© 2018 NEW MEXICO NEWS SERVICES 12-31-18
Tax experts hear about job growth figures and issue before taxation and revenue department
By Harold Morgan
New Mexico Progress
Our vaunted sunsets fade quickly but return the next day. The 2 percent plus year-over-year job growth figures that cheered us all since June will prove just as ephemeral. The difference is that the job growth wasn’t there in the first place. Early February will bring numbers more accurate than the cheery 2 percent.
These revisions, done annually using more precise statistical methods, will bring annual job growth to around 1.8 percent – not extraordinary but still very good, said Jeff Mitchell, director of the University of New Mexico’s Bureau of Business and Economic Research. Mitchell spoke Dec. 19 during the annual Legislative Outlook Conference of the New Mexico Tax Research Institute in Albuquerque.
David Abbey, director of the Legislative Finance Committee, began his presentation by listing concerns of Moody’s Investor Service, as the firm downgraded the rating of the state’s general obligation bonds twice in the past two years. Moody’s downgrades did the state a favor, Abbey said. The actions got the attention of people across state government and will drive the coming session.
These worries are: fiscal stability, revenue and general fund reserves; educational outcomes from early childhood to higher education; Medicaid growth financially crowding out other responsibilities; state employee pay and pension solvency; and tax reform to address high gross receipts rates and the narrowing base.
Abbey closed with another list, this one of troubles at the Taxation and Revenue Department. The list was remarkable in that such problems seldom get explicit treatment from the podium to a crowd of 100 or so experts in the particular topic. The items, which are hidden behind the scenes but affect everyone, are:
Tax refund protest totals are up to $320 million. Claims remain in process. Smaller items being taken to court with a staff lawyer cost more than the claim.
Audit and compliance issues, especially with regard to tax withholding for oil and gas personnel working in New Mexico and living in another state such as Texas.
Workers compensation tax collections.
The telecommunications relay service surcharge, a tax on intrastate calls.
Vacancies, especially among mid-level senior staff. Is the work getting done?
“When you hear about (the problems) it makes you wonder what else is out there,” Abbey said in conclusion.
License plates, a Taxation and Revenue responsibility, are one of those “what else” items; my license plate is deteriorating.
Movie production subsidies under the Film Production Tax Credit continue to be approved by Taxation and Revenue and the New Mexico Film Office. But the $50 million annual subsidy cap and continuing approvals mean that the amount the state owes movie companies will approach $300 million. A quick analysis, Abbey said, suggests that the state gets a twenty cent return on each dollar of subsidy. Maybe the state should just write a check directly to the production staff.
The Lujan Grisham administration appears to be doubling down on movie production by hiring Alicia Keyes, city of Albuquerque film production liaison, as economic development department secretary.
The 2019 legislative session might be the time—“the perfect time,” Senate majority leader Peter Wirth, suspects—to do something serious about the state’s tax system. “We’ve become more and more reliant on gross receipts,” said the Santa Fe Democrat, due to increased oil and gas production.
Several major tax bills are being developed. The coming proposal from Rep. Jim Trujillo, D-Santa Fe, who chairs the House Taxation and Revenue Committee, seeks dependable revenue, removing “unneeded nickel and dime” taxes, increasing the gas tax and cutting the gross receipts tax rate.
Overall, said Rep. Jason Harper, R-Rio Rancho, “good tax policy is not partisan; bad tax policy is partisan.”
© 2018 NEW MEXICO NEWS SERVICES 12-17-18
County income growth: No pattern, little performance
By Harold Morgan
New Mexico Progress
Follow the money, it is said.
For money around the state, specifically per capita personal income, it was $39,811 in 2017, the latest available, putting us 48th nationally, according to the federal Bureau of Economic Analysis, and at 77 percent of the national per capita income of $51,640. The one-year increase was 2.3 percent, not quite two-thirds of the 3.6 percent national income growth.
