KRWG

Las Cruces Development: What Does a Subsidy Buy?

Jul 27, 2020

 

Credit Country Club Estates / Las Cruces

  Commentary: Developers have brought a controversial proposal to Las Cruces and Dona Ana County.   They’ll   build a state-of-the-art mixed-use development called Royal Crossings on the 91 acre abandoned Las Cruces Country Club property if the city and county agree to divert a projected $243 million in tax revenues into their pockets over the next 25 years.  

The developers will retain 100% ownership of the project.

 

The complicated proposal is called a Tax Increment Development District, or TIDD.  The hotly disputed plan got me so worked up that I dreamt about it last night.  In the dream, I convened my personal (and imaginary) cabinet to kick around the pros and cons.  The facts about the development proposal are real.

“Mr. Moneybags, you’re my treasury secretary, what do you think about the financing arrangements on this deal?”

“Mr. President” (as long as I’m dreaming) “I am frankly troubled.  The developers say they will include $46 million worth of public improvements as part of the deal.  But by the time we cover TIDD costs we’re out $243 million.  We could finance the same improvements over the same time period for just $70 million by issuing municipal bonds.  We’d save $173 million.”

“What public improvements are they offering anyway?  Can you tell us Madam Secretary Soundroof?”

“My Urban Planning staff determined that the improvements consist of new roads, a big parking structure, and small green spaces with walking trails mixed in.”

“Don’t developers customarily build that stuff on their own dime around here?”

“Yes sir, Mr. President.”

“So why would we hand $243 million to these guys and get nothing in return?” 

“Jobs, Mr. President.” interjected Economic Development Secretary Numbers Jumbled. “The project will bring new jobs”.

“Please explain”.

“Well, the new office space is projected to produce 700 permanent jobs.”

“Isn’t that backwards Mr. Jumbled?  If jobs exist, we need to build offices.  But I don’t see how building offices creates permanent jobs!”

“Studies show there is demand for the office, hotel and medical service facilities the Royal Crossings development provides.  If we build, people will come”

“I’m confused Secretary Jumbled.  If there’s demand, won’t other developers build similar facilities anyway?  Why should we hand these guys the equivalent of 60% of Las Cruces’ annual budget?”

“Uh……”

“Will Royal Crossing’s profits go to a worthy public purpose?” I asked. “Affordable housing, police, fire, maybe a food bank?  Is that the angle here?”

“Actually, no Mr. President” said Secretary Moneybags.  “That would make the Royal Crossing project a non- profit enterprise. Giving tax money to public service-oriented non-profits is illegal under New Mexico’s anti-donation clause.  By putting all the profits in the hands of the private developers and their limited partners (each of whom must invest a minimum of $5 million) we can give away all the tax money we want!”

“Very fair” I said archly.

“May I speak?” asked Secretary Soundroof.  

I nodded.

“There are a couple of clear benefits to this project, Mr. President.  First, we clean up a neglected property that has become an eyesore in the middle of town.  Second, we get a state-of-the-art mixed-use development that might make our community more attractive to businesses and families considering a move to this community.”

“Well how much of a subsidy is that worth?” I asked.

Suddenly, I awoke in a cold sweat.  I shaved, brushed my teeth and took a shower.  And now, again relegated to ordinary citizenship, I write this column preoccupied with one question.

How much of a subsidy is that worth?

Steve Fischmann

Las Cruces

Public Regulation Commissioner District 5