LEDA Town Halls Rio Rancho, Santa Fe, Farmington, Roswell and Las - PowerPoint Presentation

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LEDA Town HallsRio Rancho, Santa Fe, Farmington, Roswell and Las CrucesJune 8-12, 2015  Welcome from Economic Development Secretary Jon BarelaStatutory Guidelines presented by NMEDD General Counsel Wade Jackson LEDA FY15 Update from Secretary Barela LEDA Guidelines & Matrix Public Comment  Slide2

LEDA and the Anti-Donation ClauseWade Jackson, General CounselSlide3

The Anti-Donation ClauseNeither the state nor any county, school district or municipality, except as otherwise provided in this constitution, shall directly or indirectly lend or pledge its credit or make any donation to or in aid of any person, association or public or private corporation or in aid of any private enterprise for the construction of any railroad except as provided in Subsections A through G of this section. . . . N.M. Const. art IX, § 14 (emphasis added).3Slide4

Except . . . Nothing in this section prohibits the state or a county or municipality from creating new job opportunities by providing land, buildings or infrastructure for facilities to support new or expanding businesses if this assistance is granted pursuant to general implementing legislation that is approved by a majority vote of those elected to each house of the legislature. The implementing legislation shall include adequate safeguards to protect public money or other resources used for the purposes authorized in this subsection. The implementing legislation shall further provide that: (1) each specific county or municipal project providing assistance pursuant to this subsection need not be approved by the legislature but shall be approved by the county or municipality pursuant to procedures provided in the implementing legislation; and (2) each specific state project providing assistance pursuant to this subsection shall be approved by law. N.M. Const. art IX, § 14(D) (emphasis added)4Slide5

Local Economic Development Act (LEDA)The purpose of the Local Economic Development Act is to implement the provisions of the 1994 constitutional amendment to Article 9, Section 14 of the constitution of New Mexico to allow public support of economic development to foster, promote and enhance local economic development efforts while continuing to protect against the unauthorized use of public money and other public resources. Further, the purpose of that act is to allow municipalities and counties to enter into joint powers agreements to plan and support regional economic development projects, including investments in arts and cultural districts created pursuant to the Arts and Cultural District Act. N.M.S.A. 1978, § 5-10-2(B) (2007).5Slide6

LEDAIs the “general implementing legislation” that allows the state or a county or municipality to contribute to economic development projects.If public assistance is granted to a project pursuant to LEDA, it is an exception to the Anti-Donation Clause.6Slide7

LimitationsOnly the state, a county, or a municipality may contribute to a project.The contribution must create new job opportunities.The governmental entity may only provide land, buildings or infrastructure.The contribution must be for facilities to support new or expanding businesses.The assistance is granted pursuant to LEDA. N.M. Const. art IX, § 14(D).7Slide8

LimitationsOnly the state, a county, or a municipality may contribute to a project.The contribution must create new job opportunities.The governmental entity may only provide land, buildings or infrastructure.The contribution must be for facilities to support new or expanding businesses.The assistance is granted pursuant to LEDA. N.M. Const. art IX, § 14(D).8Slide9

Substantive ContributionThe local or regional government shall require a substantive contribution from the qualifying entity for each economic development project. Public support provided for an economic development project shall be in exchange for a substantive contribution from the qualifying entity. The contribution shall be of value and may be paid in money, in-kind services, jobs, expanded tax base, property or other thing or service of value for the expansion of the economy. N.M.S.A. 1978, § 5-10-10(B) (2013).9Slide10

Clawbacks & SecurityThe implementing legislation shall include adequate safeguards to protect public money or other resources used for the purposes authorized in this subsection. N.M. Const. art IX, § 14(D).10Slide11

ClawbacksIf a qualifying entity fails to perform its substantive contribution, the local or regional government shall enforce the project participation agreement to recover that portion of the public support for which the qualifying entity failed to provide a substantive contribution. The recovery shall be proportional to the failed performance of the substantive contribution and shall take into account all previous substantive contributions for the economic development project performed by the qualifying entity, based on the terms stated in the project participation agreement. The project participation agreement for an economic development project that uses public support provided by the state to a local or regional government shall include a recapture agreement for the state. N.M.S.A. 1978, § 5-10-10(D) (2013).11Slide12

SecurityThe qualifying entity shall provide security to each local or regional government, the state or any other New Mexico governmental entity providing public support for an economic development project. The security shall secure the qualifying entity's obligations based on terms stated in the project participation agreement with the local or regional government and shall reflect the amount of public support provided to the qualifying entity and the substantive contribution expected from the qualifying entity. N.M.S.A. 1978, § 5-10-10(C) (2013).12Slide13

