Jobs Council wants $50M ‘closing fund’
Lawmakers say fund can help woo businesses and spur job creation
SANTA FE — In an attempt to ramp up New Mexico job creation, a bipartisan legislative panel and Gov. Susana Martinez say more money should go into a state “closing fund” for economic development.
A recommendation from the legislative Jobs Council calls for appropriating $50 million in the coming year — more than triple the current amount.
During a recent legislative hearing, lawmakers noted other states have much larger funds to help woo businesses and spur job creation.
The Texas Enterprise Fund, for instance, has doled out more than $222 million over 10 years.
“I think it’s a great time to look at this model,” Rep. Larry Larrañaga, R-Albuquerque, said during this week’s discussion by the Legislative Finance Committee about the Jobs Council’s recommendations.
Other lawmakers questioned whether tweaks need to be made to the state’s system for handling the money, including whether unspent money should revert to the state’s general fund, as is currently the practice.
A total of $15 million was appropriated this year for the state’s closing fund, a pool of discretionary grant money available under what is known as the Local Economic Development Act.
The money flows through local governments and is generally used to help with land acquisition, building improvements or other bricks-and-mortar work sought by private companies. The state constitution bars it from being given directly to the companies.
Of the $15 million, roughly $7.8 million has been spent since July, according to the state’s Economic Development Department.
That includes $2 million for building improvements for Global Fashion Technologies Inc., a clothing manufacturing company set to open its doors in Valencia County in April or May 2015. It also includes $250,000
to pay for sewage and wastewater treatment upgrades at the Santa Fe Brewing Co., which is expanding.
The governor, who voiced support for more closing fund money during her re-election campaign this year, said this year’s funding has been used both to help New Mexico-based companies hire more workers and to recruit out-of-state companies.
“The state’s closing fund has been a critical tool in helping diversify our economy, grow the private sector and better compete for jobs,” Martinez said in a statement.
Economic development experts have also called for beefing up the state’s closing fund, which can be used in conjunction with various tax breaks offered by the state.
Gary Tonjes, president of Albuquerque Economic Development, Inc., said during this week’s legislative hearing that New Mexico’s relative shortfall of closing fund money has been among the reasons for the state’s recent economic development struggles.
“The (size of the) job creation fund has been one of those items that has cost us dearly,” Tonjes told lawmakers.
Some lawmakers have said a larger closing fund could help the state pursue high-profile companies, such as Tesla Motors.
Earlier this year, Tesla named New Mexico as one of four finalist states for a car battery “gigafactory” the company plans to build. Tesla ultimately selected a site in Nevada for the $5 billion plant, with Nevada approving a $1.3 billion incentive package to help lure the company.
In New Mexico, a $50 million appropriation for the state’s closing fund would represent a dramatic increase in this kind of spending.
In last year’s budget, a total of just $3 million was appropriated for the closing fund under the LEDA program.
While state lawmakers are expecting to have more money to spend on next year’s budget than they did for this year’s $6.2 billion budget, an ongoing dip in oil prices could mean less available money than previously projected.
Larrañaga told the Journal the final dollar amount appropriated for the closing fund might not hit the requested $50 million figure, but he said he hopes it’s close to that.
“We’ve got to be conscious what we have in the budget, but I think it has to be a priority,” Larrañaga said.
Deal-closing funds in some states have drawn scrutiny, with criticisms surfacing that they can, if unchecked, be used as political slush funds. A recent audit of the Texas fund raised questions about faulty oversight and reporting provisions in that state’s program.
Some restrictions have already been enacted in New Mexico as state lawmakers in 2013 approved a bill that allows closing fund money appropriated by the state to be recovered, or clawed back, if the private company doesn’t comply with an agreed-upon schedule and other conditions.
Sen. George Muñoz, D-Gallup, said more restrictions might have to be considered, such as limiting how much money from the fund could be spent on a single project.
However, Muñoz, who pushed for a larger recommended dollar amount as a member of the Jobs Council, said he supports beefing up the state’s closing fund, explaining, “If we’re going to play in the game, let’s play in the game.”