1. LEDA Town Halls Rio Rancho, Santa Fe, Farmington, Roswell and Las Cruces June 8-12, 2015  Welcome from Economic Development Secretary Jon Barela  Statutory Guidelines presented by NMEDD General Counsel Wade Jackson  LEDA FY15 Update from Secretary Barela  LEDA Guidelines & Matrix  Public Comment

2. LEDA and the Anti-Donation Clause WADE JACKSON, GENERAL COUNSEL

3. The Anti-Donation Clause Neither the state nor any county, school district or municipality, except as otherwise provided in this constitution, shall directly or indirectly lend or pledge its credit or make any donation to or in aid of any person, association or public or private corporation or in aid of any private enterprise for the construction of any railroad except as provided in Subsections A through G of this section.... N.M. Const. art IX, § 14 (emphasis added). 3

4. Except... Nothing in this section prohibits the state or a county or municipality from creating new job opportunities by providing land, buildings or infrastructure for facilities to support new or expanding businesses if this assistance is granted pursuant to general implementing legislation that is approved by a majority vote of those elected to each house of the legislature. The implementing legislation shall include adequate safeguards to protect public money or other resources used for the purposes authorized in this subsection. The implementing legislation shall further provide that: (1) each specific county or municipal project providing assistance pursuant to this subsection need not be approved by the legislature but shall be approved by the county or municipality pursuant to procedures provided in the implementing legislation; and (2) each specific state project providing assistance pursuant to this subsection shall be approved by law. N.M. Const. art IX, § 14(D) (emphasis added) 4

5. Local Economic Development Act (LEDA) The purpose of the Local Economic Development Act is to implement the provisions of the 1994 constitutional amendment to Article 9, Section 14 of the constitution of New Mexico to allow public support of economic development to foster, promote and enhance local economic development efforts while continuing to protect against the unauthorized use of public money and other public resources. Further, the purpose of that act is to allow municipalities and counties to enter into joint powers agreements to plan and support regional economic development projects, including investments in arts and cultural districts created pursuant to the Arts and Cultural District Act. N.M.S.A. 1978, § 5-10-2(B) (2007). 5

6. LEDA Is the “general implementing legislation” that allows the state or a county or municipality to contribute to economic development projects. If public assistance is granted to a project pursuant to LEDA, it is an exception to the Anti- Donation Clause. 6

7. Limitations Only the state, a county, or a municipality may contribute to a project. The contribution must create new job opportunities. The governmental entity may only provide land, buildings or infrastructure. The contribution must be for facilities to support new or expanding businesses. The assistance is granted pursuant to LEDA. N.M. Const. art IX, § 14(D). 7

8. Limitations Only the state, a county, or a municipality may contribute to a project. The contribution must create new job opportunities. The governmental entity may only provide land, buildings or infrastructure. The contribution must be for facilities to support new or expanding businesses. The assistance is granted pursuant to LEDA. N.M. Const. art IX, § 14(D). 8

9. Substantive Contribution The local or regional government shall require a substantive contribution from the qualifying entity for each economic development project. Public support provided for an economic development project shall be in exchange for a substantive contribution from the qualifying entity. The contribution shall be of value and may be paid in money, in-kind services, jobs, expanded tax base, property or other thing or service of value for the expansion of the economy. N.M.S.A. 1978, § 5-10-10(B) (2013). 9

10. Clawbacks & Security The implementing legislation shall include adequate safeguards to protect public money or other resources used for the purposes authorized in this subsection. N.M. Const. art IX, § 14(D). 10

11. Clawbacks If a qualifying entity fails to perform its substantive contribution, the local or regional government shall enforce the project participation agreement to recover that portion of the public support for which the qualifying entity failed to provide a substantive contribution. The recovery shall be proportional to the failed performance of the substantive contribution and shall take into account all previous substantive contributions for the economic development project performed by the qualifying entity, based on the terms stated in the project participation agreement. The project participation agreement for an economic development project that uses public support provided by the state to a local or regional government shall include a recapture agreement for the state. N.M.S.A. 1978, § 5-10-10(D) (2013). 11

12. Security The qualifying entity shall provide security to each local or regional government, the state or any other New Mexico governmental entity providing public support for an economic development project. The security shall secure the qualifying entity's obligations based on terms stated in the project participation agreement with the local or regional government and shall reflect the amount of public support provided to the qualifying entity and the substantive contribution expected from the qualifying entity. N.M.S.A. 1978, § 5-10-10(C) (2013). 12

13. Security The project participation agreement at a minimum shall set out... the security provided to each governmental entity that provides public support for an economic development project by the qualifying entity in the form of a lien, mortgage or other indenture and the pledge of the qualifying business’s financial or material participation and cooperation to guarantee the qualifying entity’s performance pursuant to the project participation agreement.... N.M.S.A. 1978, § 5-10-10(E)(2) (2013).

