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BernCo OKs $1.7M tax break, IRB for West Side shopping center

Flix Brewhouse is the anchor tenant for the Village @ La Orilla, a shopping center at Coors and La Orilla. Bernalillo County commissioners approved $1.7 million in tax breaks for the development. (Jim Thompson/Albuquerque Journal)

Copyright © 2017 Albuquerque Journal

Bernalillo County commissioners approved an estimated $1.7 million tax break for a West Side shopping center last week, shrugging off stiff opposition from two neighborhood associations and the commission chairwoman as well as some faulty advance information provided by the county.

Tuesday’s 3-2 vote authorized the tax breaks and the issuance of an Industrial Revenue Bond of up to $4 million for Village @ La Orilla LLC, a shopping center located at Coors and La Orilla. Its anchor tenant is Flix Brewhouse.

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The Alban Hills and Taylor Ranch neighborhood associations argued that the tax break is nothing more than corporate welfare. Patsy Nelson, president of the Alban Hills association, said La Orilla is already successful without the tax break, and she said it isn’t fair to all the other shopping centers that aren’t getting the same break.

Commissioner Wayne Johnson countered that the deal will create manufacturing jobs through the brew house.

Approval was rushed through despite multiple irregularities and a plea from Commissioner Maggie Hart Stebbins to postpone action for two weeks.

Construction continues at the Village @ La Orilla in Northwest Albuquerque. Two neighborhood associations opposed tax breaks for the shopping center. (Jim Thompson/Albuquerque Journal)

Those irregularities included information provided to the commission and the public that the county acknowledges was incorrect.

A faulty analysis of the deal by county staff that was published on the county website grossly underestimated the amount of the tax break, in one section stating that the total exemption over the 15-year term of the bonds would be $655,926 – hundreds of thousands of dollars less than it ended up being. Commissioners weren’t provided with a corrected analysis of what they were approving until 26 minutes before Tuesday’s meeting.

There was also a last-minute revelation that the property does not have the zoning designation required for the canning and keg-producing operation for which county Economic Development Director Mayling Armijo said the economic development package was being granted.

Armijo, who presented the economic development proposal, initially told the commission that, to her knowledge, the proper zoning designations were in place. A document included in the meeting packet also asserted that the project was eligible to begin construction once the IRB package went through.

But Armijo corrected herself moments before the vote, saying she had just been informed by another county employee that the developer didn’t have the required zoning.

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A lease agreement approved by the commission as part of the package also contained the wrong property tax rate that La Orilla would have to pay, but an attorney for the county has determined that the vote approving the IRB and tax breaks doesn’t need to be redone because the item was properly noticed and the intent of the commission was clear.

The county plans to finalize the deal within the next 90 days.

County spokesman Andrew Lenderman acknowledged that the way the measure was handled was not fair to the county’s taxpayers, and he said County Manager Julie Morgas Baca is working to retool the process to eliminate these types of glitches.

“The information provided to the commission and the public simply wasn’t good enough, and the county manager is committed to making sure this never happens again,” he told the Journal. “…The county manager wants a strong process where the commission has sufficient information and where the public has good, solid information well in advance of any kind of economic development proposal.”

Working as a consultant on the La Orilla project is former Bernalillo County manager Thaddeus Lucero. Lucero served as county manager from 2003 to 2011. During most of that time, Morgas Baca worked under him as a deputy county manager.

The county’s new economic development policy requires it to post its analysis on the proposed IRB along with supporting documents on its website eight days before the commission meeting when it is scheduled to be approved. The county says it met that requirement, despite the fact that key information in the county’s analysis and in the supporting documents was wrong.

How IRBs work

IRBs are an economic development tool used to spur private investment by offering certain exemptions on such business expenses as property taxes and even taxes assessed on equipment purchases.

Flix Brewhouse at Village @ La Orilla Plaza at the corner of the Coors and La Orilla Road. (Jim Thompson/Albuquerque Journal)

While an IRB results in tax breaks and reduced borrowing costs for a particular project, the company or developer behind the project, not Bernalillo County, is responsible for paying off the bond, which is a type of loan.

The Village @ La Orilla is a shopping center whose anchor tenant is Flix Brewhouse, an eight-screen movie theater that opened in November. The developer said it was requesting the bonds for the benefit of its tenants, saying that tax savings would pass directly on to the tenants, as they would be obligated to pay the property taxes and any payment in lieu of taxes through their leases.

In the end, the county’s Economic Development Department ended up negotiating a deal through which La Orilla will receive an estimated $1.7 million exemption on real property and other taxes over 15 years. Over that same 15-year period, La Orilla will pay an estimated $1.5 million in payments in lieu of tax fees.

Armijo told commissioners that county economic development staff didn’t like that the project was primarily retail. But she said the 15-year, $4 million IRB being recommended was focused primarily on Flix Brewhouse’s manufacturing of specialty craft beers and the planned canning and kegging operation for that beer.

According to a county document, the cost of building the canning/kegging area is about $1.1 million, and when it’s completed, it will create and sustain 15 to 30 permanent jobs producing $1 million to $1.5 million in payroll and benefits.

“Beginning in late 2017, the Flix Brewhouse will begin distribution to local Albuquerque and New Mexico restaurant and liquor establishments and then plans to distribute outside of New Mexico in the future,” the county states in its executive summary of the project.

But the current zoning in place doesn’t allow for that type of operation.

“Apparently, the developer asked for a special use permit in the recent past. That special use permit was approved; however, it’s for the manufacture of beer and selling beer as retail only,” Lenderman said. “The special use permit never contemplated wholesaling and distribution, so Bernalillo County suggests to the developer that they make another special use application through our planning processes.”

2 Democrats opposed

Democrat Steven Michael Quezada, the measure’s sponsor, joined Republican Commissioners Lonnie Talbert and Johnson in voting for the IRB. Voting against were Chairwoman Debbie O’Malley and Hart Stebbins, both Democrats.

O’Malley noted that La Orilla is in her district, and she refused to sponsor the IRB proposal.

“I felt very strongly that it does not meet the intent of the IRBs …,” she said. “I agree that it is unfair to the taxpayers and similar businesses, and I’m concerned about the precedent it’s setting as well.”

Hart Stebbins argued unsuccessfully to delay action on the proposal given that commissioners weren’t provided with a corrected analysis of the proposal until less than half an hour before the meeting.

That request was voted down by a 3-2 vote after Armijo informed the commission that delaying the vote would force the developer and Economic Development Department to start the process over again.

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