SecurityThe project participation agreement at a minimum shall set out . . . the security provided to each governmental entity that provides public support for an economic development project by the qualifying entity in the form of a lien, mortgage or other indenture and the pledge of the qualifying business’s financial or material participation and cooperation to guarantee the qualifying entity’s performance pursuant to the project participation agreement. . . . N.M.S.A. 1978, § 5-10-10(E)(2) (2013).Slide14

LimitationsThe implementing legislation shall further provide that: (1) Each specific county or municipal project providing assistance pursuant to this subsection need not be approved by the legislature but shall be approved by the county or municipality pursuant to procedures provided in the implementing legislation. N.M. Const. art IX, § 14(D).The local or regional government shall review each project application, and projects shall be approved by ordinance. N.M.S.A. 1978, § 5-10-9(A) (2013).14Slide15

Qualifying Entity“Qualifying entity" means a corporation, limited liability company, partnership, joint venture, syndicate, association or other person that is one or a combination of two or more of the following: (1) an industry for the manufacturing, processing or assembling of agricultural or manufactured products; (2) a commercial enterprise for storing, warehousing, distributing or selling products of agriculture, mining or industry, but, other than as provided in Paragraph (5), (6) or (9) of this subsection, not including any enterprise for sale of goods or commodities at retail or for distribution to the public of electricity, gas, water or telephone or other services commonly classified as public utilities; (3) a business in which all or part of the activities of the business involves the supplying of services to the general public or to governmental agencies or to a specific industry or customer, but, other than as provided in Paragraph (5) or (9) of this subsection, not including businesses primarily engaged in the sale of goods or commodities at retail; (4) an Indian nation, tribe or pueblo or a federally chartered tribal corporation; (5) a telecommunications sales enterprise that makes the majority of its sales to persons outside New Mexico; (6) a facility for the direct sales by growers of agricultural products, commonly known as farmers' markets; (7) a business that is the developer of a metropolitan redevelopment project; (8) a cultural facility; and (9) a retail business;

N.M.S.A. 1978, § 5-10-3(I) (2013).

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Qualifying Entity“Cultural facility" means a facility that is owned by the state, a county, a municipality or a qualifying entity that serves the public through preserving, educating and promoting the arts and culture of a particular locale, including theaters, museums, libraries, galleries, cultural compounds, educational organizations, performing arts venues and organizations, fine arts organizations, studios and media laboratories and live-work housing facilities.” N.M.S.A. 1978, § 5-10-3(B) (2013).16Slide17

Qualifying Entity“Retail business" means a business that is primarily engaged in the sale of goods or commodities at retail and that is located in a municipality with a population of ten thousand or less.” N.M.S.A. 1978, § 5-10-3(B) (2013).17Slide18

Local Economic Development Act (LEDA)Discussion of Policy GuidelinesJon Barela, Cabinet SecretarySlide19

$37.5 Million in FY16Largest appropriation in the history of the programMore than 30 states have deal closing funds with varying levels of accountabilityGood and bad examples as to how these funds are deployed.Economic development incentives are being scrutinized more and moreAny use of public funds requires a high level of transparencyAt least $2.5 million allocated to rural areas in the general appropriations act19Slide20

EDD LEDA GoalsPrivate sector job creation and increased wagesCommunity impact and supportRural and underserved areas of our stateCapital investment and leverageEnvironmentally sustainable outcomesFinancial soundness and readiness to proceedGrowth of New Mexico businessesRelocate new companies to the state20Slide21

Current Qualifying EntitiesRequires the passage of a local ordinance and an economic development planAn industry for the manufacturing, processing or assembling of agricultural or manufactured productsCommercial enterprise storing, warehousing, distributing or selling products of agriculture, mining or industry, but NOT an enterprise for the sale of goods or commodities at retail A tribal entityTelecommunications enterprise with more than 50% of its sales outside the stateA facility for direct sales by growers of agricultural products (farmers markets)A business that is the developer of a metropolitan redevelopment projectCultural facilityPrivate sector jobs – including nonprofits21Slide22

LEDA Funding UsesPurchase, lease, grant, construction, reconstruction, improvement or other acquisition or conveyance of land, buildings or other infrastructurePublic works/infrastructure improvement essential to the location or expansion of a qualifying entityProfessional services necessary to implement a plan or projectDirect loans or grants for land, buildings or infrastructureTechnical assistance to cultural facilitiesLoan guarantees securing the cost of land, buildings or infrastructure in an amount not to exceed the revenue derived from LOGRTPurchase of land for a publicly held industrial park or a publicly-owned cultural facility; and the construction of a building for use by a qualifying entity22Slide23

