NM policymakers look to taxpayer-subsidized economic development

Rather than making the tough tax, regulatory, and education policy changes that have a proven track record of success in to better compete with our neighbors, it looks like the latest economic development plans under discussion involve more government spending. One plan involves:

Creating a discretionary “closing” fund that could be used to help entice out-of-state businesses to relocate to New Mexico.
Increasing funding for the state Department of Tourism’s marketing and outreach programs.
Increasing the amount of money from the state Severance Tax Permanent Fund available to be invested by the Small Business Investment Corp.
Coordinating the efforts of state agencies with regional council of government districts to improve data gathering and economic planning.

Will it work? It’s hard to say. There’s certainly no empirical evidence that such plans can boost a given state’s economy. I hope that if this plan is approved by the Legislature that it will succeed, but I must admit that I’m doubtful. After all, it is a classic case of the seen vs. the unseen. You are taxing one group of existing businesses and taxpayers to create incentives for a second group that you are hoping to attract.

A second economic development proposal involves spending millions of dollars on multiple facilities for a new business incubator. The spending on this new incubator — $4.5 million for the Aperture Center and $7.5 million for the First Baptist Church site would dwarf the $739,000 spent on all business incubators by the state over four years between 2007 and 2010.

Again, it is not that business incubators can’t work or that this one won’t, but it is a lot of money and of a scale far beyond every other incubator in the state in terms of taxpayer costs. It also will result in a significant reduction of property taxes paid given that the Aperture Center now pays $200,000 in property taxes and that would be taken off the tax rolls once it is purchased by UNM.

Hopefully these endeavors work out. They are certainly easier to achieve politically than reforms that take on the entrenched and concentrated special interests as outlined in the RGF paper above. Before allocating tax dollars for either project, taxpayers should demand careful cost-benefit analyses of both initiatives.