Hoping for a bright business future

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The boarded-up buildings and fields of weeds lining Belen’s Main Street tell the story better than mere words ever could. For some years now, hard times have been knocking at the door in many parts of Valencia County.

Vacant buildings and weeds, signs of blight and abandonment, are common along Belen’s Main Street. Belen’s economic development director says the city’s three freeway exits could lead to better times.

The same could be said about much of New Mexico. Last year, the state’s economy grew by a little less than 1 percent, hardly a sign of a robust recovery from what many people call “the Great Recession.”

During the economic downturn that began in 2007 and officially ended in 2009, the state lost 53,000 jobs, only 3,000 of which have been recovered.

While not the hardest-hit area, Valencia County was nonetheless severely impacted and the local unemployment rate remains stubbornly higher than the state’s as a whole.

In July, of New Mexico’s 33 counties, Valencia — the sixth largest with 77,070 residents — had the seventh highest unemployment rate, 8.7 percent, according to the state Department of Workforce Solutions.

Luna County, at 16.6 percent, had the highest. The unemployment rate in Bernalillo County was 7.6 percent, a little above the state average of 7.4 percent.

For those who have found work, the average hourly wage in Valencia County is $13.98, a rather lowly figure that compares to $19.53 statewide. The average annual pay in the county is $29,068, compared to $40,612 in New Mexico as a whole.

The county is part of the Albuquerque Metropolitan Statistical Area. The median household income in Valencia County is $40,552, compared to $47,405 in Bernalillo County, a difference of $6,853.

But things may be looking up. Several local business leaders and government officials say that they expect slow, but continued improvement in the county and state economies in the coming months and years, a theme echoed by many economists.

In August, Jim Rounds, a keynote speakers at the New Mexico Municipal League’s 55th annual conference in Las Cruces, told the gathering exactly that. The senior economist with Elliot D. Pollack and Co., of Scottsdale, Ariz., made a big impression on Belen City Counselor Wayne Gallegos, who came away convinced that better times are just over the horizon.

Economics is an imperfect science, with widespread disagreement among experts as to what the future may bring. Not everyone foresees steady progress; some even predict a virtual economic Armageddon, especially when the economy is viewed from a global perspective.

Unfortunately, comprehensive programs that involve local governments and local businesses that seek mutual paths over the rough economic landscape are few and far between. There also seems to be little coordination among various business groups and between some businesses and elected officials.

Most joint programs involve the state government on one hand and a business or local government on the other.

One bright spot in an otherwise gloomy picture is the village of Los Lunas, the county seat and largest incorporated area.

“I’m optimistic,” said Ralph L. Mims, the village’s economic development manager.

For a number of reasons, the effects of the recession have been less severe in Los Lunas than other areas in the county, and the village is still managing to attract new businesses, mostly “smaller, mom and pop” operations, Mims said.

One big advantage is Los Lunas’ proximity to Albuquerque. Some businesses don’t want to be in the heart of the metropolitan area, but near it. At the same time, Los Lunas is buffered from urban sprawl by Isleta Pueblo and maintains a friendly, small-town feeling — the best of both worlds.

Home prices and taxes in Los Lunas are lower than in Albuquerque, a fact that prospective businesses obviously find attractive. While the same might be true in Belen, Bosque Farms and Peralta, Los Lunas also has another advantage: “a lot of vacant land — with the infrastructure already in place,” Mims said.

The village experienced a 47.5 percent population growth from 2000 to 2010, the second-fastest growing community in the state.

Branding is important to Los Lunas, Mims said, pointing to a sign painted on a meeting room wall, “Small community, Big possibilities.” That, along with the economic development slogan, “A community that works,” tells the story.

“I work for the village of Los Lunas, but I also want to promote Valencia County as a whole,” Mims said. “That’s very important for development.”

One thing Los Lunas seems to do well is facilitate opportunities to businesses offered by the state:

• High Wage Tax Credit: A company can take a credit equal to 10 percent of the combined value of salaries and benefits for new jobs that pay at least $28,000 annually. The tax credit, which can be taken for four years, cannot exceed $12,000 per year per job.