New Mexicans started the 2007-to-2017 decade ranked 46th among state incomes. National income grew 2.6 percent during the decade. We locked in at 2.3 percent.
These few numbers nicely summarize our lost decade. No wonder people are leaving.
Wait a minute, some might say. Job growth is way up the past few months. The amount of “new money” available for legislative largess starting in January is well north of $1 billion, and just recently humongous new oil pools were unveiled in the Permian Basin, which is partly in Lea and Eddy Counties.
My response: It ain’t there ‘til it’s there. In any case, assuming legislative prudence, large one-off demands should consume much of the new money—replenishing the state reserve fund, pension funds, roads. The mineral production spending goes to Lea and Eddy residents in the form of wages and local gross receipts taxes and is redistributed to the rest of us after a cut for state government. Royalties build the Permanent Fund, are invested and generate income to pay for state government. (Santa Fe can’t function on art alone.)
The newest consensus forecast, unveiled Dec. 10, sees “recurring” (as opposed to one-time) revenue as $7.6 billion for FY 20, the budget year ending June 30, 2020, with a $157 million revenue drop the next year, FY 21. “Consensus” refers to four agencies having agreed on the numbers. The exciting number is the $1.1 billion of “new money” estimated for FY 20, that being projected revenue less current year spending.
The cyclical nature of oil and gas income overlays everything, as Lea and Eddy residents well know.
In 2016 the Eddy and Lea income growth was respectively 32nd and 33rd among our 33 counties, last in other words. During 2016 the per capita income of Eddy County residents dropped 7 percent and was down 7.3 percent in Lea County. The next year, 2017, as production grew, Lea County was second with 8.5 percent income growth to $37,419. Eddy was fifth at $48,280 income after a 3.4 percent increase. Even with the better year, neither county reclaimed the 2015 income level.
The usual suspects—Union, De Baca, Harding, and Mora—resumed their place at the bottom of income performance, all showing dropping income during 2017. Income in Luna and Torrance counties also dropped during 2017.
For top and bottom income rank in 2017, no overall pattern emerges. One element does stand out. Three of the six counties in the north central urban area dominate. This area combines the Albuquerque and Santa Fe metro areas plus Los Alamos. Los Alamos continues to lead with a per capita income just over $65,000. Santa Fe is second at $55,500, with Bernalillo County (Albuquerque) fifth at $42,100.
The income in Los Alamos doesn’t count in considering the other 32 counties because of the concentration of well-paid scientists at Los Alamos National Laboratory.
Metro Albuquerque also has two of six lowest income counties, Valencia, 28th with $32,200, and Torrance, 30th with $29,200. The others in the bottom six are Catron, 29th; Luna, 31st; Cibola, 32nd; and McKinley, 33rd with $26, 837, less than half of Santa Fe.
The middle counties are Hidalgo, Quay and Taos.
So, for income in New Mexico’s counties, it’s no pattern and no performance.
© 2018 NEW MEXICO NEWS SERVICES 12-3-18
Lower oil prices good for world, less so for New Mexico
By Harold Morgan
New Mexico Progress
The solvency discussion is over for New Mexico’s state government.
That discussion drove policy decisions in 2009 with the effects of the national Great Recession and again in 2014 when oil prices collapsed. Around state government, it was ugly. In case anyone has forgotten, talking about solvency means figuring out how to not run out of money.
Financial discussions today offer two themes.
Locally the tale is about the money, an estimated $1.5 billion in “new money” (the difference between this year’s spending and next year’s revenue) for the 2019-2020 budget year. The money is coming from vastly increased oil and gas production, especially from the Permian Basin in Lea and Eddy counties. National publications tell a second Permian Basin story, one decorated with caution.
The newest economic forecast from the University of New Mexico’s Bureau of Business and Economic Research lends a warm glow to all the money. “We are in the strongest position we’ve been in since 2008,” BBER director Jeff Mitchell told a conference last month. Year-over-year wage job gains of 1.3 percent, or 10,500 jobs, are seen for this year and 2019 with annual job growth of 1.2 percent through 2023.
