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SANTA FE – About one-third of the companies that received financial aid under the Local Economic Development Act in a recent six-year period failed to meet their job-creation or employment requirements, legislative analysts say, and the state hasn’t always pursued reimbursement of the money.
But analysts for the Legislative Finance Committee also credited the Economic Development Department for shifting in recent years to awarding the funds as the companies meet certain milestones rather than doling it all out up front.
The findings are part of a report issued Monday examining New Mexico’s $350 million investment over six years in two economic development initiatives – the Local Economic Development Act and the Job Training Incentive Program. The period examined covers the final three years of then-Gov. Susana Martinez’s administration and the first three years under Gov. Michelle Lujan Grisham.
Economic Development Secretary Alicia Keyes said the state has ramped up its scrutiny of the incentives and is committed to following up on changes recommended by legislative analysts.
She also defended the programs, describing them as key to helping New Mexico’s economy withstand the COVID-19 pandemic. They have helped create thousands of jobs over the years, she said, and generated enormous return on the investment.
“We take our responsibility as stewards of taxpayer dollars very seriously,” Keyes told lawmakers Monday during a hearing at the Capitol.
The incentives, she said, have been key to landing projects with Netflix, Facebook, Intel and the companies planning to build an aluminum-rolling mill in Valencia County.
The report by analysts for the Legislative Finance Committee described New Mexico’s recent appropriations to carry out the Local Economic Development Act and Job Training Incentive Program as “higher than ever,” making it all the more important to scrutinize the spending.
LEDA grants pass through local governments and generally pay for land, building and similar costs to help businesses; JTIP reimburses companies for a share of the wages paid to new employees.
The legislative report found that 33 of 101 agreements under the Local Economic Development Act between fiscal years 2016 to 2021 didn’t result in the minimum employment requirements, leaving the state with 2,500 expected jobs that didn’t materialize. In the other 68 cases, the companies either met the requirements or are on track to do so.
Legislative analysts also said the state didn’t always try to claw back the funds when companies failed to meet their job obligations, forgoing about $4.1 million in potential recovery.
But they said concern about inconsistency was tempered somewhat by the “switch from the historical practice of giving all money awarded through LEDA to the company upfront and instead (providing) the money in tranches as the company meets milestones.”
Economic development officials also said they had good reason in some cases to opt against pursuing reimbursement. The COVID-19 pandemic damaged the ability of some companies to meet their targets, officials said, and the state takes a less-punitive approach to businesses that remain in New Mexico while trying to meet their job requirements.
Jon Clark, deputy secretary for economic development, said it doesn’t make sense to make it harder for companies genuinely trying to meet their employment obligations.
“We know the programs aren’t perfect,” he said. But “we’ve made a lot of progress.”
In any case, Keyes said, the state pursues claw backs when it’s in the interest of taxpayers.
The LFC report recommends better monitoring of employment compliance, a new policy outlining when it’s appropriate to not require job creation and amending state law to better define the goals of the programs.
New Mexico lawmakers have dramatically ramped up spending on economic development initiatives over the last decade – with LEDA spending increasing from $3 million in the 2014 budget year to $50 million this year – in an attempt to bolster job creation statewide.
The push was intended to match other states, including Texas, that have much larger closing funds to help woo businesses.