• Manufacturers Investment Tax Credit: A manufacturer can take a 5 percent credit of the value of equipment and other property used. Credit can be taken against taxes owed up to 85 percent, and any remaining balance can be carried forward. The catch? The company has to add at least one new job.

• Local Economic Development Act: Open to municipalities and counties, which can use up to 5 percent of general funds on hand, buildings and infrastructure for a business that qualifies as economic development — usually one that brings new money into a community.

• Job Training Incentive Program: Companies are reimbursed for a portion of new-job training. Half of a participating company’s revenue must come from out-of-state sales, but exceptions are built in for so-called green industries. Reimbursement can amount to up to 75 percent of a wage for up to six months.

• Industrial Revenue Bonds: Municipalities or the county can also issue industrial revenue bonds to finance economic development. Businesses benefitting from the bonds must arrange for a buyer and submit a letter of credit from a bond house or bank. IRBs can be issued for up to 30 years. Los Lunas emphasizes that health care facilities are eligible for the bonds.

The village is also preparing a set of local incentives to attract new businesses:

• Deferring impact fees for large manufacturing, industrial and health-related business that import wealth to Los Lunas.

• Deferring or even eliminating hookup fees for water and sewer lines for the same large enterprises that create a certain number of jobs.

• Reducing building fees based on the discretion of the village council.

• Paying a portion of landscaping costs, with certain conditions.

One negative for development in Los Lunas is that unlike Belen, the village has few vacant buildings that businesses can move right into.

“They have to build from the ground up,” Mims said.

Another, which the village hopes to rectify, is that it has but one interchange on Interstate 25. Still, Los Lunas is primed for growth, he said.

Mims’ rosy outlook is shared by other Valencia County movers and shakers.

Andy Gomez, a Los Lunas real estate broker and the immediate past-president of the Valencia County Chamber of Commerce, said he is “absolutely” optimistic regarding the future.

“I wouldn’t get up in the morning if I wasn’t going to be optimistic and positive,” Gomez said.

He is, however, just as quick to concede that times are tough, but quickly added, “All the more reason for hard work. Whether we’re in a recession or not, when I get up in the morning, it’s the same thing: I work at it.”

As far as programs aimed specifically at improving the county’s economic business climate, Gomez pointed to the chamber’s regular monthly membership meetings. Taken together, the meetings are one of the strongest tools available to assist local businesses, he said.

They bring people together and allow them to make contacts, to network and to learn about each other’s commercial enterprises. They also give business owners an opportunity to talk about their own companies, what has worked and what hasn’t.

“That, hopefully, will assist in the growth and improvement of one another’s businesses,” he said.

In addition to one-on-one communication at the meetings, business owners can address the group at large, a captive and receptive audience.

The theme of September’s meeting was “Marketing Your Business,” in which several marketing experts were invited to speak.

“You can’t be successful without marketing your business,” Gomez said.

The Valencia County Chamber of Commerce also provides its members with free email blasts twice monthly “to promote anything that might be going on in their businesses.”

Gomez said he can’t predict precisely when New Mexico will have gained back the 53,000 lost jobs or when the hard times will end, but he is confident that will happen.

“The present is good,” he said. “The future is bright.”

Ten miles to the south, Rhona Baca Espinoza, executive director of the Greater Belen Chamber of Commerce, seems just as optimistic.

Locally, she said, Belen has “taken a positive step forward.” She cited the city council’s willingness to deal with such emotional issues as nuisance abatement and more obvious problems such as vacant buildings on Main Street. She also credited the previous administration’s efforts to improve infrastructure.

“The city has turned around,” Espinoza said. “We really have everything in order for growth.”

Still, she acknowledged, Belen’s business community remains “a little pensive, maybe even a little discouraged at times.”

Steven Tomita, Belen’s new economic development director, recently represented the city at a meeting of the Mid-Region Council of Governments. He described the council as “a big tool in working together with other local governments.”

Another valuable resource, he said, is the National Association of Industrial and Office Parks, which meets monthly. September was the first time he attended as a representative of Belen; previously, he was there as a consultant.

“They’re always looking at what’s going on in areas such as legislation that could impact retail or industrial development,” he said.

He also expects to attend gatherings sponsored by the American Planning Association to “see how other communities deal with development issues, how cities manage their growth.”

