Bill that would extend tax breaks, spur development in blighted areas edges closer to law

A bill that could increase investment and development activity in some of the state’s blighted areas is inching closer to becoming law, a move that has generated excitement from local developers and city leaders.

Senate Bill 58, sponsored by Sen. Heather Berghmans, D-Albuquerque, would extend the property tax exemption period for development projects in Metropolitan Redevelopment Areas, allowing such projects to receive tax breaks for up to 14 years.

The bill — backed by the city of Albuquerque, the New Mexico Association of Realtors and the Greater Albuquerque Chamber of Commerce — passed the Senate by a 27-8 vote last week and unanimously made its way through the House Commerce & Economic Development Committee on Monday.

“I think (this would be) absolutely a good thing for the city of Albuquerque, as well as the state of New Mexico,” said Josh Rogers, partner with Titan Development.

Titan Development, a New Mexico-based developer, has completed several projects in Albuquerque’s Metropolitan Redevelopment Areas, commonly referred to as MRAs. The city has 19 MRAs — blighted areas for which development incentives, including tax abatements, are available.

Tax abatements allow property taxes to be frozen at pre-development levels for certain periods, which under current law is only seven years. The bill would give agencies overseeing MRAs the ability to award developers tax abatements ranging between one and 14 years.

A longer abatement period of 14 years could be particularly beneficial to projects like affordable housing developments that require more financing and often take more than a decade to stabilize, said Metropolitan Redevelopment Agency Director Terry Brunner. Albuquerque-based affordable housing developer and nonprofit Sol Housing often deals with such projects.

“Every dollar we can save on property taxes just means more affordability for our end user,” said Sol Housing Executive Director Felipe Rael. “The seven years (have not been) as effective for our type of developments as a longer term would be because we bring in outside investors and partners to help support those affordable rents.”

Longer abatement periods have been effective in increasing development activity in other communities across the nation, Brunner said, prompting the city to help draft the proposed legislation.

“We think if we extend it up to 14 (years), we’ll get even more activity,” Brunner said.

The extension wouldn’t just impact Albuquerque. Other New Mexico cities, such as Farmington, Las Cruces and Santa Fe, also have similar agencies and designated MRAs.

A bill analysis from the Department of Finance and Administration agreed the proposed legislation would encourage development in MRAs. But it also highlighted a downside of delaying property tax revenues from these properties, potentially impacting funding for public services and infrastructure in the short term.

In Brunner’s view, local taxing authorities can either continue to receive $1,000 annual property taxes on vacant lots without this added incentive or implement the extension to increase activity on these lots and receive fewer property taxes for a period that will lead to higher revenues down the road.

“The smarter choice is to offer this incentive and potentially dramatically increase the revenues that are coming in,” Brunner said. “It’s a proven, successful program, and I think expanding it will do great things for the areas in need of redevelopment around Albuquerque.”

Rogers agreed. The developer said he already has a couple of Titan projects in mind — thus far held back by high construction costs and interest rates — that could come to fruition as a result of a potential extension.

“That 14-year period will definitely be the difference between some projects working and some projects not working,” Rogers said.

Senate Bill 58 has to appear in front of a tax committee before it heads to the House floor for a vote. Berghmans said she’s optimistic about the bill’s chances of getting past the finish line.

“I think (the chances are) very good,” Berghmans said. “We’re really doing it in partnership with the people that are running this program, and so we trust it when they say they need this flexibility.”

Kylie Garcia covers retail and real estate for the Journal. You can reach her at kgarcia@abqjournal.com.