The structure of how we use and protect our tax dollars is the key. Click HERE for an Albuquerque Business First Guest Column by NMBC President Carla Sonntag.
Many states have funds to help ‘seal the deal’ when a company is looking to relocate. Those funds can be used for things like New Mexico’s Job Training Incentive Program (JTIP) for new wages or Local Economic Development Act (LEDA) for land, building and infrastructure costs. Local governments also use Industrial Revenue bonds (IRBs) to cover other expenses.
New Mexico must compete for businesses and sometimes these funds can make the difference. We must, however, address the issue of government-subsidized competition created when the government funds a company that will directly compete with an established New Mexico business.
We saw this happen in 2014. The state provided $537,626 in JTIP funds and $2.75 million in LEDA funds to CN Wire, a Turkish copper wire manufacturer. Dona Ana County offered IRBs of $70 million to cover 75 percent of property taxes and an exemption from $30 million of Gross Receipts Taxes on equipment.
The problem? CN located within a mile of International Wire Group (IWG), a direct competitor that had invested millions of dollars since it began operating here in 2011. IWG is currently in litigation with the Town of Anthony, which took over the IRB offer after IWG filed a complaint. (Municipalities have no statutory complaint process which is why the issue was moved.)
What message are we sending when we fund in this manner? Maybe that people should beware when investing in New Mexico because their company could be the next victim of government-subsidized competition? And if you have a complaint, it may never be heard because the issue can be moved to a jurisdiction that isn’t required to hear them.
If New Mexico truly wants to promote economic development, it needs a business environment that supports healthy competition. Our track record of using tax-funded incentives has not been stellar as we’ve seen with these losses: Advent Solar, $16.2 million; Schott Solar, $16.4 million; and Eclipse Aviation, $20 Million. To be prudent with taxpayer dollars, there must be mechanisms that hold future companies accountable for meeting benchmarks and returning funds if they do not.
Government-subsidized competition that could drive an existing New Mexico company out of business is not where our tax dollars should be invested. We should limit those investments to new or complementary industries. And to promote a healthy business climate, government must respect existing companies and provide for timely complaint hearings without an option to move to another venue in order to avoid addressing the issue.
Contact the New Mexico Business Coalition with questions or comments at nmbiz@nmbizcoalition.org or (505) 836-4223.