Unprecedented funding for our downtown area at stake: $293 million over 20 years is estimated in one scenario

Bill designed to supercharge city center redevelopment introduced in legislature Unprecedented funding for our downtown area at stake: $293 million over 20 years estimated in one scenario Sponsored by legislators from Las Cruces and Taos, the bill could impact downtown areas across New Mexico Tax increment finance tool is popular around the country; Implementation here would require sign-off of state and county Since the introduction last summer of the Downtown Forward Plan, Mayor Tim Keller and top officials in his administration have returned again and again to three key talking points: Whether the motivation is a sense of civic pride, a desire for a healthy unifying cultural hub, or the potential to generate trainloads of tax receipts from the sort of economic dynamism city centers are capable of, Albuquerque needs a thriving Downtown. Ours, however, is going to require considerable public spending to spruce things up, improve infrastructure, build lots of housing, grease the skids for other commercial projects, and otherwise jumpstart the sort of virtuous circle of redevelopment that other cities across the country have already arrived at. That is only going to happen with a sustained source of funding and a governance structure that can be left to do its methodical work over the course of many years - at least a degree or two removed from whoever is mayor and whether downtown revitalization is in vogue at any given moment. As of late last week, there's a specific roadmap to get there, and it comes in the form of Senate Bill 251, introduced by Senator Carrie Hamblen (D-Las Cruces) and Representative Kristina Ortez (D-Taos), that would attach financial rocket boosters to existing revitalization efforts. Theory and reality Downtown redevelopment in New Mexico is typically attempted through specially-drawn districts called metropolitan redevelopment areas. They can be found in places large and small, from cities like Las Vegas, Silver City, and Gallup to relative hamlets like Roy and Questa. Albuquerque has about 20 (map), and the odds are good you're in one right now: Twelve of them are located south of I-40 between I-25 and the river. They cover the entirety of the Downtown core, Wells Park, Sawmill, Barelas, South Broadway, key pockets of EDo and Huning Highland, and just about all of the Central corridor. Local governments are responsible for drawing out the districts, which under state law must cover economically distressed areas. Within those zones, they are given a wide berth to buy land, improve infrastructure, put up cultural facilities, build housing, and enter into all manner of other public-private partnerships designed to inspire further investment. It is a classic recipe for urban revitalization - at least in theory. In practice, however, the money for such efforts arrives in small and haphazard installments - a city bond infusion here, a state or federal grant there. The money then goes to things like the recent Downtown storefront grant program and the forthcoming Downtowner apartment complex (DAN, 5/20/22). But once a project is out the door, it may be a long time before money is available to do another one, and the sound of crickets gets louder in the meantime. "There's nothing that we can really count on," said Karen Iverson, the manager of the city's Metropolitan Redevelopment Agency. Nuts and bolts The bill by Hamblen and Ortez proposes to change all that by beating a soft path between metropolitan redevelopment areas and tax increment financing, a tool that can be substantial in heft but one that New Mexico statutes make tricky to pull off, particularly in already-urbanized areas. (It is, however, easier and more popular in other states and has been used in the downtown areas of Boise, Colorado Springs, and Oklahoma City.) Within those metropolitan redevelopment areas, local governments would be allowed to divert up to 75 percent of gross receipts and property tax revenue above and beyond the levels that existed when the plan was put in place (see our illustrated guide below). They could do so for up to 20 years, ensuring a steady and long-term funding stream. That's just the beginning of the minutiae: Both the relevant county government and a state panel that includes the governor and lieutenant governor would have to sign off on the creation of the new tax increment zones, which could include entire existing redevelopment areas, pieces of different ones, or a new area altogether, Iverson said. The diversion would only apply to taxes levied by the state, city, and county - not local school districts or other agencies like the Middle Rio Grande Conservancy District. Local governments would be in charge of coming up with the specifics of a redevelopment plan and administering it. Iverson said she expects that in Albuquerque's case it would fall to the City Council unless they decided otherwise. Beyond the complexities, however, the upshot is simple enough: For cities around New Mexico, tax increment areas could bring in millions of dollars - perhaps tens or hundreds of millions - for publically financed redevelopment projects. That would mean new (or restored) buildings with new businesses and new residences that would add to the tax base, but the hope is that the activity would also inspire knock-on private investment as more entrepreneurs are attracted to the new and improved infrastructure and suddenly larger customer base, pushing tax collections higher still. One estimate commissioned by the city projected that a district folding together all the existing redevelopment areas south of I-40 and between I-25 and the river would generate $293 million over 20 years. Needless to say, that would translate into an unprecedented amount of redevelopment oomph. The Downtown storefront and apartment projects mentioned above count as marquee redevelopment efforts by today's standards, but they represent only about 1 percent of