One of the city’s main attributes and something that drew him to Belen, Tomita said, is it’s unique and superior transportation infrastructure. He cited the three freeway interchanges, the rail yard, the Rail Runner station and the Belen Alexander Municipal Airport, to say nothing of the close proximity to Albuquerque’s Sunport.

The road to growth and prosperity, however, won’t necessarily be smooth, he said. It’s easier when traveled as a group, a mutual effort that includes the chamber of commerce and the nonprofit Greater Belen Economic Development Corp. Often the city’s role is simply to act as a facilitator.

“If someone comes in looking for land or buildings, for example, we guide them to the EDC or chamber,” Tomita said. “We also may be able to provide some economic support if a business entity is planning some kind of expansion. Of course we have to consider what we get back, our return on that investment.”

The city owns land that it might offer on favorable terms. There are also buildings available.

“We keep inventories so we can let businesses and developers know what’s available,” Tomita said.

All of Belen’s elected officials have high hopes for what Tomita can bring to the city. But at the same time, Belen’s Economic Development chief must also wear the hat of director of planning and zoning, usually a full-time position.

In Bosque Farms, Mayor Robert Knowlton said there isn’t much a small, rural municipality can do to attract new business and jobs.

“In some ways, our hands are tied,” Knowlton said.

In 2005, the village of Bosque Farms formed an Economic Development Committee, which Knowlton chaired, to look for ways to attract new businesses and help existing ones. The panel consisted of local business owners and residents, but the biggest boost has come from the state, the Department of Economic Development’s Certified Community Initiative.

As a CCI participant, Bosque Farms would be eligible for new businesses brought into the state by the New Mexico Partnership, about half of which are aimed at rural areas. But the village hasn’t been able to partake, primarily because it doesn’t have any large tracts of land available for development, and many CCI opportunities are for large retail stores.

“It wasn’t a good fit for Bosque Farms,” said Knowlton, who was elected mayor in March, but who served on the village council for eight years and was also on the planning and zoning commission for four.

Unfortunately, he added, some of the large land owners on the outskirts of town don’t seem to have much interest in bringing development into Bosque Farms.

“They’ve put up ‘For Sale’ signs; that’s about the extent of it,” he said.

CCI did give Bosque Farms a grant of about $4,000 or $5,000 a year to help with economic development.

“That helped us pay a consultant to design and build a quality website,” Knowlton said. “You need a good Web presence with good demographics to sell the community. It wasn’t a lot of money, but it was money we didn’t have to pull out of our budget.”

The village’s website tells visitors that “Bosque Farms, in the heart of beautiful New Mexico, is the ideal place for businesses and families to call home. (It has a) prosperous commercial district with plenty of opportunities for growth, suburban and agricultural living areas (and a) relaxed rural setting near the vibrant urban life of Albuquerque.”

The invitation is accompanied by a calendar-quality photograph of a tree-lined pasture with horses grazing serenely under a vivid rainbow.

“It’s all here,” the site continues. “Learn more about our progressive, friendly village and everything it has to offer your business and family … Welcome!”

Knowlton said he is encouraged by the arrival last winter of the Tractor Supply Co., which “came to town after checking out our website.” The store was the chain’s first in central New Mexico.

“One worry is that you end up playing one business off of another,” Knowlton said. “Some of the same items sold at Tractor Supply are sold by Hacienda, our big home improvement company. But when you look at our gross receipts, they’re up a little, partly because of Tractor Supply coming to town.”

The village also used the CCI money to hire a consultant for advice, but he informed village officials that “there wasn’t much we could do, especially with a recession going on,” Knowlton said.

But the village is hoping to take advantage of one bit of his advice.

“He told us was we needed to get Bosque Farms on the map. Think of Corrales Arts & Crafts or the Bernalillo Wine Festival,” he said.

It is unfortunate, Knowlton said, that the state Economic Development Department recently revised the Certified Community Initiative and participants are required to re-apply.

“Now, to get one of the grants, you have to hire a full-time economic development person,” he said. “Small towns like Bosque Farms can’t afford that. Some CCI towns have dropped out of the program. We’re trying to lure businesses, but we’re not developers.”

