New proposed legislation aims to make sure taxpayers get their money back if a private business that received government economic development funds fails to deliver on its promises.
House Bill 352, sponsored by Rep. Jason Harper, R-Rio Rancho, makes “clawback” provisions mandatory on all economic development agreements to provide security for every governmental entity involved. Clawbacks require a company to give the government money if it doesn’t meet certain goals, such as employment levels, after taking taxpayer money.
“When the tax dollars of New Mexicans go to a business, the citizens of New Mexico should have protection and assurance that their money will not be swept down the drain,” Harper said. “This legislation will bring accountability back to the process, while also ensuring we can attract and keep good businesses in our state — creating desperately needed jobs and increasing our economic stability.”
Many economic development agreements include clawback provisions, but state law doesn’t require it, he said.
The bill — which Reps. Nate Gentry, R-Albuquerque, and Brian Egolf, D-Santa Fe, co-sponsored — would require that companies that close or fail to meet their contract requirements after receiving taxpayer money repay an amount proportional to how severely they fail and how long they’ve stayed in business in the community.
A business that failed more would repay more, but that amount could be lessened if it had made bigger investments and provided more payroll over a period of time.
Harper’s bill also aims to leave businesses and economic development personnel latitude in making agreements.
“I don’t like micromanaging from the top,” he said.
Harper said he was “trying to be fair to the business that’s taking a risk, but also protect the taxpayer.”
Harper spoke of Schott Solar, which received $16 million of state money but closed in 2012. Former Gov. Bill Richardson had insisted on no clawbacks in the agreement with the company, so nothing was repaid.
Since Schott Solar completely stopped its operations in Albuquerque, Harper said, under his plan, it would have had to repay all of the money, minus some amount of credit for the investment and jobs it had provided for a time.
A Legislature news release also mentioned Hewlett-Packard’s Rio Rancho facility. The company recently announced that 200 positions, but not all of the employees in those jobs, would move to Georgia.
That action makes it highly unlikely the company will have the number of employees required under the Local Economic Development Act agreement in which the City of Rio Rancho gave HP incentives to move here.
HP’s agreement with the city does include clawbacks, but some people have questioned if they’re sufficient to return taxpayer money.
Rio Rancho Mayor Tom Swisstack said he had no problem with the legislation.
“Having clawbacks in any program that works with business is a good thing,” he said.
Swisstack also agreed with the bill taking into consideration a good faith effort by the business and its investment and payroll in the community. While clawbacks are enhanced, he said, each company is treated individually.