SunCal TIDD: Reasons for optimism?
TIDDs issue bonds based upon the new businesses and values generated from within the 9 Districts. The bond sale proceeds reimburse SunCal for the costs of the public infrastructure. The bonds are repaid from the new business taxes and other taxes generated within the Districts – NOT from current Albuquerque taxpayers or current businesses. By using TIDDS, the new development pays for its own infrastructure instead of having the City pay for it from its general fund.
It would seem that the issue really is as simple as the billboard on I-40 states: the only way you can conceivably be opposed to a SunCal TIDD is if you object to 20,000 new jobs in New Mexico. Why, then, did 33 of 66 lawmakers at the state capital conspire to prevent the gainful employment of 20,000 people?
Economics, stupid. The proposed TIDD on SunCal lands would, by the time they are estimated to be paid off in 2047, require more than $1 billion in state, county, and city funding (viii). Forty years is a long time, you might say, but it’s not very long to the state. Furthermore, when it comes to ensuring tax revenue in the future, one might argue that development is the only viable way to proceed.
Yet SunCal admits that it hasn’t taken inflation into its accounting of future tax revenues or costs of maintaining all those new streets and underground pipes. Add this to the city’s estimate that an Albuquerque population growing at a middling 1% a year would run out of viable supplies of drinking water in 2060, and you realize that opposition to SunCal may not have been because legislators in Santa Fe hated the idea of more jobs for New Mexicans. (Part of SunCal’s 20,000 estimate consists of high-paying Aeronautics jobs).
When one takes in the whole of New Mexico politics, it is easy to be frustrated by the corruption, vagrance, and various chicaneries that seem to define it. Yet this is to miss the forest for the trees. SunCal, for all its high-paying lobbyists and advertising campaigns, could not see the simple truth, that it faced an all-too-rare moment of sanity in Santa Fe: SunCal’s last message on its Twitter account, dated March 19th, says “SunCal Tax Plan a Benefit to State!” On March 20th, Legislators defeated their proposal.
But this isn’t a reason to celebrate quite yet. The TIDD issue will almost certainly come up before the legislature again in the next session, and SunCal will continue to skew the facts as long as it thinks it can get massive amounts of bond money from a captive state legislature.
Filed under: SunCal
The SunCal Companies' "money partner" certain Lehman Brothers entities which are not in bankruptcy simply decided to stiff SunCal, its contractors and subcontractors, and the communities where SunCal California projects are located, causing the filing of 31 bankruptcy cases involving those projects. Among those most directly affected are homeowners in an Orange County SunCal development who are paying horrific "Mello Roos" taxes, which are in many ways akin to the TIDD proposed for SunCal's Albuquerque project. See:
http://www.ocregister.com/articles/pacifica-schoo...
In addition, SunCal just closed its marketing center for a 25,000 home project in California's Antelope Valley, so things are getting worse for this embattled land developer. Obviously, the local government agency involved in that project is thanking their lucky stars they did not issue tax increment financed bonds, like TIDD bonds, to finance the infrastructure for that project.
No sane city, county or state officials in New Mexico would issue massive amounts of tax exempt bonds to develop the infrastructure for a speculative real estate project.
Even if the buyers of those city, county and state TIDD bonds have no recourse to the public purse if the land owners fail to pay the increased taxes designed to generate revenues to pay the TIDD bonds, what SunCal and all others who argue that tax increment bonds are "self financing" fail to admit that each and every state is limited, by Federal law, to a certain dollar maximum of tax exempt bonds which can be issued each year. That Federal limitation is designed to set a maximum on "tax exempt interest" which the IRS cannot tax each year…or conversely to kill off tax exempt financing which amount to construction financing which should, in reality, be made with conventional construction loans.
So yes, New Mexico, there is a cost to issuing TIDD bonds. It's burning up your tax exempt bonding capacity for other "necessary" state-wide and community-wide infrastructure projects.
Governor Richardson had better be very, very careful about supporting TIDD financing for the SunCal project, simply because the lawyers for Lehman Brothers, the lawyers for unpaid SunCal subcontractors, and the lawyers for the "sure to lose their money" second mortgage lenders on the Lehman/SunCal projects are all aggressively digging for dirt on SunCal's owners, in order to leverage their clients into getting what is owed them on the debts which are the subject of the 31 bankruptcies.