14. Limitations The implementing legislation shall further provide that: (1) Each specific county or municipal project providing assistance pursuant to this subsection need not be approved by the legislature but shall be approved by the county or municipality pursuant to procedures provided in the implementing legislation. N.M. Const. art IX, § 14(D). The local or regional government shall review each project application, and projects shall be approved by ordinance. N.M.S.A. 1978, § 5-10-9(A) (2013). 14

15. Qualifying Entity “Qualifying entity" means a corporation, limited liability company, partnership, joint venture, syndicate, association or other person that is one or a combination of two or more of the following: (1)an industry for the manufacturing, processing or assembling of agricultural or manufactured products; (2)a commercial enterprise for storing, warehousing, distributing or selling products of agriculture, mining or industry, but, other than as provided in Paragraph (5), (6) or (9) of this subsection, not including any enterprise for sale of goods or commodities at retail or for distribution to the public of electricity, gas, water or telephone or other services commonly classified as public utilities; (3)a business in which all or part of the activities of the business involves the supplying of services to the general public or to governmental agencies or to a specific industry or customer, but, other than as provided in Paragraph (5) or (9) of this subsection, not including businesses primarily engaged in the sale of goods or commodities at retail; (4)an Indian nation, tribe or pueblo or a federally chartered tribal corporation; (5)a telecommunications sales enterprise that makes the majority of its sales to persons outside New Mexico; (6)a facility for the direct sales by growers of agricultural products, commonly known as farmers' markets; (7)a business that is the developer of a metropolitan redevelopment project; (8)a cultural facility; and (9)a retail business; N.M.S.A. 1978, § 5-10-3(I) (2013). 15

16. Qualifying Entity “Cultural facility" means a facility that is owned by the state, a county, a municipality or a qualifying entity that serves the public through preserving, educating and promoting the arts and culture of a particular locale, including theaters, museums, libraries, galleries, cultural compounds, educational organizations, performing arts venues and organizations, fine arts organizations, studios and media laboratories and live-work housing facilities.” N.M.S.A. 1978, § 5-10-3(B) (2013). 16

17. Qualifying Entity “Retail business" means a business that is primarily engaged in the sale of goods or commodities at retail and that is located in a municipality with a population of ten thousand or less.” N.M.S.A. 1978, § 5-10-3(B) (2013). 17

18. Local Economic Development Act (LEDA) DISCUSSION OF POLICY GUIDELINES JON BARELA, CABINET SECRETARY

19. $37.5 Million in FY16 Largest appropriation in the history of the program More than 30 states have deal closing funds with varying levels of accountability ◦Good and bad examples as to how these funds are deployed. Economic development incentives are being scrutinized more and more Any use of public funds requires a high level of transparency At least $2.5 million allocated to rural areas in the general appropriations act 19

20. EDD LEDA Goals Private sector job creation and increased wages Community impact and support Rural and underserved areas of our state Capital investment and leverage Environmentally sustainable outcomes Financial soundness and readiness to proceed Growth of New Mexico businesses Relocate new companies to the state 20

21. Current Qualifying Entities Requires the passage of a local ordinance and an economic development plan An industry for the manufacturing, processing or assembling of agricultural or manufactured products Commercial enterprise storing, warehousing, distributing or selling products of agriculture, mining or industry, but NOT an enterprise for the sale of goods or commodities at retail A tribal entity Telecommunications enterprise with more than 50% of its sales outside the state A facility for direct sales by growers of agricultural products (farmers markets) A business that is the developer of a metropolitan redevelopment project Cultural facility Private sector jobs – including nonprofits 21

22. LEDA Funding Uses Purchase, lease, grant, construction, reconstruction, improvement or other acquisition or conveyance of land, buildings or other infrastructure Public works/infrastructure improvement essential to the location or expansion of a qualifying entity Professional services necessary to implement a plan or project Direct loans or grants for land, buildings or infrastructure Technical assistance to cultural facilities Loan guarantees securing the cost of land, buildings or infrastructure in an amount not to exceed the revenue derived from LOGRT Purchase of land for a publicly held industrial park or a publicly-owned cultural facility; and the construction of a building for use by a qualifying entity 22