Knowlton is also trying to get lawmakers to change a statute that restricts communities from offering incentives to retail businesses, including those that might come from out side New Mexico. Incentives on services is allowed, but not retail establishments, he said.

“When Tractor Supply came to town, they asked if we could offer incentives and were disappointed when they found out we couldn’t,” he said.

Meanwhile, retailers such as Trader Joe’s and Sprouts have told Bosque Farms officials the village doesn’t have the population density to support their stores.

Knowlton said he hopes Tractor Supply Co. will act as a magnet to attract other stores.

“We need a good anchor store, an incentive for other businesses to move here,” he said.

Much like Bosque Farms, neighboring Peralta is limited in the scope and number of steps it can take to bolster economic development. One of the town’s main weaknesses is that any commercial development is limited to a two-mile stretch along N.M. 47, said Peralta Town Clerk Julie Pluemer.

Nonetheless, she is buoyed by a wealth of affordable property along the commercial thoroughfare and today’s low real estate prices, two good signs for future growth.

And once a major reconstruction and revamping project for N.M. 47 is completed — currently in the design phase — the area will be even more attractive.

Pluemer said she is most excited by the new leadership in the county, including Greg Martin, Los Lunas’ new administrator, and Valencia County Manager Bruce Swingle. She expects the new ideas they bring to the table will be good for the county as a whole.

Martin is spearheading a drive for monthly meetings of high-level local officials to communicate and share ideas, something that can only be good for everyone involved, Pluemer says.

Locally, it seems, the outlook — while perhaps not rosy — is generally optimistic. But the predictions don’t take into account the long reaching effects of several potentially threatening situations beyond the control of anyone in Valencia County or New Mexico:

• How will Europe ultimately deal with Greece and other struggling Eurozone countries?

• How will the United States and other major industrial nations deal with spiraling debt, public and private?

• What happens if there is a war with Iran?

• And perhaps more immediately and most ominously, what will happen on Jan. 1, when massive budget cuts and tax increases — called sequestration — are set to take effect?

While many economists, public officials and business leaders agree that the economic picture in New Mexico is bright, just about everyone is holding a collective breath over sequestration, an enormous cloud looming over the entire U.S. economy.

Sequestration was written into the Budget Control Act of 2011. Many observers speak openly of it sending the nation willy-nilly over a “fiscal cliff.”

At this point, no one can say with any certainty how the government — Congress and the Obama administration — will deal with sequestration, $1.2 trillion in across-the-board spending cuts and tax increases that will begin automatically with the new year.

The cuts — if left alone — would include an 8.4 percent reduction in most affected non-defense discretionary programs in 2013. Additionally, certain Department of Defense programs would face a 7.5 percent cut. And spending on mandatory entitlements (except Medicare) would decrease by 8 percent; Medicare by 2 percent. The total budgetary impact for 2013 would be nearly $500 billion.

From 2014 to 2021 the projected cuts are structured differently, but the impact would likely be just as significant. The trickle-down effect, coupled with an already weak national economy, could have catastrophic consequences on local governments and businesses.

Many economists say such cuts could easily plunge the economy into another recession.

In August, the Congressional Budget Office warned that if the government does not act to avert sequestration, the nation’s economy would plummet almost immediately into a recession of about 2.9 percent of GDP. That would drive the unemployment rate back above 9 percent.

The agency’s latest forecast is considerably more ominous than the one presented in January, which warned of a “mild” recession with the economy shrinking a mere 1.3 percent.

“We estimate that New Mexico would lose 20,000 jobs permanently, and that’s a conservative figure,” said Lee A. Reynis of the University of New Mexico’s Bureau of Business and Economic Research.

Economic developer Mark Lautman, a co-founder of the Community Economics Lab, goes even further. He said job losses in New Mexico could wind up totalling 50,000.

Federal jobs in New Mexico fall into the category of “economic base” jobs, those that bring money into the state and help create additional jobs.

New Mexico has a big federal employment base: Department of the Interior, Department of Energy, Department of Defense. These tens of thousands of jobs are provided and paid for by all U.S. taxpayers, so New Mexico is reaping a big benefit. Economists say that each base job provides for an additional one and a half service sector jobs.

