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.

Links for more information

Good Jobs First study

Good Jobs First subsidy tracker

Link to 2010 report by the New Mexico Taxation and Revenue Department on business incentive tax credits

City of Albuquerque’s site on industrial revenue bond process and application

Reinventing Economic Development: How not to lose sleep over income inequality

New Mexico Business Weekly by Mark Lautman, Guest Columnist

Date: Friday, January 27, 2012, 4:00am MST

Recessions are a natural part of the economic cycle. They are how the market purges the excesses and inefficiencies of the economy so a new cycle of prosperity can begin. This one has been dubbed the Great Recession because its depth and length resemble that of the Great Depression.

There are positive signs that the worst is over: U.S. GDP is back to prerecession levels, corporate earnings are up 15 percent, the stock market is up on the year, private-sector jobs are being added to the economy and the official unemployment rate is going down, the federal government is downsizing and the troops are coming home.

A closer look reveals that few of the structural impediments holding up a new cycle of prosperity have been dealt with. GDP might be back to prerecession levels, but we are doing it with 7 million fewer workers. If you use the more honest calculation for unemployment that accounts for the nearly 9 million part-time workers who need full-time work and the 2.5 million not counted because their unemployment ran out or they gave up looking, the unemployment rate is more than 15 percent.

When you factor in the millions of self-employed and those going back to school, the jobless rate is between 17 and 20 percent, which is close to where it was during the Depression. The reason we aren’t seeing a similar level of suffering is that a substantial socioeconomic safety net is in place this time. The risks of a collapse of the global financial system might be secondary to the health and social problems that stem from long-term unemployment and income inequality. When it comes to income inequality, the U.S. is dead last, meaning the gulf between the haves and have-nots here is way outside the norms of modern nations. If not reversed, it could be our undoing. Here’s why:

We are learning a lot about the effects of threat-induced stress on the human brain. Threats cause the cerebral cortex to be flooded with a powerful hormone called cortisol that results in a temporary rewiring of the brain. If you get enough restorative sleep after a cortisol brain flood, the brain can rewire itself back. Too many threat-induced events and too little restorative sleep results in a permanent rewiring known as PTSD.

As many of us enter geezerhood, a slower, less traumatic, but equally damaging process sets in. Neuroscientists believe that after our parents die, we realize that no one is watching our backs anymore. This causes us to worry more. Stress from worrying raises the level of these same nasty chemicals, and the sleep cycle is interrupted often enough to keep the brain from repairing itself. The brain also makes a critical distinction between a threat and a challenge and deals with them differently. So I apologize for all the brain damage I’ve caused by characterizing our demographic and economic problems as threats when I could have called them challenges.

What they call “social evaluative stress,” the brain’s reaction to being judged by others, or considered inferior, could have similar debilitating effects. The frustration, humiliation, anger and resentment break down the trust and confidence in our institutions and destroy the social cohesion needed to maintain healthy and livable communities.

One of the most powerful ways to reduce stress and get more restorative sleep is to socialize more by making personal connections with other people, connections where you help them solve a problem or improve their lives in some way. In other words, have their backs. This kind of value-added socializing has been shown to reverse the long-term effects of stress.

We might not have control over what happens in Washington, but there is a grand bargain to be made at the local level. Aging boomers, returning vets and the expanding ranks of dislocated and demoralized workers are going to need communities willing to socialize them.

Communities are going to need the qualified, cortisol-free workers to keep the economy viable and an engaged and committed citizenry to maintain the social cohesion that makes communities work.

What can the average person do with this challenge? Look around your community or your neighborhood. Find someone who needs help. Figure out how to engage her on a personal or professional level. Then urge her to do the same.

It will change your brain, your life and those of others. If enough of you do it, it will strengthen your community.

In the process, I guarantee you will stop losing sleep and worrying about yourself or the economy.

MARK LAUTMAN, whose column appears monthly, is an economic architect with Lautman Economic Architecture LLC and a founder of Community Economics Lab, a nonprofit think tank focused on developing new ways to do economic development. He is the author of the book “When The Boomers Bail,” available at Amazon.com    . Reach him at lautman123@gmail.com or marklautman.com.

Giving home businesses a break

All you people who work from home, listen up. Somebody thinks you’re important.

The governor has suggested reducing or eliminating the gross receipts tax on small businesses with a gross receipts tax liability of less than $200 a month – about half of the 80,000 businesses in the state.

One of those businesses is mine. Wow! I was as happy to hear about a tax break as I was to learn there are 40,000 of us out here.

Who are we? We’re writers, consultants, bookkeepers, caterers, travel agents, website designers – you name it – and we work from home to minimize overhead.

Critics have pointed out that if the governor’s goal is to create jobs, this slice of the private sector is least likely to do it. They reason that a business paying less than $200 a month in gross receipts tax is grossing $34,000 or less a year, not enough to hire anybody.

That may be true, but it fails to describe the economic web spun by the smallest of the small. We buy supplies, equipment, office furniture and services. We maintain vehicles and pay utility bills. Our work sometimes requires travel, and we support the hospitality industry. When I’m on the road I seek out locally owned eateries. Whenever possible, I steer work to other independents or partner with them on a project.