FY15 Appropriation = $15 MillionNeptune Aviation, AlamogordoNew Mexico Poles, AlamogordoSanta Fe Brewing, Santa FeFranco Whole Foods, Las CrucesCertoPlast, Las CrucesPreferred Produce, DemingLea, Silco & Lyceum Theaters Lovington, Silver City & ClovisS & P Data, Rio RanchoStrategic Aerospace, RoswellNGL Partners, Cibola CountyGoogle, MoriartyPreCheck, AlamogordoAccurate Machine & Tool, Los LunasFlagship Foods, Bernalillo CountyNM Transload, Bernalillo CountyNew Mexico Foods, Bernalillo CountyCaanes, AlbuquerqueOro Grande, Otero CountyMCS, Santa TeresaComcast, Albuquerque

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Best & Worst Practices NationallyBEST:Clawback provisionsObjective scoring toolFinancial due diligence to minimize riskPermanent jobs at good wagesSpecific thresholds for job creationCommitment of local governmentFully-funded project, shovel readyAudit or compliance verification processWORST:Incentivizing low-wage jobs and questionable projectsMissing compliance process

Weak awards agreements

Lack of financial due diligence

Non-disclosure of recipients, amounts, selection process

Lack of documentation

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LEDA MetricsPerformance measures are developed annually in cooperation with the Legislative Finance Committee, the Department of Finance & Administration & EDD.Measures are submitted with the agency budget request and strategic plan each year on September 1st.Two LEDA performance measures in FY16:Private sector dollars leveraged by each LEDA dollar – 5 to 1Number of jobs created through the use of LEDA funds – 1,50025Slide26

Proposed LEDA GuidelinesMust create permanent FTEs (minimum 32 hours per week)Goal: 10 to 1 ratio of private investment to LEDA funds (metric is 5:1)Economic base business such as manufacturing, warehousing, exported servicesEDD target industry clusters: aerospace & defense; advanced manufacturing; back office & technical support; digital & emerging media; energy; food processing; and logistics & transportationNo retail projects with state fundsMust be demonstrated competition for the project from out of stateNo government facilities or government jobsDue diligence process and minimal risk to stateProject must be fully-funded and shovel readyEqual consideration will be given to competing businessesProject’s environmental footprint will be considered, including priorities

Tiered thresholds based on urban, rural or economically-distressed (see map, #10)

Competitive wages that support New Mexico families (see chart, #11)

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Urban, Rural and Economically-DistressedMinimum job creation requirements, wage thresholds, and the ratio of private sector investment to public funds are typically determined by the location of the project.Economically-distressed areas are usually those with high unemployment, a higher rate of poverty, and lower median income levels.27Slide28

Average Weekly Wages by City, County and Industry SectorLOCATIONAVERAGE WEEKLY WAGE BY INDUSTRY SECTORAVERAGE WEEKLY WAGE FOR ALL INDUSTRY SECTORS (PRIVATE ONLY)Manufucturing

Transportation & Warehousing

Information

Finance & Insurance

Professional & Technical Services

Bernalillo

$939

$800

$919

$1,074

$1,430

$772

Catron

$366

*

*

*

*

$384

Chaves

$802

$752

$678

$757

$1,031

$609

Cibola

$578

$1,128

$575

$786

$889

$668

Colfax

$611

$1,014

$552

$644

$624

$454

Curry

$839

$1,127

$640

$762

$857

$634

De Baca

*

$0

*

*

*

$512

Dona Ana

$814

$639

$650

$773

$987

$578

Eddy

$1,260

$1,133

$795

$832

$1,077

$999

Grant

$437

$539

$1,096

$593

$561

$702

Guadalupe

*

$526

*

$555

*

$441

Harding

*

$0

$0

*

$0

$791

Hidalgo

*

$1,042

$504

*

$561

$411

Lea

$1,669

$1,370

$809

$954

$923

$1,023

Lincoln

$577

$415

$467

$717

$913$511Los Alamos$745*$452$1,025*$1,427Luna$503$771*$616$1,250$469McKinley$1,021$878$550$556$748$500Mora*$513*$403$0$489Otero$552$576$687$673$912$610Quay$630$673$840$695$595$490Rio Arriba$527$496$348$689$1,251$573Roosevelt$676$769$634$711$736$525Sandoval$1,854$803$913$830$1,101$816San Juan$845$955$733$710$835$880San Miguel$413$406$701$666$651$456Santa Fe$701$734$890$1,361$1,222$721Sierra**$496$566$617$457Socorro$844$909$538$584$1,260$569Taos$484$543$727$715$731$534Torrance$1,078$513$608$685$764$640Union**$805$784$586$535Valencia$824$737$624$693$600$531*Not disclosedSource: Quarterly Census of Employment & Wages, 3rd Quarter 2014, New Mexico Department of Workforce Solutions

Wage thresholds are typically based on prevailing wages in the project locationIncentives should not be used for low-wage jobs.Publishing wage thresholds contributes to the goal of transparency and full-disclosure.Wages vary significantly across industries and locations.These are actual average weekly wages collected and published by the New Mexico Department of Workforce Solutions.

