New Mexico needs jobs – and lots of them. The challenge is to develop new opportunities without hurting or destroying existing businesses in the state.
Free enterprise and healthy competition are good for everyone. It makes companies stronger and provides better opportunities for employees. State subsidized competition, on the other hand, is detrimental all the way around and makes the state less attractive as a place to do business.
Why? Because if the state will get involved in subsidizing one company over another (choosing a company to succeed through state handouts and one that may ultimately be driven out of the state — or worse — to failure), those conditions will eventually have a detrimental effect on the state by potentially creating a disincentive for companies to move here and invest their own money. Plus, it could be YOU, YOUR Company, or YOUR employer that is next on the chopping block.
According to the Las Cruces Bulletin (6/13/14), the state and Dona Ana County are currently courting CN Wire, a Turkish owned copper wire manufacturer, to set up shop in Santa Teresa. The Doña Ana County Commission has approved $70 million in taxable revenue bonds. The New Mexico Board of Finance must first rule on whether it would result in unfair competition. If the ordinance becomes law, CN would only pay 25 percent of the normal amount of property taxes.
Doña Ana County residents and businesses, brace yourself for yet another taxable event for which you will ultimately be responsible. If approved, you're going to pay . . .
In addition to the bond issue, Job Training Incentive Program (JTIP) has awarded a grant of $537,626 and there will be Local Economic Development Act (LEDA) funds available as well. And just to sweeten the deal, CN's operating equipment will be exempt from gross receipts taxes.
So what's the problem with providing such great incentives to a company that promises to create 195 jobs in three years? There is an existing company, International Wire Group (IWG), in the same business located within one mile of CN's proposed site. IWG has never received state incentives or subsidies of any kind.
In fact, IWG purchased a failing business in 2011, saving at least 20 jobs. Subsequent to the purchase, IWG invested $4 million in capital improvements and grew the business to 65 employees.
NM statute 4-59-15 states that if a company maintains that a "proposed project would directly and substantially compete with such an existing business or enterprise [ ] the bonds in connection with such project shall not be issued until the state board of finance has determined that the proposed project will not directly or substantially compete with an existing business or enterprise located within the boundaries of the county or within five miles of the proposed project"
So on the subject of unfair competition ... CN can effectively drive prices down while still making a profit because they will be operating with only a fraction of the taxes and operational costs that would be incurred without state subsidies. Margins are slim in copper wire manufacturing and IWG must cover its costs. Will IWG be able to stay in business with this type of state-subsidized competition?
Free enterprise and healthy competition are good for everyone. Subsidizing a new company to the detriment of an existing one is neither free enterprise nor does it provide for healthy competition. Government should provide equal business opportunities for growth and development. Beyond that, it needs to get out of the way and stop choosing winners and losers. Period.