TIDD Sought by Private Developer Raises Yellow Caution Flag for City

In a work session Monday, the City Council will discuss an unusual deal with a Nebraska developer that could be a costly mistake. 

 

The deal concerns the old country club area, where Nebraska developers have built a “boutique” hospital that may help or hurt Las Cruces. They now want to add retail spaces near it. 

 

The developers want the City to create a Tax Incremental Development District (TIDD) in which city-authorized bonds would fund infrastructure and other costs that developers usually bear. The city would pledge substantial future increased GRT revenues to pay off the bonds. One document suggests that could be tens of millions of dollars. 

 

TIDDs can work well for public needs (such as downtown Las Cruces) where a city wants to develop or improve an area and increase GRT income, and uses a variety of developers to do so.

Las Cruces has never created a TIDD for a single developer. In Albuquerque, TIDDs to help single developers have a somewhat sorry history.

TIDDs are intended to draw new economic activity and jobs – not to move businesses into the district from surrounding areas. They shouldn’t be used unless they’re the only way to bring about desired development.

Here, the area is appealing, and the boutique hospital got built, so is a TIDD necessary? If developers screw this up, and bonds don’t get paid off, bondholders suffer. Does the City’s reputation or credit-rating? If the development just shifts business and jobs from downtown or El Paseo, that’s not NEW economic activity that enriches us – but Cruces tax monies would go to pay off the bonds. 

 

Legally, this developer is the brand-new “LC Nova LLC,” which lists Zachary Wiegert as manager and registered agent. The out-of-state entities that own the surrounding property are apparently involved, and the value of their property stands to increase, particularly if this works. 

 

Quick Google hits for Wiegert do not show mayors happily cutting ribbons.

Rather, one (from 2011) describes old friends of Wiegert’s trying to hold him and his partners to an oral agreement – but when they met, Wiegert “lost my temper” and shouted insults in an allegedly intimidating manner. The entity with which Wiegert was associated dropped out. The deal fell apart. 

 

In another, Project 19 LLC (for which Wiegert spoke) announced it was abandoning promised plans to develop the site of the old Omaha Civic Auditorium, though the same developers had expressed great excitement about the project. The deal required a major tenant. Omaha’s mayor said the developers’ failure to sign one was the reason they walked. 

 

Whoever was to blame, those reports don’t tend to instill absolute confidence these folks will do better by Las Cruces. Each included allegations Wiegert’s team wasn’t sticking to a deal. 

 

Perhaps more critical are the many questions the basic idea raises. If we use TIDDs in this way, won’t every developer want one? Should we do TIDDs at all? How do we protect our interests? How much potential “public good” do we require for a developer to get this help? If we’re now going to subsidize developments, hadn’t we better agree on coherent ground rules before facing the onslaught of applicants?

We owe it to ourselves, to residents near the TIDD, and to folks who buy the bonds – to be very cautious, and to be quite careful who gets help from our GRT revenues and gets to have the city’s good name behind their operations.

                                                          – 30 --


[The above column appeared this morning, Sunday, 28 June 2020, in the Las Cruces Sun-News, as well as on the newspaper's website and (presently) on KRWG's website.  A spoken version will air during the week on both KRWG and KTAL, 101.5 FM (www.lccommunityradio.org) and will also be available on-demand on KRWG's site. ]

 [I have little to add.  This was a column I felt less than usually comfortable writing, because I don't have detailed knowledge on the subject.  There appear to be some passionate economic-development fans advising the city who have not really looked at this thing as critically as one might wish, but also a lot of passionate opponents.  There seems, as there often is, a lot of misinformation floating around -- to which I hope I haven't contributed any.  It does seem that the weight of what evidence there is tends to suggest caution with this kind of development tool; the city should require pretty strong evidence that this development would really CREATE economic activity here rather than draw it from elsewhere in the area, to these developers' profit but with no significant gain to the City; and it's pretty obvious that if the ice cream truck starts offering stuff like this other kids will join the crowd around it.  So, yeah, I'd be instinctively skeptical.]

[Thanks to Greg Lennes, who responded to this column by supplying, this morning, a link to this story on a detailed study of how such things work out.  The referenced study was by something called the Lincoln Institute of Land Policy.  (It is not named after Abraham Lincoln, but after some wealthy but thoughtful gent named Lincoln, and studies how to use tax policies and such to improve things.  It lists as its six core concerns: low-carbon, climate-resilient communities and regions; efficient and equitable tax systems, reduced poverty and spatial inequality, fiscally healthy communities and regions, sustainably managed land and water resources, and functional land markets and reduced informality."  Sounds like more than six, but all laudable, although I've no idea what "reduced informality" is.  It also has a fairly heavyweight and varied board -- and several Lincolns still working for it.)  The study suggests some policy considerations and would be worth a read by city councilors.]

[Monday's work session is at 1 -- and can be watched on various media including  Facebook (https://www.facebook.com/CityofLasCruces/), YouTube (https://www.youtube.com/user/CLCTV20), the city's website (https://lascruces.civicweb.net/Portal/Video.aspx) and Cable Television 20. ]

(c) pgoodmanphotos 

(c) pgoodmanphotos

I should probably add this comment from a friend:

"I worked diligently along with many others in about 2010 on TIDDs here and in ABQ.  The NM TIDD law was newly passed then, focused on a big development in ABQ.  TIDDs were all the rage around the country.

"The TIDD concept, as with many others, is good.  The devil is in the details, starting with the state law.  The entity in control of the TIDD can do amazing things with the tax money they get, and they are free from all normally expected rules of transparency and good practice in how they spend the money.

"Cities have set up TIDDs to get things going, and suddenly found they gave away so much of their tax money they can no longer operate to support the new business, if it ever shows up - it really messes up the bottom line if overdone.  If Las Cruces approves this new one it could put them in a fiscal bind down the road.  The financial flow into the TIDDs is for a very long time.  And once started it is very difficult - maybe impossible - to stop.

"Since the City has yet, to my knowledge, to face their immediate fiscal problems due to the economic shutdown, I wonder if their fiscal analysis capability has the ability to assess the impact of this TIDD.

"The City's Downtown TIDD is a textbook example of the best way to set up and administer a TIDD, and a perfect use of the money.  The funds are from a bet against future growth - and that bet is not sure to pay off, so there is risk - and should be used conservatively and to build the infrastructure needed to enable new development.  The Downtown investments are yet to pay off - we'll see.

"A concerted effort stopped the County from approving a TIDD for Verde in the Santa Teresa area.  The way it was written it had the capability to bankrupt the County while enriching Verde.  

"The group got the state to turn down a huge TIDD in the petroglyphs area in ABQ which was a bold rip off.

"If the City sees the TIDD for this area as a "Must Have" for some reason, it should be set up as a City TIDD, just like the downtown one, with the City running it and controlling the use of the funds.  That is about the only way to keep it under control.

"The more things change....   It didn't take long for the TIDD lessons of 10 years ago to fade into history and the experience begin to repeat itself.  Reminds some of us old farts of the Police Review situation.  We had it in pretty good shape and getting better 10 years ago, then it was allowed to just fade, then lapse, and we are right back where we started.  Maybe we need an 'Office of Corporate Memory'."