There has been a steady complaint in some economic development circles that New Mexico lacks economic development incentives that, like Texas communities have, allow cities and counties to offer direct aid to companies looking to relocate to the state.
Industrial revenue bonds, various tax incentives and in-plant training funds are often cited as the state's only economic development tools.
But 28 New Mexico communities have tapped into a little-known economic development tool that allows them to offer millions in land, buildings and infrastructure, such as water and sewer lines and roads, to companies. Collectively, those communities have the potential of putting $45.3 million into direct economic development incentives.
Those cities and counties are beginning to take advantage of the state's Local Economic Development Act of 1994, which vastly broadened the ability of communities to aid companies.
"Every community in the state -- 33 counties and 102 chartered municipalities -- are eligible to use the act," says Tom Mills, a lawyer and deputy director of the New Mexico Energy, Mineral and Natural Resources Department, who helped pass the law.
"But a little less than one-fourth of them have taken advantage of this opportunity," Mills adds.
The act was passed as a way to get around the restrictions of the anti-donation clause in the state's constitution. That clause forbids governments from using public funds to directly aid companies or individuals. In the late 1980s and early 1990s, it was cited as a main impediment to economic development efforts.
The economic development act allows cities and counties to use up to five percent of their general fund budgets and impose a gross receipts tax -- with the approval of voters -- to fund economic development efforts. Cities can impose a one percent tax in one-sixteenth-cent increments, while counties are limited to one-eighth of one percent.
Twenty-eight cities and counties have adopted economic development plans that allow them to use up to five percent of their budgets to aid companies, and five of those cities -- Alamogordo, Artesia, Clovis, Portales and Tucumcari -- have adopted an economic development gross receipts tax.
"We are very excited about having this tool, and we are cautiously optimistic about what projects to use them on," says Portales City Manager Orlando Ortega. "It really allows communities to go out and recruit businesses. The days of sitting back and waiting for companies to come knocking on your door are long gone, and we need every tool to encourage smart business growth in our communities."
Voters in Portales, a city of 12,000, approved a one-eighth-cent economic development tax in July 2002. Since then, the city has collected $120,000 but has yet to use it on any projects, Ortega says.
The city of Clovis (Pop. 32,511) adopted a one-eighth-cent economic development gross receipts tax in July 2000.
The city now has $1.4 million in its economic development fund, and has been using the money to lure companies to the community. Clovis has spent $182,000 on three projects -- an expanded golf course, meat processing plant and truck rental company -- that have provided 107 jobs, says City Manager Ray Mondragon.
It also expects to use some of that money to help build a water treatment plant for a $200 million cheddar cheese plant that the city has attracted.
"It has been very positive," Mondragon says of the tax, which raises about $550,000 a year.
City officials were wary at first of using economic development money to help renovate a dilapidated country club with $47,000 in tax money.
But the renovated site proved to be a benefit when officials from the Ireland-based Glanbia Foods Inc. were looking for a place to build the facility, which will be the largest cheddar cheese plant in North America, Mondragon says.
"We were concerned that it would be viewed negatively," Mondragon says of the money the city put into the golf course. "But the country club was one of the things they [Glanbia officials] were looking at. It turned out to be a positive thing."
Tucumcari (Pop. 5,989), adopted a one-eighth-cent tax in January 2000 and has funneled $38,000 to five projects, including a cheese plant expansion that will add 17 jobs.
Mills says it takes some work for communities to comply with the Local Economic Development Act. They must write broad-based economic development plans, as well as plans for each project they decide to spend money on. Those individual plans must be adopted as city ordinances, and the deals must be audited every few years, he adds.
"Those are safeguards against the misuse of public money," Mills says.
The development act is administered by the New Mexico Economic Development Department, which will help communities through the process of developing economic development funds, Mills says.
ddomrzalski@bizjournals.com | 348-8322