23. FY15 Appropriation = $15 Million Neptune Aviation, Alamogordo New Mexico Poles, Alamogordo Santa Fe Brewing, Santa Fe Franco Whole Foods, Las Cruces CertoPlast, Las Cruces Preferred Produce, Deming Lea, Silco & Lyceum Theaters Lovington, Silver City & Clovis S & P Data, Rio Rancho Strategic Aerospace, Roswell NGL Partners, Cibola County Google, Moriarty PreCheck, Alamogordo Accurate Machine & Tool, Los Lunas Flagship Foods, Bernalillo County NM Transload, Bernalillo County New Mexico Foods, Bernalillo County Caanes, Albuquerque Oro Grande, Otero County MCS, Santa Teresa Comcast, Albuquerque 23

24. Best & Worst Practices Nationally BEST: Clawback provisions Objective scoring tool Financial due diligence to minimize risk Permanent jobs at good wages Specific thresholds for job creation Commitment of local government Fully-funded project, shovel ready Audit or compliance verification process WORST: Incentivizing low-wage jobs and questionable projects Missing compliance process Weak awards agreements Lack of financial due diligence Non-disclosure of recipients, amounts, selection process Lack of documentation 24

25. LEDA Metrics Performance measures are developed annually in cooperation with the Legislative Finance Committee, the Department of Finance & Administration & EDD. Measures are submitted with the agency budget request and strategic plan each year on September 1 st. Two LEDA performance measures in FY16: Private sector dollars leveraged by each LEDA dollar – 5 to 1 Number of jobs created through the use of LEDA funds – 1,500 25

26. Proposed LEDA Guidelines Must create permanent FTEs (minimum 32 hours per week) Goal: 10 to 1 ratio of private investment to LEDA funds (metric is 5:1) Economic base business such as manufacturing, warehousing, exported services EDD target industry clusters: aerospace & defense; advanced manufacturing; back office & technical support; digital & emerging media; energy; food processing; and logistics & transportation No retail projects with state funds Must be demonstrated competition for the project from out of state No government facilities or government jobs Due diligence process and minimal risk to state Project must be fully-funded and shovel ready Equal consideration will be given to competing businesses Project’s environmental footprint will be considered, including priorities Tiered thresholds based on urban, rural or economically-distressed (see map, #10) Competitive wages that support New Mexico families (see chart, #11) 26

27. Urban, Rural and Economicall y-Distressed Minimum job creation requirements, wage thresholds, and the ratio of private sector investment to public funds are typically determined by the location of the project. Economically-distressed areas are usually those with high unemployment, a higher rate of poverty, and lower median income levels. 27

28. Average Weekly Wages by City, County and Industry Sector LOCATION AVERAGE WEEKLY WAGE BY INDUSTRY SECTOR AVERAGE WEEKLY WAGE FOR ALL INDUSTRY SECTORS (PRIVATE ONLY) Manufucturing Transportation & WarehousingInformationFinance & Insurance Professional & Technical Services Bernalillo$939$800$919$1,074$1,430$772 Catron$366****$384 Chaves$802$752$678$757$1,031$609 Cibola$578$1,128$575$786$889$668 Colfax$611$1,014$552$644$624$454 Curry$839$1,127$640$762$857$634 De Baca*$0***$512 Dona Ana$814$639$650$773$987$578 Eddy$1,260$1,133$795$832$1,077$999 Grant$437$539$1,096$593$561$702 Guadalupe*$526*$555*$441 Harding*$0 * $791 Hidalgo*$1,042$504*$561$411 Lea$1,669$1,370$809$954$923$1,023 Lincoln$577$415$467$717$913$511 Los Alamos$745*$452$1,025*$1,427 Luna$503$771*$616$1,250$469 McKinley$1,021$878$550$556$748$500 Mora*$513*$403$0$489 Otero$552$576$687$673$912$610 Quay$630$673$840$695$595$490 Rio Arriba$527$496$348$689$1,251$573 Roosevelt$676$769$634$711$736$525 Sandoval$1,854$803$913$830$1,101$816 San Juan$845$955$733$710$835$880 San Miguel$413$406$701$666$651$456 Santa Fe$701$734$890$1,361$1,222$721 Sierra**$496$566$617$457 Socorro$844$909$538$584$1,260$569 Taos$484$543$727$715$731$534 Torrance$1,078$513$608$685$764$640 Union**$805$784$586$535 Valencia$824$737$624$693$600$531 *Not disclosed Source: Quarterly Census of Employment & Wages, 3rd Quarter 2014, New Mexico Department of Workforce Solutions Wage thresholds are typically based on prevailing wages in the project location Incentives should not be used for low-wage jobs. Publishing wage thresholds contributes to the goal of transparency and full- disclosure. Wages vary significantly across industries and locations. These are actual average weekly wages collected and published by the New Mexico Department of Workforce Solutions. 28