BBER’s forecast sees oil in the $50 to $80/bbl range.
But wait. As of this writing, oil was at $50.42/bbl, a drop of around one-third since early October. A Nov. 26 Wall Street Journal story said lower oil prices would be good for the national economy; lower oil prices trickle through to you and me in all sorts of happy ways. That $50/bbl is the bottom of BBER’s range.
A hint of Governor-elect Michelle Lujan Grisham’s approach came Thanksgiving week with the report that she is considering dumping the order to consolidate state government personnel functions because the plan would lead to more job vacancies. If this happens it would mean that the new administration is reverting to the old New Mexico public ethic of state government being the first and last resort for employment. It would also be a blow to productivity in government, a conceptual oxymoron anyway. The point of such consolidation is to do the same with less.
The state may be getting lucky about some serious matters. Our two big pension funds are way in the hole with regard to the amount of money expected over time and the amount owed to retirees. The Educational Retirement Board plans to ask for $248.3 million as a one-time injection. The other fund is the Public Employees Retirement Association.
The reserve account, the hedge against falling revenue, is up some. But allocating a major piece to reserves—maybe half—of the $1.5 billion would comfort the financial worriers. Addressing the perpetual nine-figure difference between highway construction and maintenance desires and available money would be nice.
A thorough look—the headline was “Peering inside the Permian—appeared recently in The Economist, the British news and culture magazine.
The production growth has been “growth for growth’s sake,” a function of low interest rates and the high productivity and short well life of shale oil wells; 80 per cent of a well’s productivity happens with the first two years. Oil company investors have noticed the shortage of profit from the drilling frenzy.
Transmission capacity is strained, though some relief is expected in a year when new pipelines open. Storage capacity is also strained. New employees are hard to find.
Companies are responding to the challenges (think profit) by buying one another and seeking improved production techniques.
Lower oil prices are good for the world by squeezing Iran, Russia and Venezuela. For New Mexico, though, not so much. With zero ability to affect prices, we’re stuck with going with the flow. Cautiously, I hope.
© 2018 NEW MEXICO NEWS SERVICES 11-19-18
Albuquerque downtown development is private, organic, flexible
By Harold Morgan
New Mexico Progress
An Albuquerque focus is one of New Mexico’s policy dangers. The Albuquerque-versus-the-rest-of-the-state mentality is a continuing black hole for ideas, some even useful. An Albuquerque commercial developer observed recently that, though a New Mexico native, he had never been to Hobbs until his company entered that market a couple of years ago.
Sometimes, though, it is useful to pay attention to Albuquerque for entertainment and productive lessons.
For decades Albuquerque has been on the downtown urban guru circuit. These consultants and professors with consulting sidelines roll in with grand ideas. In the 1980s it was Chris Leinberger whose wisdom spun into downtown live-work spaces, some, I suspect, still vacant. Later, Richard Florida pitched his “creative class” vision.
Over time Albuquerque powers that be have junketed to Florida, Denver and Portland, Oregon, to gawk at the latest fad.
In late October, Bruce Katz came to Albuquerque’s NAIOP commercial real estate group to tout “new localism and opportunity zones.” Katz has a book and a consultancy, New Localism Advisors (thenewlocalism.com). In a newsletter, Katz spoke well of the disastrous and destructive (my opinion) ART project, which he toured with former Albuquerque R.J. Berry, ART creator. At NAIOP, Berry introduced Katz, calling him “a friend.” (Consider the source and beware.)
In his talk to NAIOP, Katz cited Indianapolis, Pittsburgh and Copenhagen, Denmark, exemplars of implementing his ideas. Note the metro population of these cities starts at two million and two have NFL franchises, elements not found in New Mexico. Maybe Bill Richardson was right about seeking that NFL franchise.
Ten days past Katz, Cato Institute senior fellow Randal O’Toole, a transportation and growth policy expert, came to the Americans for Prosperity office in Albuquerque. O’Toole’s consultancy is the Thoreau Institute.
