Some Developers Support Tax Subsidies For Santolina Project
Some developers who build huge housing projects say it’s common sense to ask the community share in the cost of paying for public infrastructure.
That’s the story of Santolina. The project, which would include roughly 38,000 housing units, is applying for tax benefits that would allow developers to be reimbursed for the costs of building things like roads and sewer systems.
Just southwest of Albuquerque lies Pajarito Mesa. It’s about 28 square miles of flat land with patches of green grass growing up in the dry brown dirt. About 800 people live here where many lack services like emergency health clinics and electricity.
Pajarito Mesa Neighborhood President Luz Maldonado said landowners never had the area legally subdivided or permitted.
"The property was just sold in five or 10 acre tracks, but there was no road," said Maldonado.
These issues could have been avoided, Maldonado said, if there had been a master plan like the one Santolina developers are proposing for about 22 square miles of land just north of Pajarito.
"You know even if we were planned at a smaller scale, we wouldn’t have the problems we have now," said Maldonado.
Over the next 40 to 50 years, Santolina developers say they’ll build housing for more than 93,000 people – that’s roughly the population of Rio Rancho, New Mexico’s third largest city.
State and local government here really wants to encourage development like this. So, there are a bunch of tax and subsidy tools that can be used to attract private investment and new growth.
Santolina developers will also have to build roads, sidewalks and other public works – and they say they need an incentive to do that quickly, so that they can attract new business to the area. Santolina agent Jim Strozier said the tax benefits were a positive tool to help developers fully build out communities.
"And that’s exactly why these tools were developed to allow, to provide, an incentive," said Strozier.
Developers are applying for $2.8 billion in tax benefits – one of which would include tax increment development districts or TIDDs.
Strozier says TIDDs are based on the idea that developers will create new value on undeveloped land through spending on construction and selling houses in the area. That new value will result in increased tax revenue.
TIDDs would allow Santolina developers to share a portion of that increased tax revenue over 25 years as a reimbursement for the construction costs of the project’s roads and sidewalks.
"If development occurs, and that tax base increases, the tax base grows. Then there is money to repay the cost of the infrastructure," said Strozier.
But not everyone is ready to use the tax benefits to incentivize developers. Bernalillo County Commissioner Art De La Cruz, who represents Santolina's district, said he needs more information before he can support Santolina developers getting these tax benefits.
"I would want to be assured that we have the ability to provide government services there without impacting anyone outside of the development," said De La Cruz.
He said future residents of the new development would need services from the county, things like police, road maintenance and schools. As long as reimbursing Santolina for infrastructure doesn’t result in the county taking a hit for those services, he’s willing to support it.
"It has to be such that the rest of the community outside of Santolina isn’t subsidizing in any form or shape schools or parks or fire stations," said De La Cruz.
In the past, TIDDs could only be used to attract private investment in run down areas within cities and towns in New Mexico.
But in 2006, developers for Mesa Del Sol, a huge development similar in size and scope to Santolina, lobbied hard to amend the existing law. Now, TIDDs can be used for projects on large tracks of undeveloped land.
Developer Paul Silverman, of Geltmore LLC, says that’s a good thing.
"Developers don't do this, you know, out of the kindness of their hearts, OK?" said Silverman.
He’s adamant that TIDDs should be used to incentivize all development. The people living in Santolina would benefit by the sidewalks and streets there, so it’s only fair for a portion of their taxes to reimburse developers.
"If they’re public improvements then the public ought to be paying for roads and everything else," said Silverman.
Whatsmore, Silverman says those reimbursements only happen if the developer actually builds houses and the value of the land actually goes up.
Mesa Del Sol was approved for TIDDs but people didn’t move in – so there was little to no added value and taxpayers didn’t pay for infrastructure. Silverman says in that case the private investors took the hit, not the public.
This story is the first of two - check out what critics of using TIDDs for Santolina have to say here.