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Are New Mexico's Economic Initiatives Aimed In Wrong Direction?

KRWG News

According to MIT, mid-size companies, that’s businesses with 10 to 99 employees, generate 35% of jobs nationally.  And these companies are better at creating middle class jobs in high-skilled areas. New Mexico economic initiatives are not focused on supporting the growth of these companies.

New Mexico has been one of the states slowest to bounce back from the recession. That could be because the state’s primary approach to economic growth has been using incentives and tax exemptions to lure big business.  New Mexico State University economist Chris Erickson says the state is moving in the wrong direction.

“Las Cruces and New Mexico is generally I think is steering towards the rocks because we are focused on developing short term solutions and getting quick fixes. When we need  to steer the ship back into the channel, where we  focus on what  creates real economic development.” Erickson says

Erickson says states that have had stronger trajectories of growth like Oregon and Colorado have taken a different, grow from within approach, known as economic gardening. Instead of giving incentives to out of state businesses assistance is geared to help local firms.  The states also enhance infrastructure to make the region a more attractive place to live and do business.

“Grow within type of policies which are aimed at helping businesses to grow.” Erickson says “Policies that involve developing amenities; parks recreation, that kind of thing. Lets face it people like to live places where it is pleasant they like to live near parks they like to live near recreational activities and if you have those available in your community and you can promote them and develop them then that can result in attracting businesses into your community.”

There are regional examples of this approach like the Organ Mountains Desert Peaks national monument designation, street improvements and a future plaza in downtown Las Cruces and state assistance programs like IDA’s or  Individual Development Accounts. The program provides eligible New Mexicans with training and a state matched savings account to help them pay for education, buy their first home or start a business. 

http://www.youtube.com/watch?v=kXOH7eToZlY&feature=youtu.be

Jessica MacKenzie is the owner-manager of Bella Luca, an Italian restaurant in Truth or Consequences.  She took part in the IDA program 8 years ago as she was establishing the business.

“When you are opening a small business every little bit helps. It was worthwhile  for us to do the classes and  go to the program and have the little couple of extra grand to help us make the dream a reality.” MacKenzie says

Mackenzie saved one thousand dollars and received four times that $4000 dollars from the state. Mackenzie says she would have saved more if she could have, but the one time matched saving program is capped at $4,000. So Mackenzie got most of the half million dollars it cost to set up the business from investments and loans.

“I don’t think there are many businesses that start for $5000.” Mackenzie says “I can only imagine if a young family were only able to get $50,000 or you know something was really could approach opening a real viable long term business.”

If this one time Individual development account for New Mexican businesses seems measly that’s because it is when compared with the 25 percent to 30 percent reimbursement for film and television production.  New Mexico has set aside $50 million a year for the film industry but only $100,000 will fund this year’s Individual development account program.

Erickson says even though the film incentives and other perks for businesses are not always rational economically they may make sense politically especially in the lead up to elections.

“Politicians like that because they can use tax incentives to attract  a business to bring them into the community short term. It gives them a short term hit, it is kind of like a heroin hit. Lets use tax incentives to get people to get short term gratification  and impress voters with what we are able to do. Whereas, real economic development takes decades to undertake.” Erickson says.

While the opening of Bella Luca may not have warranted a ribbon cutting ceremony or a press conference, they do employ 16 full time staff in the summer and 10 in the off season and Erickson says companies owned by locals like Jessica Mackenzie typically have more staying power than firms lured in by incentives and managed out of state.

Simon Thompson
Sous Chef Isaac started working at Bella Luca 8 years ago as a dishwasher. He now runs the kitchen.

“You are more  ingrained  in the fabric of your community.” MacKenzie says “My staff are my friends you know I work side by side with them  so there is a deeper emotional connection to my own  work and to the level of pride I try to inspire.”

Davin Lopez is the CEO of MVEDA, the Mesilla Valley Economic Alliance one of many organizations in the state working to attract new jobs.  He says while economic gardening sounds good in theory implementing the approach in New Mexico is a lot more complicated, particularly with the state’s low skill workforce and difficulty retaining the state’s college graduates.

“Build a private sector industry where a lot of these  students can move into and stay here  in the region.” Lopez says “We are exporting our greatest talent.”

But Lopez says there does need to be more long-term investment in infrastructure, work force development, and quality of life initiatives.  However he says those long-term efforts can be difficult because MVEDA’s success is measured in the short-term.

“For me in my world, I am asked to perform every year. We have to be positively performing every year. I can’t really wait.”

Lopez says the region and state as a whole could benefit from a longer term perspective in generating economic development

Whether that happens or not Lopez says economic development boards will leverage everything available to them to bring jobs to the region, including all the business incentives and tax exemptions the state, city and county have to offer.

More on the story from Davin Lopez, President and CEO, Mesilla Valley Economic Development Alliance:

In my interview I strongly made the point that most of New Mexico’s incentives were designed to show a return on investment to public dollars  for the jobs created.  I stated that, at MVEDA, we are always very concerned about RIO and run impact analysis to illustrate the value of a job vs. an incentive provided and therefore support efforts in using certain incentives as a recruitment tool.  Additionally these same incentives are applicable to existing companies.  I further stated that with properly designed incentives, we can begin to recruit marquee companies which if existed in Las Cruces, then begin to provide a goal for students to strive for, to look forward to, which in the long run could lower drop-out rates,  and get more students to the finish line and graduation.  IBM is one example of a lost opportunity.

 

 

  

Simon Thompson was a reporter/producer for KRWG-TV's Newsmakers from 2014 to 2017. Encores of his work appear from time to time on KRWG-TV's Newsmakers and KRWG-FM's Fronteras-A Changing America.