SWOPblogger

Forest City Covington has the inside track on this year’s IRBIE. After obtaining a purchase agreement for 3002 acres of land between the Albuquerque Airport and Journal Pavilion in 2005, company CEO Mike Daly let the Albuquerque Journal know they planned to ask for financing assistance from the state legislature in 2006. As documented by Common Cause New Mexico in “Developing Real Influence: the Real Estate Industry and the NM Legislature,” February 2007, Forest City invested heavily in state politicians including the governor and the state land commissioner. The total lobbying investment in cash and in-kind incentives (governor Richardson gets free plane trips) is estimated at over $200,000 in 2006 alone. In the short 2006 legislative session, Forest City hired a team of lobbyists and experts to ensure passage of the Tax Increment for Development Act which allowed for the creation of Tax Increment Development Districts (TIDD) for the purpose of expanding economic development opportunities. The bill passed at the very last minute of the session.

Next stop was the ABQ City Council for approval of an individual TIDD for Forest City Covington’s Mesa del Sol (MdS) project. In January 2007, the City Council approved MdS’s application for the creation of five TIDDs for just the first phase of its proposed 13,000 acre development. MdS then sought and was awarded state legislature approval of up to $500 million in increment tax capture of the state’s tax portion. The deal is now complete.

So what exactly does all this tax jargon mean? TIDD is the NM version (or perversion) of a development tool known as Tax Incentive Financing or TIF. It is supposed to work like this:

· A community designates a blighted or troubled area as a “TIF” district.

· The taxes coming from the area are measured at a “baseline” prior to the TIF creation.

· Development plans are made and hopefully implemented after the TIF designation.

· The new development generates increased taxes which are earmarked specifically to be used within that neighborhood for a designated period of time.

Essentially, Tax Increment Financing has historically been used as a way to generate new development in blighted areas, most often in the urban core. It’s a way to capture public revenue and reinvest it in older, sometimes historic, neighborhoods that sorely need it. The new tax revenues support new development and help restore health and viability of once declining neighborhoods.

An example:

A blighted inner city neighborhood annual gross receipts tax is $1000. A TIF district is created to promote economic development in the neighborhood, and the “baseline” GRT is $1000. The post-TIF development annual gross receipts tax contribution is $1500. Due to the TIF percentage agreement of 50%, $250 of those taxes is retained by the district to support its infrastructure needs, rather than being put into citywide coffers. $250 represents 50% of the new tax dollars that otherwise would not have been there. The baseline $1000 plus the other $250 is put into citywide coffers to support the many essential services we all share.

We think this type of use of our tax dollars is responsible and we support it. So what’s the problem?

In New Mexico, thanks to Forest City Covington and their friends in high places, the TIF concept has been changed to mean we give massive tax breaks to wealthy development projects on undeveloped land on the fringes of our city.

The proposed Mesa del Sol TIDD is not a blighted area. Rather, it’s a brand new and major real estate development in Albuquerque. And it sets a dangerous precedent.

NM TIDDs allow for the capture of Gross Receipt Taxes (GRT) and Property Taxes. Gross Receipts Taxes, which in NM are much more valuable than Property Taxes, are our primary concern. What’s the baseline GRT base for the MdS TIDD? Essentially ZERO, since it’s just open space. How much of the increment do the already approved MdS TIDDs allow? Up to 75% of the State’s taxing share, 67% of the City’s, and the County will soon decide how much to allow.

Yes, 75% of the State’s GRT taxing share in the massive new MdS development…dollars that are used to support every community, small or large, rural or urban, in New Mexico…can be retained by Forest City Covington to pay for their development needs. Total take for MdS from the State GRT is estimated at over $1 Billion over 45 years.

You have to hand it to the Albuquerque City Council. They bravely passed a “No Net Expense” city policy for new development. Now Albuquerque is meeting that “No Net Expense” to the city policy by having the rest of New Mexico pay for Albuquerque growth. Taxpayers from Clayton to Carlsbad are subsidizing core development in the Albuquerque Rio Grande Corridor. And so are taxpayers from Duranes to Westgate, which are in Albuquerque but outside of the MdS TIDD.

Still, we are probably looking at diverting over $75 Million in city tax revenues to the MdS TIDD. And by the way, approximately 70% of city revenue comes from GRT payments. Total anticipated TIDD Taxes (revenue diverted directly to the Forest City Covington MdS TIDD) are just short of $1.5 Billion, from the MdS pro formas!

Where does this leave SunCal which is planning the massive development project on the old Atrisco land grant on the west side? Working hard to get the same deal that MdS got.

Why does SunCal have a shot at the IRBIE? SunCal owns over 5 times the acreage that MdS controls. If SunCal is successful, the deal will be much larger and the impacts even more onerous. In fact, it will be the largest TIDD ever given in the United States. And once again, one of the poorest states in the nation will set a record for corporate welfare.

The state legislature was overwhelmed (“bowled over” according to the Common Cause report) by the lobbying and the money spent by Forest City. The City Council, not to mention the Mayor, got the same rush. But the Council has now had some time to contemplate the MdS deal and has reservations. Led by Councilor Cadigan, there have been attempts to remove the MdS type of development from future TIDD agreements altogether. Currently, Councilor Cadigan, who has worked very hard on this issue, has a new proposal to change the Albuquerque TIDD ordinance and make future “Greenfield” developments meet employment, housing, and business goals good for the city. His latest proposal goes before council on Wednesday, September 5.

Here at SWOP, we think that Greenfield development should be removed from the TIDD ordinance altogether.

In the absence of that, we should impose a Moratorium on TIDDS until a full and independent fiscal analysis can be completed and reviewed. Why is it that our city is always giving away the bank without proper fiscal analysis?

But short of what we consider the truly responsible approach to the creation of TIDDs, Cadigan’s current floor amendment does a lot toward at least ensuring we get something from these huge tax give-aways.

What does the other side say in opposition to having to provide the City with any guarantees that they will develop their TIDDs in what the City at large considers a responsible manner? Meaning, mixed-use development that provides workforce housing, small business incentives, transit oriented transportation routes, schools, and parks?

Well, the Chamber of Commerce’s “Position Paper,” dated August 27, outlines objections to many of Cadigan’s amendments to the current ordinance, which currently is devoid of any accountability measures. But in a nutshell, their position, which mirrors that of real estate developers, is that everything should be a matter of “Good Faith” case by case negotiations with the City.

Do we need to point out that here in Albuquerque, not to mention the State of New Mexico, “Good Faith” has never ensured our Corporate Welfare Tax Giveways pay off? Some of us do have pretty good historical memory.

Folks need to call or email their Councilors before next Wednesday’s meeting and tell them to stop giving away the store. Then go to the Council Session and speak out. The MdS deal is done. But other developers are at the table with a huge lobbying machine because the stakes are so high. Community leaders who care about the rest of the city must state their concerns. And state leaders and organizations must defend the interests of their communities.

The Council meets at 5:00 PM on Wednesday September 5. Council Meetings are held in the Vincent E. Griego Council Chambers on the basement level of the Albuquerque/Bernalillo County Government Center building, One Civic Plaza NW.

This article was prepared by Eric Schmieder.

# posted by marjorie @ 11:35 AM