Accountable USA - New Mexico

New Mexico has an aggressive and controversial economic development subsidy portfolio. More than two dozen programs – many of which are industry-specific – offer credits, deductions, abatements, and exemptions for a multiplicity of taxes.

Among the most controversial practices is the use of taxable Industrial Development Bonds as a gateway for costly, long-term property tax abatements for large companies. Intel has been a major beneficiary for its manufacturing operations outside Albuquerque (see below). Another recipient, Philips Semiconductor, had to pay back some of its tax breaks after it shut down its plant in Albuquerque (see below).

New Mexico is also home to Mesa del Sol, a massive New Urbanist mixed-used development whose tax increment financing (TIF) subsidy is the largest in the country: $500 million over 25 years (see below). The state’s TIF program, called Tax Increment Development Districts (TIDD), can divert not only county and municipal property taxes, but also the state, county, and municipal increments of the gross receipts tax (a large revenue source).

As in several other states, New Mexico’s film production tax credit has also been contentious. Enacted in 2003, the program costs more than $65 million a year (in a poor state of 2 million residents).  

Although New Mexico uses a Native American sun symbol for its flag and license plates, the state leaves taxpayers in the dark.  Our review of five major programs found that most are not transparent.  

Key Subsidy Programs

Subsidy Program Recent Annual
Cost
Online Recipient
Disclosure
Recipient Disclosure
Score
Job-Creation/
Job-Quality Score**
Monitoring/
Enforcement Score***

Film Tax Credit

a 25% tax rebate on all direct production and post-production expenditures

$77.0 million (FY2011)
0/100
13/100
39/100

High Wage Jobs Tax Credit

refundable credits worth 10% of wages and benefits for new jobs that meet minimum salary requirements; credits may be applied against the state portion of gross receipts tax, compensating tax and withholding tax

$9.3 million (FY2011)
0/100
40/100
40/100

Job Training Incentive Program

program reimburses 40-75 percent of employee wages during training periods

$6.7 million (FY2012)
34/100
not included
not included

Manufacturer's Investment Tax Credit

credit against up to 85% of gross receipts taxes and payroll withholding taxes equal to 5% of the value of certain industrial equipment

$1.9 million (FY2011)
0/100
25/100
45/100

Technology Jobs Tax Credit

a tax credit equal to 10% of the wages and benefits paid for each new economic-base job created

$3.1 million (FY2011)
0/100
not included
not included

* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).

** The score is derived from the Good Jobs First report Money for Something (December 2011).

*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).

Major Subsidy Deals

Intel (1993)

After staging a bidding war among a half-dozen states, Intel announced in 1993 that it had chosen a suburb of Albuquerque called Rio Rancho as the site of what was said to be the largest plant expansion in the history of the semiconductor industry: a $1 billion chip fabrication facility with 1,000 employees and 1.3 million square feet of manufacturing space. New Mexico agreed to provide $1 billion in industrial revenue bonds (IRBs) plus investment tax credits, property tax abatements and training grants – the amounts for which were not initially disclosed. The IRBs were of the taxable variety and were to be purchased by Intel itself; they served less as a source of financing than as a vehicle for the property tax abatements by making the valuable facility tax-exempt.

Rio Rancho was not virgin territory for Intel. It already had a plant there that had opened in 1980. Although public officials praised the deal, critics such as the SouthWest Organizing Project, an environmental justice group, complained about the size of the subsidies (which it valued at $250 million over the first five years) and worried that the new plant would exacerbate existing environmental problems tied to Intel’s operations. By 1995 the IRB issue approved by Sandoval County had risen to $8 billion, with Intel’s ten-year property and sales tax subsidies said to be worth about $455 million. Intel later made large additional investments in Rio Rancho using self-financing IRBs (including a $16 billion issue in 2004) and tax abatements. In 2007 Intel announced that it would eliminate 1,000 jobs in Rio Rancho, nearly one-quarter of its workforce there. (Key sources)

Philips Semiconductor (1995 and 2000)

When Philips Semiconductor (now known as NXP) decided it wanted to expand its microchip production operation in Albuquerque in 1995, it followed the lead of Intel and asked for a deal under which it would get a lucrative property tax abatement via the issuance of taxable industrial revenue bonds (IRBs). The $200 million bond issue, the largest in the city’s history, was criticized by groups such as the SouthWest Organizing Project (SWOP) and ACORN for lacking a careful cost-benefit analysis.

The deal nevertheless was approved, and when Philips planned an additional expansion in 2000 it came back to the city with a request for an even larger deal: $400 million in bonds. The property tax savings to the company were estimated at $22 million, in addition to $19 million in state sales tax exemptions on the purchase of equipment. Groups such as SWOP protested again, but again the deal sailed through. Two years later, however, Philips shocked the city by announcing that as part of a restructuring plan it would close its Albuquerque operations and put 600 people out of work. Because the IRB deal had a clawback provision, the city was able to recoup $13 million of the property tax abatements it had given the company. (Key sources)

Forest City Covington/Mesa del Sol (2007)

Starting in the 1980s, New Mexico’s State Land Office had a dream of developing a 13,000-acre tract of open land south of Albuquerque known as Mesa del Sol. In 2002 the state chose Forest City Covington, a joint venture of real estate company Forest City Enterprises and the investment group Covington Capital, as the master developer for what was to be a vast mixed use project incorporating thousands of residential units and extensive recreational resources as well as large amounts of commercial and industrial space. In 2006 Forest City Covington proposed tapping hundreds of millions in future tax revenues generated by the development to pay for upfront infrastructure costs.

To accomplish this, the company wanted city and country officials to create the state’s first tax increment development district (TIDD), an arrangement that would divert 75 percent of both gross receipts and property taxes from three levels of government (city, county and state) to finance the greenfield's infrastructure work. Despite opposition from groups such as 1,000 Friends of New Mexico, the city of Albuquerque approved the creation of the TIDD and then agreed to divert a slightly smaller portion (67 percent) of future tax revenues into it, representing a projected subsidy of about $130 million. Two state agencies went along with the company’s 75 percent request.

Mesa del Sol moved ahead, but there remained in Santa Fe a lively debate about state officials began to have second thoughts about the practice of giving up large amounts of future tax revenue. In March 2009 the state legislature deadlocked on a request from developer SunCal for a $408 million TIDD to subsidize a giant proposed project on Albuquerque’s West Side. (Key sources)

Walmart in New Mexico

  • At least 1 Wal-Mart location has received subsidies worth about $6.7 million in New Mexico.
  • We found no instances of property tax assessment challenges by Wal-Mart in New Mexico, but given the absence of centralized data, it is still possible that appeals have occurred.
  • Many Wal-Mart workers are ineligible for health coverage from their employer or choose not to purchase what is available, because it is too expensive or too limited in scope. These workers often turn to taxpayer-funded health programs such as Medicaid. New Mexico is among those states that have not disclosed data on the employers with the most workers or their dependents enrolled in such programs.

For more information, see the New Mexico page of Wal-Mart Subsidy Watch.