O’Toole spent his extra day in New Mexico riding the Rail Runner to Santa Fe. His blog post provides the best description of the operation I’ve seen. Nice pictures, too. And numbers. All New Mexicans can see what their money is subsidizing. See: https://ti.org/antiplanner/?p=15317#more-15317.
While downtown Albuquerque boasts government-driven innovation incubator buildings and the Lobo Rainforest Building at Innovate ABQ, just to the north the Glorieta Station development is emerging.
The important idea here is that the development is not some urban guru’s latest big idea. And it’s all private, including the financing. While generally planned, the development will be organic, ad hoc and flexible with initiative coming from companies and developers responding to ideas and needs.
The main man is Ed Garcia of Albuquerque who leads the family-owned Garcia Automotive Group that in just over 50 years has grown to include 15 dealerships spread among Albuquerque, Santa Fe and El Paso with brands from Land Rover to Toyota.
Just recently Xpansiv Data Systems of San Francisco slipped its Albuquerque branch into the project. Xpansiv offers a commodity-intelligence platform (whatever that is). The Garcia neon sign collection is next door. Another tenant is The Roaster Coffee Shop. In between, whiskey barrels are arrayed around the office of the old Joe G. Maloof and Co.
Garcia doesn’t offer the sheets of promotional material typically accompanying real estate projects. Rather, he sketches the concept. From there the market—people and companies with needs—can find solutions within the development.
Garcia’s vision sees Glorieta Station as a mix of culture and commerce, where everything comes together.
There is some irony that Garcia has absorbed the former Maloof office, which held the Maloofs’ Coors beer distributorship. Garcia also owns First Plaza in downtown, which was home to Albuquerque’s First National Bank, once owned by the Maloofs.
Because Glorieta Station is different, and because it is private, it might just work. And that would benefit all New Mexico.
© 2018 NEW MEXICO NEWS SERVICES 11-5-18
State population growth dismal, but seven counties gain
By Harold Morgan
New Mexico Progress
In a previous column, I discussed those leaving New Mexico, namely the 25- to- 44-year olds who should provide the core of a productive society. This time the topic is the number staying. The numbers, for July 1, 2017, come from the Census Bureau. New numbers are due next month.
The state’s overall population situation remains dismal; we added only 28,891 people from the April 2010 census to 2017. That’s a 1.4 percent increase. Contrast that with Arizona, up by 624,253 (yes, from a larger base), a 9.8 percent increase. Booming Colorado’s population grew 11.5 percent during the period. Those two neighbors can’t match New Mexico’s “accomplishment” of declining population in 2014 and 2015. It has been a lost decade.
Ten New Mexico counties gained population during the period. Only Sandoval and Santa Fe counties gained every year. Bernalillo and Los Alamos counties lost population during one year by amounts so tiny as to not really count. These four are the north central urban area. Doña Ana is also urban with the second largest county population in 2017 (215,579), with Las Cruces and part of the larger Júarez-El Paso combo.
Urban wins. The message isn’t good for the rest of the state.
Amid the gloom a few glimmers appear.
While just five counties showed positive domestic migration for the seven-year period, for the 2016-2017 year it was a dozen. (Domestic migration refers to people moving into or out of an area.) The seven with the migration turnaround are Catron, Lincoln, Los Alamos, Guadalupe, Torrance, Union, and Valencia.
Additionally, Santa Fe and Sandoval counties attracted substantially more migrants than the seven-year average. For the year, Bernalillo County lost 1,860 domestic migrants, equal to its seven year average.
For other counties, different things are happening.
The Chaves County population grew by 148 between 2012 and 2013 and has drifted down since. Chaves’ 2017 population is 64,866. It was 65,645 for the 2010 Census.
Lea and McKinley counties are close in the alphabet and in population with Lea showing 68,759 in 2017 and McKinley at 72,564. Both gained population during the 2010 to 2017 period. They peaked in 2015 and dropped the next two years.
