SANTA FE – The operators of the El Castillo retirement community have agreed to make additional “payments in lieu of taxes,” or PILOTs, to offset property tax breaks El Castillo would receive if Santa Fe city government issues $80 million in tax-free industrial revenue bonds for a new facility.
El Castillo initially agreed to pay the equivalent of the annual property taxes due to the Santa Fe Public Schools and to the Santa Fe Community College during the 30-year-life of the bond issue. Under the IRB financing arrangement, recipients legally aren’t responsible for the property taxes on the financed project. Also, investors don’t pay state or federal income taxes on the bond interest they earn.
Santa Fe Mayor Alan Webber said Monday that El Castillo last week committed to making PILOT payments to the other government recipients of property tax revenue, but starting in year six of the bond issue. David Buchholtz, El Castillo’s attorney, later confirmed the arrangement.
Santa Fe County government, along with the public schools, are the biggest benefactors of property taxes. Along with the community college, the city and state governments also take in property tax revenue.
County Manager Katherine Miller recently sent a letter to city officials raising questions about the proposed El Castillo bond issue, saying it would cost the county $210,000 a year.
She also questioned whether the bond issue would give El Castillo an unfair advantage in the local senior housing market and whether El Castillo needs public help to finance its planned 68-unit expansion at Paseo de Peralta and Old Taos Highway downtown. She wrote that El Castillo appears to be a “well-capitalized entity” that could finance expansion without a government subsidy in the form of tax abatements.
Webber Monday called issues raised by Miller “red herrings” not relevant to the bond financing and said Santa Fe in the past had “gone to sleep” on using IRBs to spur economic development, while the financing method has been well-used by other cities. The Santa Fe City Council recently approved $17 million in IRBs for a high-pressure food processing plant in mid-town expected to create morethan 160 jobs.
County spokeswoman Carmelina Hart said Monday the additional PILOT payments that El Castillo has agreed to make are “a step in the right direction.” She also said the County Commission is scheduled to discuss the proposed IRB at a meeting today and may make a recommendation to the city.