COMMENTARY: “Santolina” is the name for a new master-planned development on the mesa just west of Albuquerque. This land currently is currently mostly scrubland. Santolina proposes to build a largely residential development, but one that would also include recreation areas like parks, retail space, and commercial areas for business.
While the idea of a large development outside of current boundaries of development is itself controversial, this column doesn’t focus on whether Santolina should be built.
There are plenty of angles to be discussed there, but there is one aspect of the development that is of immediate concern to all taxpayers: financing the development through Tax Increment Development Districts (TIDDs). This week, Santolina will try to convince Bernalillo County commissioners that they should commit the county to taking $500 million out of the county’s general fund — out of the tax dollars paid by every single resident of Bernalillo County — over the next few decades and give it to the rich out-of-state owners of Santolina.
How TIDDs work
A TIDD is an area where the county (or other jurisdiction, like a city or state) takes future revenues from the new development and gives those revenues back to the developer to reimburse the cost of building the development. It effectively removes any risk for the developer, because as long as something gets built and taxes are generated in that area, they get all their money back.
In the case of a “greenfield” TIDD, one that is built where there is no existing infrastructure or buildings, virtually 100 percent of the new tax revenue is included in the TIDD. That’s because the “increment” is simply the new revenue amount minus the old revenue amount. If the old revenue amount is close to zero, which is the case with scrubland, that means almost all the new revenue is part of the TIDD.
When most people first hear about TIDDs, they like them. They say “well, since it’s all new money, who cares if we give back some of it to the people who made the investment? The county will come out ahead anyhow because they didn’t have any revenue before!”
There’s one problem with this logic: while the revenue is new, in any development, particularly one with tens of thousands of new homes and residents, there are also major new costs. We’re essentially talking about creating another Rio Rancho-sized development of homes. Just as Rio Rancho residents pay taxes to get services, so too will Santolina residents have to pay taxes.
Santolina wants 45 percent of those taxes, though. The problem that creates is that with almost half of that new tax revenue being diverted from services to an out-of-state corporation, there won’t be money to provide all of the necessary services.
The big question
Santolina will pay for studies showing “no new net expense” to Bernalillo County. But there’s one hard question they’re never able to answer: How can this new community provide the services residents need at 55 cents on the dollar? How is Santolina able to pay for schools, roads, sewer, water, parks, infrastructure, maintenance, solid waste (trash), police, fire, courts, prisons, and dozens of other core services with half the revenue of any other municipality or county in the state?
The only answer
The short answer is they can’t. They’ll rely on other residents of Bernalillo County to pick up the slack, because that even though TIDD money is calculated the new area’s revenue, it all comes out of the general fund. Since nobody can provide adequate services at 55 cents on the dollar, taxpayers from the rest of the county have to bail out Santolina.
That means, by definition, services everywhere else will suffer. Only one of two things happens once the money is gone: Either everyone in the county starts getting worse and worse services, even though they’re all paying the same taxes that they used to, or some future county commission has to raise taxes just to provide the same services they used to.
It’s not an ideological issue. It’s math. You can’t divert half of the tax revenue from a big part of any metropolitan area and have the same services for half the price.
Whether the voters and politicians of Bernalillo County decide to slash services or raise taxes, or a combination of both, the Santolina TIDDs guarantee fiscal crises for decades to come. These TIDDs couldn’t be more fiscally irresponsible, regardless of whether you like Santolina’s plans or not.
Impacts beyond budgets
There are other objections to TIDDs, including the fact that massive subsidizations of new housing decimate existing housing values in nearby areas. In other words, the near west side, south valley, and any part of the Albuquerque metro area that has houses in the $200,000-$500,000 range will see housing values plummet and stagnate for decades if a new, heavily subsidized development is created with TIDDs. Housing values wouldn’t necessarily drop if Santolina let the market decide when there’s a demand for new housing rather than having politicians artificially incent new development that the market isn’t supporting.
There are conservative objections to TIDDs in addition to sheer fiscal recklessness: TIDDs constitute a subsidy to one group of developers when others haven’t received them, and amount to government picking winners and losers in the market. That’s one of many reasons that the conservative Rio Grande Foundation, which AFSCME opposes on many core issues, also opposes TIDDs.
State legislators and politicians at all levels across New Mexico are going to be asked to expand these massive sweetheart tax deals if Bernalillo County approves TIDDs this week. In the short term, it can be tempting for politicians to approve the tax giveaways, as Santolina already proved that they will dump tens of thousands of dollars into even into low-dollar races like county commission seats (at the last minute so no one knows about it during the campaign).
But elected officials should resist that temptation, because TIDDs are a fiscal and policy disaster, ensuring that New Mexico taxpayers send hundreds of millions of dollars out of state while being left with nothing but more bills to cover here at home.
Bundy is the political and legislative director for AFSCME in New Mexico. The opinions in his column are personal and do not necessarily reflect any official AFSCME position. Contact him at [email protected].