More Issues In the News

Board of Finance is set to vote on new, more specific guidelines for the use of TIDDs

ALBUQUERQUE—How New Mexico goes about allocating big chunks of local and state tax revenue to so-called Tax Increment Development Districts (TIDDs) may soon be given some much-needed clarity.

The New Mexico Board of Finance will vote on proposed rules Tuesday that would provide more guidelines for evaluation when they consider applications by developers to reserve years worth of future state gross receipts tax (GRT) revenue for their projects.

Tax Increment Financing (TIF), which is the underlying funding mechanism in TIDDs, is used in 49 states as an economic development tool by local governments. It sometimes generates controversy over the tax revenue that’s lost and the growth TIDDs incentivize.

Here’s how it works: a geographically defined district is created by a governing jurisdiction, usually a municipality or county. A percentage of the future tax revenue generated in that district is then allocated to pay for the infrastructure costs of private developers. The purpose is to spur private investment with the idea that economic development in that area will increase.

New Mexico, however, is somewhat unique in the sense that in addition to capturing local taxes, the state now allows for the allotment of state tax revenue for the TIDD.

In fact, TIDDs became a big issue in New Mexico when the state legislature passed the enabling TIDD statute in 2006 allowing up to 75 percent of future state gross receipts tax to pay for the infrastructure of privately developed master planned communities in “greenfield” areas. Greenfields are previously undeveloped areas on the fringes of the city.

Since 2006, the state has invested a large portion of its future GRT in two of the largest developments in the country. SunCalGRT over the next 25 years. and Mesa del Sol, both of which are on the outskirts of Albuquerque and will lay claim to over $1.1 billion of the state

According to the state statute, only local governments can designate a TIDD. Once it has been designated, the state Board of Finance is the entity at the state level that decides whether it will grant a percentage of future state tax revenues to the project.

Critics fear that such heavy investment of the GRT will detrimentally drain the state’s general fund, which provides money for basic services, including education, throughout the state. One-third of the general fund comes from state GRT revenue.

Olivia Padilla-Jackson, director of the Board of Finance, told the Independent that it’s very important to clarify the process through which the state makes a decision to fund a TIDD. The proposed guidelines will provide some added stringency to the process, and point to a variety of different factors that the board should consider when making a decision.

According to Jim Nunns, director of tax policy for the state Taxation and Revenue Department, "The idea is that the state should do due diligence to see that an applicant meets the statute." He adds, "The statute can be complicated and it’s in the government’s interest to try to assist in the process. The goal is to create somewhat of a template for the applicant so it’s consistent and the process is helpful to those that are applying."

Some of the highlights of the proposed rule changes include the following:

* More planning and economic information would be required from applicants, such as feasibility studies, audited financial statements of the applicant, plus economic development and master development plans.

* The board would evaluate whether or not the project could occur in “substantially the same form” without a dedication of state GRT, and ensure that the TIDD will have a positive revenue impact on the general fund over the life of the bonds.

* The board would determine whether or not the development plan includes adequate provisions for workforce housing and schools, and that the percentage of tax revenue allocated to the project is the “most prudent amount possible."The Board would take into consideration a wide variety of things, including any proposed “environmentally protective technologies,” energy and water efficiencies, and sustainable development elements, and the availability of water and water rights. Plus, the impact on surrounding government entities would be considered.

Anne Stauffer, researcher with New Mexico Voices for Children, says that the proposed rules are very important. "The Board of Finance is incredibly influential,” she said, “because they are the gatekeepers who decide if they want to give up to 75 percent of the increment to a district."

Tom Clifford of the New Mexico Tax Research Institute echoed Stauffer’s comments, telling the Independent that the original TIF statute "…gave general guidelines on what to look for but no guidance on the specifics of the application process."

Padilla-Jackson stated that the board has received a lot of public comments from both developers and different community groups, each coming from a different angle.

The meeting is set for 9:30 a.m. Tuesday, July 22, at the State Capitol Building, Room 315 in downtown Santa Fe. Although agendas for board meetings aren’t posted until 24 hours prior, Padilla-Jackson says that she believes there will be a public comment period toward the end of the meeting.