The performance was quite different. Lea County added 4,032 people, or 6.2 percent, during the seven years. McKinley added 1,076 for a 1.5 percent increase. With one exception, the population factors were about the same. The exception was domestic migration. While Lea County lost 990 people to other parts of the U.S., 3,581 people left McKinley County. That’s three and a half times more than the Lea departures.
Incomes add to the story. For 2016 (the latest income figures available) the per capita income in Lea County was $33,371 (22nd in the state) and $25,688 in McKinley (33rd in the state).
To state the obvious, the economies of the two counties are quite different and people respond accordingly, seeking betterment, just as people respond to the economies of Arizona, Colorado and Texas being quite different from New Mexico.
Our vast spaces show in the population numbers. We have seven counties with fewer than 5,000 people—Catron, De Baca, Guadalupe, Harding, Hidalgo, Mora, and Union. Five counties are in the northeast with two in the southwest. Their total 2017 population was 23,580. Together they lost 7.8 percent of their population in seven years.
The group spreads across 15.1 million acres, 19 percent of the state’s 77.9 million acres. The spread is thin; the seven-county population is 1.2 percent of the state’s 2.09 million.
All in all, we go back to the economic truism: incentives matter, incentives such as higher income and decent education for the kids..
© 2018 NEW MEXICO NEWS SERVICES 10-22-18
The young, educated and energetic leaving for Colorado, Texas, Arizona
By Harold Morgan
New Mexico Progress
People move from New Mexico in greater numbers than people move here. We have known this for years.
Speculation about the leavers has long centered on young families. The speculation makes sense. People trying to build a middle class life, something that includes educating the children, are poorly served by economies that are stagnant to declining.
Now we can say that the speculation is true, mostly, thanks to the Federal Reserve Bank of Kansas City, which serves northern New Mexico. The information comes in the KC Fed’s Rocky Mountain Economist newsletter, which discusses migration trends in Colorado, New Mexico and Wyoming.
Natural population growth—births minus deaths—is the part of population change responding to longer term trends. Migration—in and out of an area—shows shorter term ups and downs. A family quits a job, calls U-Haul and is gone.
People chose New Mexico in the early 1990s, the Fed said, with about 22,000 net migrants in the peak year, 1994. The flow reversed as the 2001 recession approached and reversed again throughout most of the 2000s.
“That flow has been negative (meaning more people leaving than coming) since 2012 as New Mexico’s economic recovery from the 2007 recession lagged national gains (no kidding), leading many individuals to seek employment opportunities in other states.”
Between 2010 and 2017, six (just six!) New Mexico counties count more people coming than leaving.
The Farmington metro area (San Juan County) leads all counties in the three states in the leaver category with about 9,600 departures.
Colorado is the most popular destination for people moving from New Mexico, followed by Texas and Arizona. These states are handy, prosperous and even booming. Oregon and North Carolina are the fourth and fifth place destinations.
Well, who are these guys?
The short answer: “In New Mexico, individuals age 25 to 44 and who earned between $50,000 and $100,000 accounted for a large share of outflows,” the Fed said. These are the people providing the core of our society. They are building businesses and careers, having children, buying houses and paying taxes.
New Mexico’s vaunted and clichéd claim of having more PhD degree holders per capita may still be true; I haven’t heard it recently. The per capita situation may have to do with our relatively small population of 2.1 million, i.e., fewer capitas, and institutions such as national laboratories that require PhDs. The hunch comes because people with some college or a degree, even, left the state while people who failed to finish high school came to the state. The effect lowers the state’s overall education level. The Fed notes that New Mexico has a “relatively large share of those with less than a high school degree.”
Of people who moved to New Mexico before 2010, just over 20 percent had at least a bachelor’s degree and about 20 percent lacked the high school diploma.
