Less than one-fifth of $50M closing fund allocated
Lawmakers beefed up fund to attract companies
SANTA FE — New Mexico lawmakers, in an attempt to invigorate the state’s economy, appropriated $50million this year for the state’s “closing fund,” more than tripling the amount of money that had been available last year.
Nearly five months into the state budget year, roughly $8.7 million of that $50 million has been allocated — with more than half of it earmarked for a new Skorpios Technologies manufacturing plant in Albuquerque.
Economic Development Secretary Jon Barela says he’s not concerned about the relatively slow spending pace, adding that it takes time for the closing fund money to be allocated and spent.
He also said the pipeline of companies wanting to expand or relocate to New Mexico is growing increasingly full.
“It would be nice to spend all the $50 million (this year), but I’m going to be judicious about how we spend the money,” Barela said in a recent interview.
However, Senate President Pro Tem Mary Kay Papen, D-Las Cruces, said the fact that less than onefifth of the $50 million has been allocated since the budget year began in July could be a sign that state officials are having difficulty persuading businesses to come to New Mexico.
“Sure, it’s a concern to me, and it should be a concern,”
Papen said. “But I don’t want them to just run and spend the money because it’s there, either.”
The closing fund is a pool of discretionary grant money available under what is known as the Local Economic Development Act. The money flows through local governments — the state government holds the purse strings — and is generally used to help with land acquisition, building renovations or other bricks-and-mortar work sought by private companies. The state Constitution bars it from being given directly to the companies.
House Speaker Don Tripp, R-Socorro, said lawmakers may consider increasing the closing fund during the 30-day legislative session that starts Jan. 19, but will probably not appropriate another $50 million.
He said the Economic Development Department has been prudent in deciding how to allocate closing fund dollars, adding that he’d be alarmed if all $50 million had been spent rapidly. Any money unused by the end of June 2016 will roll over to the next fiscal year.
“We’ve only used part of it,” Tripp told the Journal. “It doesn’t spoil, as far as I’m concerned.”
Increasing the amount of money in the closing fund was touted last year by the legislative Jobs Council — led by Tripp and Papen — as a way to ramp up New Mexico job creation. Other states, including Texas, have much larger closing funds to help woo businesses.
Gov. Susana Martinez backed the effort, and the funding was provided in two bills approved this year by the Legislature — the annual budget bill and a $295 million capital works package approved in a June special session. The $50 million total is a dramatic increase from previous years; $15 million was appropriated for the closing fund last year and just $3 million in the 2014 budget year.
New Mexico’s economy has been sluggish in recent years, according to several growth measures. The state’s 6.8 percent unemployment rate for October was the second-highest rate in the nation, although nonfarm payroll employment has grown.
Some lawmakers have argued that a larger closing fund would help the state pursue high-profile companies, such as Tesla Motors. Last year, Tesla named New Mexico as one of four finalist states for a car battery “gigafactory” the company planned 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.
Economic Development Department Secretary Barela, a Martinez appointee, said part of his strategy is to have money available for a “big fish,” or a large-scale business endeavor.
But he also said most of the allocated closing fund dollars have gone toward helping small businesses, adding that it’s unlikely the state would have been able to keep a business like Skorpios without having money to invest in infrastructure.
The most recent project to be allocated closing fund dollars is the expansion of a Southwest Cheese Co. factory in Clovis, and distributing the money around New Mexico is a point of emphasis, Barela said.
“We are intent on spreading dollars throughout the state,” he said.
But Papen indicated that other types of economic development strategies might also have to be considered, saying of the closing fund, “I think it’s certainly had some success, but I think it could have more success than it’s had.”
Other projects that Local Economic Development Act funding has been allocated for since July include:
$1.5 million for construction and building improvements for Ready Roast Inc., a peanut processing plant in Portales.
$25,000 for construction and other upgrades for Ol’ Gringo Chile Co., which makes salsas and chile sauces in Las Cruces.
$100,000 for a building renovation for Little Toad Creek Brewery and Distillery in Silver City.
There are safeguards in place for closing fund money in New Mexico. State lawmakers in 2013 approved a bill that allows funds 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.
Such clawback provisions are affixed to all deals involving New Mexico’s closing fund, Barela said.