Some of us choose to stay small, but some of the smallest aspire to grow. Many of the garage entrepreneurs I’ve interviewed over the years became successful. Also, some of us landed in this under-$200 group because the recession flattened our work. Nobody bailed us out.

Last week, I heard two economists debate tax policy on TV. One advocated tax breaks for the rich as the most likely to create employment. The other pointed out that the rich can already afford to start or run businesses, that they have access to financing. If you want to create jobs, he said, offer breaks at the lower rungs of the ladder; when those people have money, they buy stuff.

Makes sense to me.

In the last year or so, home-based businesses and jobs have become an economic development strategy, and because most are mobile, they hold promise for rural areas.

Economic developer Mark Lautman sees home-based work as the solution to unemployment and under-employment. In a presentation to the legislative interim Economic and Rural Development Committee, he said many jobs can now be done from home. About 4.9 percent of employed New Mexicans, or 42,500 people, already work primarily from home. This includes both workers and the self-employed. Of those people, 37 percent bring new money into their communities. They’re likely to spend more of their income at home, and they’re not contributing to traffic congestion and pollution.

He said 18,000 home-based businesses support another 78,000 jobs in the state, which means that if a community recruits or helps create more of them, it creates other jobs as well.

The committee surmised correctly that health insurance is an issue for these people. But don’t stop there. To grow, the tiny business faces a regulatory maze.

I suspect the biggest obstacle to this little tax break is that people don’t take us seriously. They assume we dabble, that we’re free as birds, that we have hobby businesses. The reality is we work a regular day, or longer. A woman I know who runs a staffing agency from home finds herself working at midnight because she can’t get away from it.

My husband jokes that I have the most demanding boss of my career.

So kudos to the governor and to Mark Lautman for recognizing that we’re here, in large numbers. We matter.

© 2012 New Mexico News Service

Source: http://www.dchieftain.com/2012/01/18/giving-home-businesses-a-break

Sandia Labs’ retirees send ripples into region’s economy

Huffington Post just profiled local Rio Rancho Economic Development hero, Shane D’Onofrio, for building and running a veteran services center, literally, in his back yard. He rounds up struggling veterans from the community and provides shelter, work space and support needed to get them back on their feet. I wrote this article about him, last month, in the NM Business Weekly. It’s great to see him getting national recognition!

Source: http://www.huffingtonpost.com/2012/01/12/shane-donofrio-nm-veteran_n_1195302.html

Shane D’Onofrio, N.M. Veteran, Uses His Disability Check To House Homeless Veterans

Expect modest economic growth in New Mexico in 2012

How does an economy that lost 53,000 jobs during its recession recover?

Very slowly, according to experts.

New Mexico’s economy lost those 53,000 jobs – 20,000 of them in the construction industry – and, according to forecasts and experts, won’t get them back until at least 2015.

And, the state’s economy, although recovering slowly, could lose another 50,000 jobs beginning in 2013 if across-the-board federal spending cuts go into effect, some say.

“The state’s economy will see very modest growth in 2012. There are two big things that are going on. One is government spending. I don’t anticipate that we will have any increase at the state level, and it looks like federal government spending is gong to be constrained,” said New Mexico State University economist Jim Peach.

“We depend so heavily on government spending that that is not a good growth sign for the New Mexico economy.”

The state’s economy grew by a little under 1 percent in 2011. If that slow pace were to continue, and the experts say it will, “it will take us another couple of years to get back to where we were when we started losing jobs in 2008,” Peach adds.

Mark Boyd, an economist with the New Mexico Department of Workforce solutions,  agreed that the state’s economy is recovering slowly.

“We are adding jobs, but we need to manage people’s expectations as to how many jobs we are adding. At best, it will be slow to moderate growth,” Boyd said.

Lee Reynis, director of the University of New Mexico’s Bureau of Business and Economic Research, said the state’s economic recovery will be a “long slog.” Private industry, including the mining and oil and gas sectors, have staged a modest recovery, but state, local and federal governments shed jobs in 2011 and will continue to do so in 2012, Reynis said.

It is those looming across-the-board federal budget cuts that are scheduled to take effect on Jan. 1, 2013, that could deliver another severe blow to the state’s economy, Reynis added. “We estimate that New Mexico would lose 20,000 jobs permanently, and that’s a conservative figure,” Reynis said.

Economic developer Mark Lautman, co-founder of the Community Economics Lab, and who writes a monthly economic development column for the Business Weekly, said job losses from federal budget cuts could total 50,000.

That’s because most federal jobs in the state are considered economic base jobs, those that bring in money from outside the state. Those federal jobs are funded by taxpayers in other states and thus bring money into New Mexico, Lautman explained.

“Those [federal] jobs are just like jobs at Intel,” Lautman said. “Every economic base job creates one-and-a -half to two service sector jobs. It would be just like losing jobs at Intel. They’ll take service sector jobs with them when they go, just as when they came here they created service sector jobs. If we were to lose 20,000 federal economic base jobs, that would take another 20,000 to 30,000 service sector jobs along.

“That would be about the same job losses that New Mexico suffered during the recession. There are some questions as to whether the federal government will actually pull the trigger on those. New Mexico’s best strategy is to get focused on the private sector and pray that Congress remains gutless.”

New Mexico and Company with Larry Ahrens 1-4-12

Posted by kiva on January 4th, 2012