Boiling Frogs-Intel vs. the Village

"Boiling Frogs - Intel vs. the Village" recounts the story of Intel Rio Rancho's impact on the air and water in the Village of Corrales from the mid-1980s to the present day. Updates to this ongoing saga will be posted here.

Wednesday, November 30, 2011


From the Sandoval Signpost December 2011

—Barbara Rockwell

Many people think of Intel as the ‘crown jewel’ of New Mexico’s economy. Its apologists would argue that Intel provides a lot of jobs, but these jobs have come at a great price for the people of Sandoval County.

The first industrial revenue bond (IRB) for $2 billion was issued in 1993. It was a hot night in August, and the hearing in the County Commission meeting room was over in forty minutes. The bond issue would be purchased by an Intel subsidiary, thus saving Intel almost a half-billion in taxes. Not allowed to speak that night was Eric Schmieder, an economist who analyzed the bond deal for Southwest Organizing Project. He complained the next day in a letter to Commission Chair Joe Lang that “the vote to approve the Intel package was rushed and negligent…with no benefit analysis on the County’s part!” Schmieder noted that the County was committed to property tax abatement for thirty years that would cost the County $300 million. The second tax subsidy was the avoidance of the New Mexico Gross Receipts Tax, a break amounting to another $50 million from this one bond issue, which brought up another point from Schmieder: “The 30-year lease requires Sandoval County to issue bonds whenever it needs more funds, sort of a Bond Charge Card, with further, clear provisions in the lease for Intel to sue to assure County compliance with the terms.” The bond also gave a tax credit of one million dollars for job training.

Intel was back in 1995, this time with another application for an $8 billion IRB from Sandoval County, breaking the record of its previous $2 billion bond, the largest in the history of America. How ironic that one of the poorest counties in the country, Sandoval County, would grant IRBs to one of the wealthiest corporations in the world. This bond issue received all the same tax breaks as the first one, amounting to $480 million. This time around, some Santa Fe lawmakers questioned the deal, thinking the tax breaks had gotten out of hand. Their concern was that the $480 million in tax breaks over thirty years would deprive Rio Rancho of the tax base it should get from Intel to build schools, roads, and other infrastructure. Intel argues that New Mexico was competing against countries that completely subsidize their high-tech companies. Nevertheless, no doubt feeling the pressure, Intel responded by giving $28.5 million for the construction of a new high school in Rio Rancho. The offer was worth about one one-hundredth of the real value of the Intel obligation, and Intel knew it. Some state lawmakers still thought it was a “real bad deal.” The Wall Street Journal quoted these lawmakers in a front-page article that ran under the headline: “Growing Pains—Rio Rancho Wooed Industry and Got It, Plus Financial Woes.” The Sandoval County Commission held what was supposed to be three public hearings on the bond issue in mid-August. They shut it down after the first meeting, standing-room only, at the Courthouse. Presentation was done by First Albany Corp, a New York-based firm that was there to demonstrate the cost-benefit analysis of the bond. Their dog and pony show was ludicrous with slides full of spelling and math errors that even us local yokels could see right through. According to their figures, the State of New Mexico would gain about $165 million over ten years from the bond. However, even factoring in the one thousand jobs and the $30 million ‘donation’ for the high school, Sandoval County would lose $27 million in taxes over the same ten-year period. Intel was the one who would really make out with $455 million more in tax breaks over the next ten years, in addition to the $114 million to $250 million (depending on whose figures you used) in tax breaks from the first bond. Locals asked impertinent questions like “why does it take $455 million to generate 1,000 new jobs? That’s $455,000 per job!” a priest from Bernalillo, Father Bill, asked why this rich corporation was getting big tax breaks when his parishioners were struggling to survive. One viejo called the high school gift a “bribe.”

The $8 billion IRB went through in September. Economists from UNM had written to Sandoval County “It is our professional opinion that the First Albany report is so seriously flawed that it cannot provide a reasonable basis for decision-making.”

In July 2004, a study came out from the NM Bureau of Business and Economic Research that showed the 1995 IRB cost Sandoval County $15 million in 2002 alone. That comes out to $225 million over the fifteen-year life of the $8 billion bond, almost ten times the $27 million net loss originally predicted.

The very next month, the Sandoval County Commission announced a $16 billion IRB for Intel, the largest ever (again) in US history. The deal was made behind closed doors in violation of the State’s Open Meetings Act with Daymon Ely as the County’s chief negotiator. The IRB was replete with all the usual tax breaks, estimated at $2 billion. Intel agreed to pay $95 million in “supplemental lease payments” during the first fifteen years of the thirty-year life of the bonds. Ely wanted to use $16 million of that amount to purchase a locomotive and cars for what would become the RailRunner. Ely claimed to be “unaware” of the financial impact that the tax breaks would have on Sandoval County, only that his pet project for the state would benefit.

Now it is 2011, and Intel Rio Rancho, for the first time in its thirty year history in New Mexico, will pay property taxes of $728,165 on property assessed at $38.2 million. They still don’t pay one thin dime in any other tax, including gross receipts—one we all pay. It will be interesting to see if Intel continues with its ‘charitable’ donations, the largesse it has showered on libraries, youth centers, and other community causes over the years. In 1997, the mayor of Belen, Costa Rica, visited Corrales and told us that Intel moved into his town with all the usual tax breaks from the federal government, but Belen imposed its own municipal tax. Intel took the city to court and lost. Intel responded by stopping all donations to local charitable causes. Mayor Alvarado said, “I have concluded that the principle reason Intel is so opposed to paying taxes is that they want to donate to specific projects that earn them good will. They want the appearance of being very generous, but without the obligation.”

One wonders, will that be Intel’s response in Sandoval County now that it has to pony up some property tax?

Barbara Rockwell is the author of “Boiling Frogs: Intel vs. the Village,” a fully-documented report on the environmental struggle between Corrales citizens and Intel. Available at Placitas Community Library.