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New Mexico’s lands are under attack by mega-developers like Verde Group and SunCal who are attempting to turn our mountains, grasslands, watersheds and open space into sprawling developments and subdivisions. In addition to gobbling up more than tens of thousands of acres of land, a tax giveaway allows them to take billions from the state—up to 75% of increased tax revenue from their development could go directly into the developer’s pockets.

We need to stop the New Mexico land rush, and close down this tax sprawl subsidy which is jeopardizing our open space and quality of life. Rather than incentivizing fringe development with developer handouts, taxpayer money should be used to invest in city services, education, teachers and environmental programs—creating the kind of state we want to live in.

The New Mexico Board of Finance, the body that approves the use of state money for TIDD projects, is currently considering rules that would help increase the Board’s access to important information, increase transparency and ensure taxpayers are getting a fair shake. The Board will vote on the draft rules at their September 16 meeting.

Read our letter on TIDD Rulemaking.

Click here for the draft of the TIDD rules.

Read our comments on the TIDD rulemaking.

How You Can Help

Please email Governor Richardson and Lt. Governor Denish, voting members on the Board of Finance, and tell them that Tax Increment Financing (TIF) law in New Mexico needs an overhaul in order to preserve our environment, serve the public interest and protect our quality of life. Ask them to support the Board of Finance’s draft rules.

Background

Tax Increment Financing (TIF) and Tax Increment Development Districts (TIDDs) in “greenfields,” or previously undeveloped open space, pose a significant risk to New Mexico’s environment, undeveloped wild spaces and our quality of life.

TIF is an economic development tool available to local governments and developers in 49 states and the District of Columbia. TIF was originally created by California in the 1950s as a way to encourage reinvestment in older, blighted areas that were seen as too risky or costly for private investors to improve. Since then, its use has expanded and there are now thousands of TIDDs across the country.

New Mexico has a uniquely generous arrangement allowing for capture of incremental state Gross Receipts Tax (GRT) revenue in addition to city and county GRT and property tax. GRT money is used state-wide to provide important services and accounts for one-third of the state’s General Fund.

When a district, the TIDD, is defined for (re)development, the developer strikes a deal with the taxing agencies (City Council, County Commission, and/or Board of Finance/New Mexico Legislature) to receive up to 75% of the incremental increase in tax revenue resulting from the improvement within the district for up to 25 years. When and if the property in the district increases in value and sales revenues rise, the incremental taxes are diverted and used by the TIF district to pay the developer for the costs of infrastructure, land acquisition, demolition, utilities and planning and other improvements within the district. Tax exempt revenue bonds are issued by the TIF district to finance the infrastructure. Once the TIDD is terminated—perhaps decades later—the incremental taxes revert back to the taxing entities.

Since the TIF statute was adopted in 2006, the state has approved two state-funded TIDD projects: Mesa del Sol and SunCal. These TIDDs are the largest in the country—both in land area (about 70,000 acres) and in money pledged ($1.1 billion in state money alone). Other developers, like Verde Group, are lining up to make use of TIF in communities around the state.

The Effects of Subsidized Sprawl

Unfortunately, this tax financing arrangement, as currently constructed, is a bad deal for New Mexico’s environment and taxpayers for some of the following reasons:

• Although originally developed to promote urban infill, TIDDs have been being used to subsidize sprawling “greenfield” development. Subsidizing fringe development and drawing jobs and vitality from the existing community contributes to global warming. Rapid, unplanned development has contributed to New Mexico’s rank as sixth in the nation for vehicle miles traveled per driver—about 18,500 miles per driver per year.
• Subsidizing sprawl contributes to loss of open space.  As inefficient patterns of development eat up open space, we lose the natural character of our state.
• Inefficient land use patterns and growth on the fringe negatively impact public health. Ozone levels are higher in sprawling areas. Sprawl is also linked to increased rates of obesity and hypertension, as fewer people walk and bike to work, school and shopping.
• Sprawl development compromises our watershed. Development that uses land efficiently and protects undisturbed wild spaces allows a community to grow while still protecting its water resources.
• Massive diversions of state Gross Receipts Tax could cripple the General Fund. State GRT revenue accounts for one-third of the General Fund, which provides money for basic services across the state, like schools, teachers and health care. SunCal and Mesa del Sol alone will have claim on over $1.1 billion dollars of state GRT for the next 25 years in just the first phases of their development. These developer deals are the biggest in the country, both in terms of land area and money.
• TIFs skirt transparency and public oversight. TIF uses future general fund revenues to support the repayment of property tax and GRT-backed debt, without having to go to voters for approval and without violating debt limitations. TIF does not appear in city, county or state budgets, so it is largely invisible to the public.
• No reporting or auditing requirements exist to measure or enforce the success of TIDDs. No statutory performance requirements exist that require specific results and there are no penalty or clawback provisions that exist for local governments to enforce such expectations.
• TIDDs in New Mexico are being driven by developers, not governments. Big projects like SunCal are being driven by private developers who stand to gain from the development. As such, TIF also strengthens the role of special interests in what should be localized planning decisions.
• New homes by the thousands will only exacerbate the lending crisis. With thousands of homes sitting empty across the state, building thousands more in massive masterplanned communities will only further compromise vitality and investment in existing neighborhoods.
• TIDDs suck money, jobs, homebuyers and economic vitality out of the existing community. Rather than spurring development, TIDDs may simply shift economic activity from one part of the state or city to another.

New Mexico and a growing number of groups are working to reform New Mexico’s TIF law to protect New Mexico’s open space, limit sprawl, increase transparency and protect taxpayers.

For more information, click here for our fact sheet. (PDF)