Stakeholders deliberate tax district proposed for old country club land
Michael McDevitt
LAS CRUCES - City lawmakers deliberated and discussed ,for more than five hours Monday, plans to form a new tax increment development district on a mostly empty stretch of land where the old country club used to sit. Many came to the conclusion that the proposal raises more questions than answers, potentially dooming a vote set for next week to approve the formation process.
The Las Cruces City Council held a work session June 29 to discuss the proposed Royal Crossing Tax Increment Development District, which would be established to reinvest some tax dollars into the area as it develops over the next two and a half decades.
The city council tabled a resolution June 15 that would have declared the city's intent to form a TIDD on the former Las Cruces Country Club site, pushing the vote to July 6. Councilors at the time said they and the public hadn't enough time to review the lengthy application documents.
But now, that resolution next week might be dead on arrival after Monday's discussion, during which councilors heard from city Economic Development Department staff, landowners and community stakeholders.
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Most councilors and community members still said there were too many unknowns and they felt rushed to meet the developer's deadline. If the developer wants to get the TIDD formed by January, the city needs to complete a public hearing process between 30 and 60 days out from July 6, then apply to the state by Sept. 1.
District 3 Councilor Gabriel Vasquez said he'd be in favor of the city taking its time and would hope the developer would continue to act in good faith if the process slows. He said the TIDD's inclusion at the council meeting June 15 surprised him, as it did other councilors.
"I do look forward to this property being developed at some point," Vasquez said. "It's inevitable."
A new "boutique" hospital was recently built on the site. Nebraska-based real estate developer Zach Wiegert intends to develop office space, restaurants, entertainment, big-box retail, grocery stores, multi-family homes, town houses and senior living on the rest of the proposed 91-acre district.
"Because it's the first of its kind, I think it needed a much broader public input process," said District 4 Councilor Johana Bencomo.
The Royal Crossing TIDD will be driven by a single developer, different from the public Downtown Las Cruces TIDD — the only other one currently within the city — which was used to fund revitalization efforts and business development downtown. That TIDD was created with a majority vote of property owners and registered voters within its borders in 2007.
District 5 Councilor Gill Sorg expressed vehement dissatisfaction with the idea to form a TIDD on the mostly vacant land. He took issue with the "but for" test applied when deciding whether to propose a TIDD — the idea is the area wouldn't be developed "but for" the TIDD.
"Well that may be the case for this company, but the land is still there. It's not going anywhere," Sorg said. "Somebody else could develop it."
What is a TIDD?
A TIDD establishes a baseline gross receipts and property tax revenue amount for an area. As development occurs, a portion or "increment" of the new tax revenue generated within the bounds of the TIDD is used to finance improvements to public infrastructure there, costs a private developer would typically cover. As public infrastructure is built, it's supposed to spur more new development in the area.
The increment that goes back to the TIDD will be used to reimburse the developer for public parking, street improvements, drainage, intersections and green space.
Sorg said the infrastructure will add value to the land, so if Wiegert sells it he'll net a profit for infrastructure improvements he himself didn't pay for.
"Our tax money is going to pay for their development and they're going to reap the profits off of that," Sorg said.
Wiegert said he and his partners take on the most risk. If the private development doesn't generate sufficient tax revenue to reimburse itself, the city wouldn't be expected to cover it.
The TIDD would sit within District 1, represented by Councilor Kasandra Gandara.
Gandara advocated for expanding the boundaries of the proposed TIDD to include more of the community, such as Apodaca Park and parts of east-west Madrid Avenue, not just the land Wiegert owns. She said if he does that, she'll consider voting yes on the TIDD.
More:City OK's Apodaca Blueprint
"I want someone who loves this community like I love this community," Gandara said to Wiegert.
City Economic Development Director Griselda Martinez said the boundaries don't need to change. New areas can be added to the TIDD plan in case the district generates excess revenue, and those areas don't need to be within the boundaries to receive funding. Wiegert said he's open to that since additional TIDD money wouldn't be useful to the developer once infrastructure costs are covered.
As a separate political subdivision, the TIDD's debt is not the city's debt. EDD staff said if a widespread economic downturn were to occur, the city would be responsible only for covering its own debt, not the TIDD's.
The public infrastructure is estimated to cost $42 million, plus annual operating costs of $1.1 million at "full buildout" of all infrastructure that's proposed. But the city's EDD estimates the public investment would lead to $457 million in private investment in the area.
Even still, the city would only reimburse the developer based on what's actually built and the actual revenue generated.
A TIDD doesn't change the tax rate. It only changes how funds are distributed that are generated within the TIDD boundaries. Without a TIDD, 100 percent of new tax revenue would go to the city. Under the TIDD proposal, 75 percent of property taxes and 70 percent of gross receipts taxes generated within the TIDD would be reinvested there instead of going to the city and the county.
A board would govern use of the funds for public infrastructure.
Raising concerns
During the Monday work session, councilors and stakeholders worried about the effect the proposed TIDD could have on the local economy. With a global pandemic and ensuing economic crisis still ongoing, some worried the city might need to keep as much tax money as it can.
However, the land itself isn't earning much revenue for the city right now, about $38,000 a year.
There were concerns that the jobs and businesses projected to come to the district could include Las Cruces businesses relocating. Some were worried the TIDD could hurt small local businesses by holding a competitive advantage over other areas and drawing more chain retail.
There were also questions about what would happen in the event bonds issued by the TIDD to finance improvements weren't able to be repaid if the district doesn't generate enough new tax dollars.
Connie Potter, a nearby resident who has a health care administration background, presented some concerns to the council. She said the TIDD raises traffic concerns, said the economic benefits are unproven and said the plan doesn't sufficiently incorporate community goals for the land laid out in the Apodaca Blueprint.
More:Las Cruces Country Club bankruptcy in limbo after twists, turns
Eva Nevarez St. John, the president of the Country Club Neighborhood Association, said she thinks the land is a prime piece of property and pointed to the land's location and frequent change of ownership as evidence of its desirability. To her, it fails the "but for" test and would be developed without a TIDD.
The land is one of the city's infill areas. It's also part of a federally designated Opportunity Zone, meaning the governor has designated it as needing development and allows the owner deferment on capital gains taxes if they own the land for a given time period. The EDD says the TIDD plan aligns with goals laid out in the city's comprehensive plan, Elevate Las Cruces.
The TIDD is solely a financing incentive for development. It doesn't change how the land can be used. Zoning, building requirements and land use won't be decided until a pending Planned Unit Development for the area is approved.
Michael McDevitt can be reached at 575-202-3205, mmcdevitt@lcsun-news.com or @MikeMcDTweets on Twitter.
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