By scary contrast nearly all of the people moving to Colorado between 2010 and 2016 had at least finished high school and about half had that college degree or more. This is not “Colorado envy.” Just facts. It seems a virtuous circle. The Colorado jobs attract people with energy and education, especially from California, who grow in the jobs and create new companies which hire people with energy and education and on and on. New Mexico goes the other way, a vicious circle.
Interest in change simmers. Dale Armstrong’s Viante New Mexico (viantenm.org) wants to educate people. The recently announced New Mexicans for Economic Prosperity has no website, a dozen unidentified members, a single staffer recently employed in the governor’s office, and, from this columnist’s perspective, no credibility.
© 2018 NEW MEXICO NEWS SERVICES 10-8-18
Three-mile-long trains may (someday) enhance New Mexico train world
By Harold Morgan
New Mexico Progress
Here’s a challenge. Visualize three miles of anything as one single thing. It’s hard. Runners, for example, commonly cover more than three miles but are conscious only of the much smaller area that is visible. The question arises because of a recent report that railroads are thinking about running trains three miles long.
What would a three-mile-long train be, besides really, really long?
On Interstate 25 there is a rest stop north of Lemitar. North of the rest stop, a sign says, “Rest Stop Three Miles.”
This is the Walking Sands rest area at mile marker 167, which stands out among the state’s rest areas for its distinctive wood structures. A sand dune area used to be located immediately west of the area, but the dunes seem to have walked away.
Imagine a single train covering the distance from Walking Sands back to the sign. Such a train might have as many as 200 cars, many carrying two shipping containers. And locomotives at both ends. It might need five minutes to pass a given point.
Other than Rail Runner, which sports colorful paint and is visible because it takes passengers through Albuquerque and Santa Fe, railroads get little attention in the state. Our tale here omits Amtrak, which has separate issues. Do remember, though, that about 4,400 Boy Scouts ride Amtrak to Raton for their time at the Philmont Scout Ranch. Out of sight, out of mind.
Two of what are called Class I railroads cross the state: the Union Pacific Corporation (UP.com) and the BNSF Railway Company (BNSF.com). BNSF is North America’s largest freight rail network. UP is second.
Company fact sheets indicate the New Mexico impact.
UP operates 618 miles of track. One segment runs along Interstate 10 from Arizona to El Paso. The other angles from El Paso to Santa Rosa, Tucumcari and the Texas Panhandle. UP’s 485 New Mexico employees were paid $46.6 million in 2017.
The UP’s New Mexico jewel is the 2,200-acre intermodal ramp and refueling station a few miles from Santa Teresa. The $470 million facility opened in 2014. It has, UP says, become a catalyst for additional economic development, including warehouses, trucking and logistical distribution centers. The facility is 11.5 miles long (visualize that!), a mile wide, with 100 miles of rail sitting on 136,000 ties and 218,000 tons of concrete used in construction.
At this time, UP has no plans for three-mile-long trains, Jeff DeGraff, UP director of corporate relations and media, said in an email.
BNSF paid its 1,389 New Mexico employees $119.7 million in 2017. The company owns 1,125 route miles of track and has trackage rights for another 515 miles. That track runs along I-40 in the western third of the state and then drops south to go through Belen and along U.S. 60 to Clovis. BNSF also runs along I-25 from El Paso to Raton, skipping Santa Fe for a digression through Lamy.
BNSF has rail yards in Albuquerque, Belen, Gallup and Clovis.
Interstate 40 in the Grants-Gallup area offers continuous wonderful trains viewing. The road is above the track. The route is busy with 92 trains per day, BNSF said, that average 8,000 feet long. BNSF has tested longer trains on the route.
Train viewing will gain with the (planned) 2019 reopening of the 40-room La Castañeda hotel, just off the tracks in Las Vegas. The 1,400-acre Central New Mexico Rail Park, now under construction in Los Lunas, is another addition to our rail world anticipated for 2019.
Trains are glorious. They also move much stuff—coal, grain, lumber, cars, asphalt and steel—and provide New Mexicans jobs and a way of life.