29. New Mexico MainStreet/LEDA Projects In addition to existing LEDA requirements, project must be within currently certified MS program or an ACD program; the project must be in the adopted District Master/MRA/Cultural Economic Development Plan for joint public/private partnership in project; and must have a letter or resolution of support from governing body Examples of Eligible Projects: Public infrastructure in the district, placemaking, pedestrian amenities Adaptive reuse of large buildings to housing Business/retail incubators or Mercados Shared work spaces or entrepreneur development centers Commercial kitchens Historic theaters, plazas, cultural corridors, museums or rail road buildings 29

30. Local Economic Development Act (LEDA) JUAN TORRES, FINANCE DEVELOPMENT

31. New Mexico Economic Development Department New Mexico Film Office Office of Business Advocacy Office of International Trade Office of Science and Technology 2

32. New Mexico Economic Development Department Business Retention and Expansion Program Job Training Incentive Program ISO 9000 Program Finance Development Programs 3

33. New Mexico Economic Development Department Administratively attached Agencies: Office of Military Base Planning and Support New Mexico Border Authority New Mexico Economic Development Partnership 4

34. New Mexico Constitution Anti-Donation Clause: Does not allow the use of public funds for gain by Private Entities Was amended to allow the State Economic Development Department to invest directly in Economic Development Projects that provide for a significant public benefit Local Economic Development Act (LEDA) allows the state to provide funding to a community who has passed LEDA in support of an Economic Development project 34

35. What is LEDA Capital Outlay funding?  Funds are Appropriated by New Mexico Legislature and signed into law by the Governor for the purpose of assisting Economic Development Projects.  Funds are made available to a community for use by a Qualifying Entity (QE) as defined in statute, for use in an Economic Development Project that has a significant public benefit to the community. 35

36. Qualified Entity Manufacturer Economic Base Service Industry Cultural Facilities Other 36

37. LEDA CO: Request for Funding Communities that have passed their Local Economic Development Act and are able to act as a fiscal agent on behalf of the project may formally request funding for LEDA CO Economic Development Projects by outlining the project scope of work and significant public benefit in a letter to the Secretary of Economic Development. Fund use is limited to the areas of Land, Building and Infrastructure. 37

38. LEDA CO: Funding Decisions NMEDD Secretary evaluates project funding requests on a number of criteria including: How the Project aligns with the community passed LEDA Total community benefit, including permanent high-paying jobs in targeted industries, local economic conditions, overall community strategic goals Established best practices guidelines Financial viability of the project, readiness to proceed and financial need 38

39. LEDA CO: Funding Decisions Additional consideration will be given to projects that: Are located in Rural and Frontier communities Communities that are in Economically Distressed areas Communities that have experienced a significant natural or man-made disaster Communities who have lost a major industry or employer Final funding decisions will be made by the Secretary in consultation with the Governor. 39

40. LEDA CO: Process Once a project has been selected for funding, a Notice of Funding Allocation (NOFA) is sent to the community outlining the process. At this point the Qualifying Entity is required to submit a LEDA CO Application which includes a number of supporting documents such as: financial statements, corporate information, information authorization release affidavit, proof of community passed LEDA Ordinance and community compliance with Executive Order on grant audit requirements. 40

41. LEDA CO: Funding Timeframe The length of time it takes to compile the requested documents will be determined by the project QE & Community. Funds transfer to a community require governing body approval of: Project Participation Agreement (PPA) between the QE & the Community; Intergovernmental Agreement (IGA) between the governing body/fiscal agent and the NMEDD; Security Document which secures the funds invested against non-performance and which may be “clawed back” in the event of such for the life of the project; A LEDA Ordinance which outlines the scope of work, including job creation information and capital investment made into the project. 41

42. Funds Disbursement Funding is on a reimbursement basis. Once the process is completed, funds are transferred to the community but may not be disbursed until the Qualified Entity submitted invoices are approved by NMEDD. 42

43. LEDA CO: Compliance QE are required to submit Department of Labor form ES 903A to report on job creation for the life of the project. The Fiscal Agent will submit semi-annual reports to NMEDD due by the end of month May and the end of the month of November outlining project performance and community impact. 43

44. Questions? Juan Torres Finance Development New Mexico Economic Development Department 505-827-0238 Juan.Torres@state.nm.us 44