Government shouldn’t subsidize development: upwards or outwards

Due primarily to challenging economic conditions which show little sign of a long-term turnaround, New Mexico’s population growth has stagnated:

Image result for new mexico population growth brian sanderoff

Of course, developers tend to build when either 1) market forces support it (see the recent discussion of Denver for details) or 2) when politicians subsidize it. While no one wants to see growth in New Mexico as badly as we do at the Rio Grande Foundation, merely developing new land and building new buildings will NOT spur economic growth. It may shift growth and, worse, cannibalize revenue from existing business and taxpayers, thus doing harm to the economy.

This is true for BOTH Mayor Berry’s efforts to get the City’s Tallest Skyscraper built and the use of tax subsidies known as TIDD’s for the Santolina development. If tall building in downtown Albuquerque made business sense, someone would be building it already. Instead, downtown continues to have a higher vacancy rate  than is found in the rest of economically-struggling Albuquerque. What will ultimately happen to this odd scheme as Mayor Berry leaves office? How much will taxpayers be on the hook for?  We don’t know, but the assertion made in the article that having a taller building would “attract more tourists to downtown” made me laugh out loud.

And then there is the Santolina development. Unlike downtown skyscrapers in sprawling Western cities, big suburban developments tend be economically-viable. So, again, why are County leaders throwing $500 million in tax subsidies at it? After all, if New Mexico were growing, developers would be lining up to bring new development. Former New Mexico Sen. Steve Fischmann (a Democrat from Las Cruces) explains how this could be nothing more than a big corporate giveaway in today’s Albuquerque Journal. 



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6 Replies to “Government shouldn’t subsidize development: upwards or outwards”

  1. If the pols are itching to develop something with government subsidies, how about moving the state fairgrounds outside the city? That would remove an eyesore, open a large tract to redevelopment and revitalize one of the city’s most depressed areas.

  2. Paul Gessing’s article strikes a harmonious chord with me.

    By subsidizing and financing new home developers in Las Cruces, the politicians have united the city government and certain developers as allies in a joint venture that directly competes against taxpayers trying to sell their own existing unsubsidized and non-city-financed homes. Thus, the taxpayers are watching the city spend city money on behalf of developers so the developers’ can be financially viable, sell their new houses for less than they would otherwise have to charge, and thereby lure buyers away from existing homes.

    In a bizarre distortion of the conceptual intent of development impact fees, the city even adds a charge to existing residents’ water bills and contributes the money to development impact fees that otherwise would be and should be paid by developers or builders. The line item charge on our water bills is cryptically named “DIF Rate Rider.” Impact fees are supposed to be paid by developers to offset the cost to the city for increased infrastructure needs caused by the development.

    Meanwhile, pushing the subsidized new houses into the market adds to supply and depresses the sales prices for existing houses. My rough math indicates to me that the loss in value of existing homes is roughly the equivalent of the revenue from sales of new homes.

    Meanwhile, problems caused by development such as increased traffic continue to grow worse.

    1. This is certainly an issue where we have worked with some of the more liberal interests and elected officials. Unfortunately, especially when it comes to TIDD’s and business/development subsidies in general, conservatives, especially elected ones have a big blind spot.

  3. A little over halfway down Paul’s linked-to article “Albuquerque skyline may get new ‘tallest skyscraper’,” there is a one-sentence paragraph stating that people are ready for downtown to get a new look.

    What people?!!! Since the sentence is not in quotes, I assume it is the writer’s opinion. Where on earth did Jeannie Nguyen get this idea? I would say that the “people” are ready for lower taxes instead of yet another “legacy” project from Mayor Berry.

    1. I’d say they are indeed “ready for a new look” for downtown which means getting the bums and beggars off of every street corner.

  4. I have been heavily involved in the issue of impact fees since before the original Texas legislation in 1987. They were to assure certain infrastructure was constructed when needed.
    Thirty years of this and we know that impact fees nationally have slowed essential infrastructure, and have increased the cost of everything, particularly housing. We know also that the one certain way of lowering the cost of housing to those who need it is by building more of it. Period.
    In terms of government spending, we know it will occur in one of several ways: at the wrong time, in the wrong amount, for the wrong reason, or not at all.
    The idea that a tall building draws tourists is correct: the same ones who look up, mouths agape, and say “Lookit the pigeons”. Akin to those who believe game arenas are economic development. Sad.

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