State out $16M in Schott closure
Albuquerque, county have ‘clawbacks’ to recover money, but state funding is ‘lost’
Albuquerque and Bernalillo County have “clawbacks” to recover money, but taxpayers are on hook for state grants.
New Mexico taxpayers will lose $15.94 million in state grants made in 2008 and 2009 to Schott Solar PV Inc., which shut down its Albuquerque operations on Friday.
The funds were approved by the Legislature and awarded to the company through the Economic Development Department under then-Gov. Bill Richardson, but the contracts authorizing the grants have no “clawback” provisions attached to them, said Economic Development Secretary Jon Barela.
“Incredibly, the (money) that the state earmarked for Schott will be lost,” Barela said. “The taxpayers will have to eat the bill.”
Barela said the Richardson administration bears responsibility.
“It’s incredible to me how the previous administration could put a deal like this together and not put a clawback in the contract,” Barela said. “They weren’t being good stewards of taxpayer money.”
Fred Mondragon, economic development secretary when the grants were made, told the Journal there was a “security agreement” in the contracts that required Schott to keep a specified number of workers employed for a certain amount of time, but he could not recall the details.
“That, in effect, is the clawback,” he said. “... I don’t know if they met the milestones.”
But the clauses regarding the “security agreements” cited by Mondragon do not contain specifications about
labor numbers or length of employment.
Wade Jackson, general counsel at the Economic Development Department, sent the contracts to the Journal for review.
“There is nothing in these contractual relationships that would allow the state to receive any of the money appropriated,” Jackson said.
In contrast, separate contracts between Schott and the city of Albuquerque and Bernalillo County do contain milestones on employment levels and time frames for hiring workers.
The city provided $1 million in assistance to Schott, including $818,000 for road improvements around the Schott facility at the Mesa del Sol master-planned community in south-central Albuquerque. It also spent $182,000 to reduce building and permitting fees.
The city can’t recover the fee-reduction assistance, but it can collect 25 percent of the value of road improvements, or about $200,000, said Deirdre Firth, a division manager in the city’s Economic Development Department.
Albuquerque also will recover 60 percent to 80 percent of tax abatements provided to Schott through industrial revenue bonds. The city is still crunching numbers to determine the total value.
“We expect that clawback amount will be in excess of $1 million,” Firth said.
The county provided $500,000 to help Schott construct and equip its buildings. That money also is protected by clawbacks, said Bernalillo County Economic Development Director Mayling Armijo.
The state’s assistance to Schott was provided under New Mexico’s Local Economic Development Act — a constitutional amendment approved by voters in the 1990s to allow government to provide direct assistance to private projects for economic development.
The Legislature approved four appropriations for Schott totaling $15.94 million, but it’s up to the state agency managing the grant contracts to include clawback provisions, said Charles Sallee, deputy director for the Legislative Finance Committee.
In this case that agency was the Economic Development Department.
“The law doesn’t specifically require a clawback, but overall it’s generally considered best practice,” Sallee said.
Economic Development spokeswoman Angela Heisel said that under Gov. Susana Martinez, the department is including clawbacks in all new Local Economic Development Act grants.
Schott shut down its 200,000-square-foot factory on Friday because of intense competition in solar panel markets from cheap Asian imports and low demand in Europe, laying off 250 employees. The company, which opened the facility in 2009, made solar photovoltaic panels and other solar components at the factory.
In 2008, the Richardson administration had pitched $130 million in potential incentives to lure the company to New Mexico.
Those incentives never materialized because they were based on the company’s original plan to build the plant out to 800,000 square meters and 1,500 workers, Schott said in a statement Friday.
The federal government also awarded Schott $33 million in stimulus tax credits in 2010, but the company never received them because it didn’t make the required investments, said Schott spokesman Matthew Kraft.