For every 100,000 people who live in a metropolitan area, which includes Valencia County, nearly 50,000 jobs are needed. Of those, 15,000 are economic base jobs; the remaining 35,000 are found in the service sector.

Other examples of economic base jobs are found in the commercial film industry and the Spaceport, in which outsiders come to New Mexico to work, hire others and, of course, spend money, which in turn leads to the creation of additional jobs.

“That’s why we offer economic incentives to them, but not others, because there’s a payback,” said Lautman, president of Lautman Economic Architecture, an Albuquerque-based consulting firm that works with states, communities and real estate firms to design and develop new economies.

Many of the economic base jobs would be struck by sequestration, and their related service jobs would follow.

For two reasons — sequestering is but one — Lautman sees little hope for the state’s economy for the next 10 years of so. He predicted a one-two punch, so to speak, first an attack by sharks and then another, slower assault by piranhas.

The shark attack has already begun, he said.

Over the years, New Mexico’s congressional delegation has been “hauling off way more than our share,” Lautman said. “The military-industrial complex here has been built at the expense of other states. And now they’re saying, ‘It’s time to get this stuff back from New Mexico.’”

He said this “taking” probably began “the moment Jeff Bingaman announced his retirement.” In this admittedly gloomy scenario, the private corporations that run the national laboratories have already begun taking major federal programs and jobs away from New Mexico, shifting them to their home states and cities. Albuquerque is likely to be especially hard hit, he said, with “sharks biting off big chunks of existing jobs. We don’t have anyone to protect us now. It’s going to be ugly.”

It could happen very quickly.

Enter the piranhas, a metaphor for sequestration, little nibblers that by law would be spread out over several years until 2021. If left unchanged, agencies such as the Agriculture Department would take relatively small hits — compared with the big bites of the sharks — of 15 percent to 20 percent in across-the-board cuts.

Communities, businesses, programs and other recipients of federal grants would also suffer, because those grants represent discretionary spending, a prime target for federal budget cutters, he said. While this might seem pretty daunting, Lautman said, by itself it’s not the end of the world.

However, given the current political climate in which smaller government is held up as the ideal, additional sequestrations could follow, he cautioned.

“Downsizing is a massive change from the paradigm we’ve all grown up with,” he said, adding that he foresees a “grave, long-term risk for our economic base sector.”

Should the government — a lame-duck Congress and potentially a lame-duck president — later this year allow sequestration to proceed, expect dire consequences, said Lautman, who is sometimes introduced at conferences as “the Dr. Kevorkian of economic development.”

Lautman said he finds it hard to imagine Congress tackling the problem. Still, he added, he is holding out hope that the nation’s lawmakers will come to their senses and act to stave off disaster.

“As soon as sequester was approved, I thought, this is going to kill us,” he said. “I think New Mexico is in for a pretty rough decade ahead. If they don’t fix this, we’re going over a cliff. It could be horrendous, another recession for sure.”

The “one bright spot” on the horizon, he continued, is how New Mexico chooses to deal with that provision of the Affordable Care Act concerned with the expansion of Medicaid.

The first three years of expansion would be largely paid for by the federal government — which is why Tea Party conservatives oppose it so adamantly — mostly the hiring of thousands of home health care providers and other service sector workers. That could offset some of the job loss the state is currently experiencing.

“The state will make out great for three years,” Lautman concluded, “then the costs shift to the states and the states get crushed.”

Most local officials declined to comment on the spectre of sequestration or other global factors threatening the local economy, saying they don’t know enough about the issues. But Belen’s economic development chief, Steven Tomita — while conceding that he can’t predict just how great the potential impacts will ultimately prove to be — said big changes are likely in store.

“Every city, every state, is going to have to look at its (historic) ability to rely on federal funds,” he said. “That’s going to be the big question.

“I have no clue how big an impact there will be, but it’s going to be big challenge requiring a change in viewpoint, a change in attitude.”

Cities such as Belen will be compelled to focus on attracting private investment.

“We’re going to have to be more aggressive,” he said. “There will be big changes in how we look at things.”

And in Bosque Farms, Knowlton said he hopes that those economists who predict slow and steady growth are correct. While he doesn’t expect any drastic changes, he said another recession “would be very, very tough on small communities.”