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New Mexico MainStreet/LEDA ProjectsIn addition to existing LEDA requirements, project must be within currently certified MS program or an ACD program; the project must be in the adopted District Master/MRA/Cultural Economic Development Plan for joint public/private partnership in project; and must have a letter or resolution of support from governing bodyExamples of Eligible Projects:Public infrastructure in the district, placemaking, pedestrian amenitiesAdaptive reuse of large buildings to housingBusiness/retail incubators or MercadosShared work spaces or entrepreneur development centersCommercial kitchensHistoric theaters, plazas, cultural corridors, museums or rail road buildings29Slide30

Local Economic Development Act (LEDA)Juan Torres, Finance DevelopmentSlide31

New Mexico Economic Development DepartmentNew Mexico Film OfficeOffice of Business AdvocacyOffice of International TradeOffice of Science and Technology2Slide32

New Mexico Economic Development DepartmentBusiness Retention and Expansion ProgramJob Training Incentive ProgramISO 9000 ProgramFinance Development Programs3Slide33

New Mexico Economic Development DepartmentAdministratively attached Agencies:Office of Military Base Planning and SupportNew Mexico Border AuthorityNew Mexico Economic Development Partnership4Slide34

New Mexico ConstitutionAnti-Donation Clause:Does not allow the use of public funds for gain by Private EntitiesWas amended to allow the State Economic Development Department to invest directly in Economic Development Projects that provide for a significant public benefitLocal Economic Development Act (LEDA) allows the state to provide funding to a community who has passed LEDA in support of an Economic Development project34Slide35

What is LEDA Capital Outlay funding?Funds are Appropriated by New Mexico Legislature and signed into law by the Governor for the purpose of assisting Economic Development Projects.Funds are made available to a community for use by a Qualifying Entity (QE) as defined in statute, for use in an Economic Development Project that has a significant public benefit to the community.35Slide36

Qualified EntityManufacturerEconomic Base Service IndustryCultural FacilitiesOther36Slide37

LEDA CO: Request for FundingCommunities that have passed their Local Economic Development Act and are able to act as a fiscal agent on behalf of the project may formally request funding for LEDA CO Economic Development Projects by outlining the project scope of work and significant public benefit in a letter to the Secretary of Economic Development.Fund use is limited to the areas of Land, Building and Infrastructure.37Slide38

LEDA CO: Funding DecisionsNMEDD Secretary evaluates project funding requests on a number of criteria including: How the Project aligns with the community passed LEDATotal community benefit, including permanent high-paying jobs in targeted industries, local economic conditions, overall community strategic goalsEstablished best practices guidelinesFinancial viability of the project, readiness to proceed and financial need38Slide39

LEDA CO: Funding DecisionsAdditional consideration will be given to projects that:Are located in Rural and Frontier communities Communities that are in Economically Distressed areasCommunities that have experienced a significant natural or man-made disaster Communities who have lost a major industry or employer Final funding decisions will be made by the Secretary in consultation with the Governor.

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LEDA CO: Process Once a project has been selected for funding, a Notice of Funding Allocation (NOFA) is sent to the community outlining the process. At this point the Qualifying Entity is required to submit a LEDA CO Application which includes a number of supporting documents such as: financial statements, corporate information, information authorization release affidavit, proof of community passed LEDA Ordinance and community compliance with Executive Order on grant audit requirements. 40Slide41

LEDA CO: Funding TimeframeThe length of time it takes to compile the requested documents will be determined by the project QE & Community. Funds transfer to a community require governing body approval of:Project Participation Agreement (PPA) between the QE & the Community;Intergovernmental Agreement (IGA) between the governing body/fiscal agent and the NMEDD;Security Document which secures the funds invested against non-performance and which may be “clawed back” in the event of such for the life of the project;A LEDA Ordinance which outlines the scope of work, including job creation information and capital investment made into the project. 41Slide42

Funds DisbursementFunding is on a reimbursement basis. Once the process is completed, funds are transferred to the community but may not be disbursed until the Qualified Entity submitted invoices are approved by NMEDD.42Slide43

LEDA CO: ComplianceQE are required to submit Department of Labor form ES 903A to report on job creation for the life of the project. The Fiscal Agent will submit semi-annual reports to NMEDD due by the end of month May and the end of the month of November outlining project performance and community impact.43Slide44

Questions?Juan TorresFinance Development New Mexico Economic Development Department505-827-0238Juan.Torres@state.nm.us44