tied to productions.
Angela Heisel, spokeswoman for the Economic Development Department, which oversees the New Mexico Film Department, said New Mexico’s film incentives are some of the most transparent in the country. NMFilm.com, the state’s website, contains data on productions’ spending and the incentives paid out.
“The film office is working with industry to include even more data,” she said.
Productions must spend their money before going to the Taxation and Revenue Department to seek a 25 percent credit on qualified New Mexico expenditures.
Good Jobs First scores all the programs low for a lack of online information about enforcement. Industrial revenue bonds got the highest scores. The manufacturers’ investment tax credit, which allows companies to get a credit on certain industrial equipment, was second. IRBs, which allow communities to abate some taxes for companies building major new facilities or buying equipment, got a nod for penalties, since IRBs have clawback provisions.
Deirdre Firth, manager of the economic development division for the city of Albuquerque, said the city has pursued clawbacks on several IRBs. It recouped $13.4 million from Philips Semiconductor after it closed, and about $900,000 from Advent Solar after it went out of business, but since Eclipse Aviation went bankrupt, the city had no recourse there. The approval process for IRBs is extensive, Firth said, and includes a fiscal impact analysis by the Bureau of Business and Economic Research at the University of New Mexico .
Althought not evaluated in the report, the JTIP incentives, which help offset the cost of training by some companies, have clawback provisions if a company lays trainees off or closes within a year of getting such funds. Gerry Bradley, policy director for New Mexico Voices for Children , which is promoting the Good Jobs report, said he supports JTIP, but wants more information online.
Heisel said the state announces recipients every month and maintains a database of that information, but the database is not online. It also tracks all the companies that receive the high-wage jobs tax credits and the manufacturers’ investment tax credit, but the information is not online. The report gave New Mexico’s Tax Increment Development Districts, or TIDDs, zeroes on all counts.
Paul Gessing, executive director of the Rio Grande Foundation , a think tank focused on limiting government, said his group has opposed many of the incentives, including TIDDs. The two most prominent were Mesa del Sol , which has lured Albuquerque Studios, Fidelity Investments and Schott Solar, and in the ABQ Uptown development where a Target store is planned. TIDDs are designated zones where state gross receipts tax and local property tax revenue are diverted to pay for infrastructure.
Brent Dupes, chief financial officer of Mesa del Sol, said the study’s report card seems aimed at incentives where companies get money first. In Mesa del Sol’s TIDD, the ony way the developer can get the money from those taxes is if he first builds publicly dedicated infrastructure such as roads or fire stations, then gets reimbursed. But that is also contingent on the development generating a certain level of gross receipts taxes, he said. The TIDD is overseen by a board made up of representatives of the city council, the city adminstration and the state Department of Finance and Administration.
Gessing said his group has criticized many of the state’s incentives, but he distinguishes those from credits that allow companies to keep more revenue. He agrees there needs to be more transparency and monitoring of incentives.
Mark Lautman, an economic development expert who once worked with Mesa del Sol, said he has not seen any egregious abuses of incentives in his many years of experience in New Mexico. However, he agrees the metrics and systems are not in place to do real cost-benefit analyses of these programs, which he finds frustrating.