by James Parks, Feb 15, 2008

When state officials in New Mexico two years ago revived and expanded a dormant program to give tax breaks to developers to encourage investment in the poor areas of the inner cities, they opened the door to a scandalous abuse of tax dollars. Several studies have documented that big-box retailers like Wal-Mart have made tax deals but not kept up their side of the agreement to create jobs and invest in the community. But what is happening in New Mexico takes the greed to another level. In an article in this month’s Planning & Environmental Law magazine, Greg LeRoy, director of Good Jobs First, points out how greedy developers use a controversial tax subsidy plan, known as TIF, to make huge profits without giving much, if anything, back to their communities. Click here to read the entire article. 

TIF stands for tax increment financing and here’s how it works. The city and the developer strike a deal that allows the two sides to split part of the increased property taxes and business revenue tax that results from the development, sometimes for as long as 15–40 years. So rather than using the new tax money to pay for vital city services, the city ends up giving money to the developer. 

But the situation in New Mexico is exacerbated by a state law passed in 2006 that not only gives developers in TIF areas part of the business and property tax revenue the city would normally receive but also part of the revenues from the state and county. 

Environmental groups and AFSCME have strongly opposed TIFs because the deals suck out money needed for vital city services. For example, city officials estimate Albuquerque needs $1.9 billion to repair and rebuild its infrastructure—money it doesn’t have because of its TIF deals.

Carter Bundy, legislative director for AFSCME Council 18 in Albuquerque, says the TIFs are: 

nothing short of an enormous giveaway of tax dollars to hugely wealthy developers who don’t need the money. The city needs the money. 

 If you want to continue to have water, good roads and pay raises for public employees so you can attract quality people, then you can’t give away the store to every developer who comes along and says I have a big piece of land and is willing to make campaign contributions. 

Forest City Covington, a partnership between Cleveland-based Forest City Enterprises, a $9 billion company, and Covington Capital of Santa Monica, Calif., lobbied heavily for the New Mexico law.   

Now the company has moved into Albuquerque with plans to build a 12,900-acre project with 37,500 homes, 18 million square feet of office and industrial space and a big-box retailer. After putting out $220,000 in campaign contributions to state officials, the company requested it get 75 percent of the increase in city and state tax revenues—the figure was negotiated down to 67 percent. Even so, that means for every new business tax dollar generated by the development, two-thirds goes to the developed area, not to the city. 

After another developer applied for a similar arrangement as that with Forest City Covington, AFSCME and several environmental and community groups last year lobbied successfully for the city council to approve measures to prohibit TIF deals in undeveloped areas. The mayor vetoed the law, and the veto still stands.  

LeRoy says:  

This is an outrage. This is the most generous TIF law in the country. You’re talking about giving away property taxes and gross receipt taxes from three sources, compared with most TIFs that only take from one tax level. This has gotten out of hand. 

The issue has moved to the state legislature where a coalition of unions, community, religious and environmental groups are pushing to change the state law to divert more of the money to the cities and not the developers. But right now the bill is bogged down in a legislative committee and chances are it won’t be considered this year. 

But Bundy says that won’t stop those who are fighting for change. 

We’re going to keep trying to push back this law by electing state officials who put fiscal responsibility and the benefit of the people ahead of their developer buddies.

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