that potential budget. Diverting a percentage of future growth in tax revenue to a new destination is a policy that comes with a handy political talking point: It would generate impressive sums of money without actually raising taxes. Still, it would have an impact: The same study that came up with the $293 million figure estimated that the state would lose out on $51 million worth of tax revenue over that same 20-year period. But if the larger redevelopment effort works, those losses could actually be reversed over time. Advocates point out that stimulating new growth - particularly in economically troubled areas - can translate into a much larger tax base being delivered back to state and local government once the increment period ends. The study of central Albuquerque, for example, projected that the state would make back all of its lost tax revenue in five years and from that point on collect more than it would have had the district never existed. A long road - through Downtown and beyond The legislation could potentially help redevelopment efforts in dozens of New Mexico cities and towns, and Iverson is quick to note that it is a statewide effort. But much of the thought leadership for the idea originated here in Albuquerque, where the future of Greater Downtown is a key motivator. City officials have been quietly discussing the legislative options since at least early last year and began shopping the tax increment idea around soon after that (DAN, 6/13/22). The conversation gained a bigger platform with the debut of the Downtown Forward Plan, though its mention at the bottom of page 15 did not make much of a splash. By July, however, Mayor Tim Keller was framing a finance district of the sort now being contemplated in Santa Fe as a sort of Downtown declaration of independence - something that could finally knock the city center off of its seemingly eternal position on the cusp of greatness and into actual systematic long-term revitalization. "We're empowering Downtown so that they are finally freed from annual budget cycles and politicians," Keller told DAN. "It will never work the way it is now." But while Downtown is clearly top of mind, Iverson said it's too early to say where exactly city officials would seek to establish a tax increment area if the statewide legislation were to become law. "There are lots of areas in Albuquerque that could benefit from this," she said, adding that "I don't have any plan other than getting this passed." That is sure to be easier said than done, however. Passing even routine non-controversial legislation in Santa Fe can be tricky, and it is not uncommon for bills to fail year after year - often by running out of time - before ultimately passing and receiving a signature from the governor. Meanwhile, the contours of the Roundhouse debate, and in particular whether the bill attracts organized opposition, should start to become clear as soon as this week. The bill is presently parked at the Senate's Tax, Business, and Transportation Committee, where it is slated for a hearing (more information below). The bill would have to pass muster with that committee and quite possibly at least one other before being voted on in the full Senate, after which it would go to the House for a similar series of hearings and a floor vote before heading to the governor for her consideration. It is a long and harrowing process, in other words. But it is also, Iverson said, the best shot advocates of urban revitalization have to make their dreams a reality, both here and across the state. "This is a game changer," she said, calling it "the best way to have a flexible source of funding to implement redevelopment." Tracking the bill Senate Bill 251 is presently at the Senate Tax, Business, and Transportation Committee, which meets on Tuesdays and Thursdays at 1:30 p.m. As of this writing, it has not been scheduled for the Tuesday hearing and the agenda for the Thursday hearing has not yet been published. (When it is it will be here, and we'll do our best to provide advanced notice in DAN as well.) How it works: An illustrated guide to tax increment financing (1.) As economic growth and inflation do their thing, the value of tax collections grows over time, like this. (2.) The idea of a tax increment is to essentially cap the normal collection at a baseline, which is the level of taxation at the beginning of the increment. For a period of time (the bill in the Senate now contemplates terms up to 20 years), the collection above the normal baseline (the yellow triangle) would go to metropolitan redevelopment, then everything would return to normal when the increment ends. (3.) But it's actually more complicated than that because the bill would only let cities take a percentage of that increment - up to 75 percent. Regular tax collections (blue) would keep going up above the baseline, though at a slower rate. (4.) But that's actually not quite right either, because the whole point of a tax increment is to spend the money in a way that stimulates redevelopment and therefore economic growth, thus turning that gradual increase in tax collections over time into a more impressive upward-trending curve. The picture above is what advocates and local governments foregoing revenue in the short-term are hoping for: The tax increment does its thing for a time, but after it's done collections are much higher than they would have been had it never existed and whatever money was missed during the increment is made back (and then some) in short order. Downtown Albuquerque News covers Downtown, Old Town, and surrounding neighborhoods. We publish weekdays except for federal holidays. If someone forwarded DAN to you, please consider subscribing. Click here to subscribe, contact us, submit a letter to the editor, or learn more about what we do. If you ever run into technical trouble receiving DAN, click here. Copyright © 2023 Downtown Albuquerque News, All rights reserved. Manage your subscription here.

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