The term “good of the company” is used a lot these days. For the most part, it consists of tax breaks for large companies to entice them to move or stay in a particular community. These are common tools that governments use in our country. The argument is that we are giving up tax revenue because the benefits to our communities are job creation and tax base expansion.
However, New Mexico uses a little-known type of corporate welfare called Industrial Revenue Bonds or IRBs to deliver these freebies. IRBs are a financial arrangement whereby local governments, in addition to guaranteed jobs and economic growth, lower taxes in exchange for a small local financial incentive. The state benefits from a growing tax base, the local community gets new business, and schools have more money from the growing economic tax base.
These programs have been used to tremendous benefit in New Mexico in the past. Intel is one of the beneficiaries of an IRB. While the state and local government lost tax revenues, this IRB created thousands of high-paying jobs and helped Rio Rancho grow into the wonderful place it is today. It was mutually beneficial for both Rio Rancho, New Mexico and Intel. However, the welfare of companies is not the same.
The New Mexico Democrats have chosen to apply the IRB tool to transmission lines, which has never been done before. In other words, they are giving a nongovernmental energy company millions in tax breaks for developing transmission lines. That would be okay with the exception that transmission lines create few or no long-term jobs and therefore do not provide a new tax base for the community in which the project exists.
If HB 105 passes, a large nongovernmental corporation will receive $ 50 million in tax breaks to develop projects that will have few permanent jobs. The real estate tax reduction on the property this project is intended for results in the loss of millions of tax dollars for our schools.
The sad part of it is when this law was passed last year that Republicans changed it to require schools to be harmless. The agreement is that we would not collect taxes on the project, but the company would have to pay the schools the amount of tax it would otherwise pay if this project were traditionally funded without IRBs. This change allowed the IRB to move forward, saving the company tens of millions of dollars and requiring little support for schools.
Last year’s agreement appeared to be a sensible solution to this new use of IRBs. We were wrong. The corporate lobbyists and their democratic makers came back this year with HB 105 and have lifted the protection for our schools. A shockingly brazen move at the same time as New Mexico school underfunding lawsuits are advancing.
Would HB 105 go by another year? Unlikely. It is no accident that these types of bills are passed while the legislature is closed to the public. If the public is not paying attention, it should be. This is no good for companies. This is corporate theft at the expense of our school children.