Revealing what the public is getting for its money

Sexy, cool and provocative are not words usually associated with government accounting changes, but that’s what might be on the way with a new mandate that will affect state and local governments in upcoming audit reports.

The coming change is known as GASB 77 — for non-geeks that means Government Accounting Standards Board Standard No. 77, which will make information about tax-abatement agreements publicly available for the first time in fiscal year 2017 audits, which are due by the end of December.

New Mexico Auditor Tim Keller has been among those at the fore of the effort nationally to better disclose how private companies benefit from public money. Now the Democrat is writing rules to make sure cities, counties and school districts report to taxpayers how much certain agreements are costing and what benefits accrue to the public.

Some hoped that GASB 77 would bring even greater transparency to all the tax credits, deductions and exemptions now in state law, some $1 billion in New Mexico. But as government auditors have applied the rule, it has been narrowed to specific tax-abatement agreements between individual companies and local governments that result in construction agreements or expansion with Industrial Revenue Bonds or Tax-Increment Financing, known as IRBs and TIFs.

The biggest of these agreements in New Mexico led to development of the Intel plant in Sandoval County, the Mesa del Sol development in Bernalillo County, the Taos Ski Valley redevelopment and the new Facebook data center in the village of Los Lunas. The most recent abatement agreement in Santa Fe was a deal between the city and Thornburg Investment Management for its offices and financial center on Ridgetop Road.

At a presentation on Rule 77 to the Revenue Stabilization and Tax Policy Committee of the Legislature, Sarita Nair, the chief government accountability officer for the Office of the State Auditor, said many deals are put together by elected bodies from a city or county, but those costs are never disclosed to school districts or water and fire districts, which also must forgo tax money for equipment and operations, but are not signatories.

“The government has said, ‘If you come to our town we’ll give you a tax break,’ but there is no intergovernmental disclosure; not all tax breaks are disclosed to all taxing bodies,” Nair said.

John Manforte, interim secretary of the New Mexico Taxation and Revenue Department, said his auditors have identified 19 tax-abatement agreements statewide that will be required to disclose as part of the new rule. Among the items that have to be included in annual audits: The date of the agreement and how long it lasts. The amount of money a local government or school district would have received without the abatement agreement.

A description of the purpose of the abatement, its goal and any promises made as far as the number of jobs or economic development benchmarks.

Keller said he will also encourage smaller government bodies such as school districts to include any costs associated with the abatement. For instance, if there were new jobs, were those enough to cover higher school bus transportation costs or the need for additional teachers and classrooms?

Gathering some of this information will not be simple, and Keller said it might require that school district, county or the company itself to appraise a land and equipment even though it is not on the tax rolls. Other analysis might have to be done with economic modeling.

This increased disclosure comes at a time when there is more and more competition for giant expansion projects by Tesla, Facebook, Google and Amazon, and even foreign firms such as the Chinese-owned Foxconn, all of which have encouraged local governments to put together tax-incentive packages.

A Bloomberg News article by Mya Frazier that was posted Monday focuses specifically on Facebook data centers, “Facebook won’t hire you: Huge government tax giveaways aren’t yielding many jobs.”

“Facebook received about $100 million in combined tax incentives from state and local governments to put its first three standalone U.S. data centers in Forest City, Prineville, Ore., and Altoona, Iowa, plus $147 million from Texas to put the fourth in Fort Worth,” writes Frazier. “The company will enjoy $57 million in combined tax breaks when it builds facilities in Papillion, Neb., and New Albany, Ohio, and won’t have to pay property taxes on one it’s putting in Los Lunas, N.M., for 30 years. The states and municipalities seem unlikely to break even on those deals, or to materially boost local employment.”

Over the next few years, the GASB rule will help answer more questions about these deals, their costs and benefits.

But it is unlikely to deter local communities from entering into new agreements — disclosure only goes so far.