BY MAIRE O’NEILL
Los Alamos County Council Chair Randall Ryti set the tone Tuesday evening for discussion of the County’s Regional Capital Project Fund by limiting the agenda item to just a presentation by Councilor Sean Williams as a separate presentation by Councilors David Izraelevitz and Sara Scott. Ryti asked that there be “not a lot of comments and critiques of other presentations” which led to a less contentious discussion of the issue than had been anticipated.
The fund had previously been discussed by Council. See https://losalamosreporter.com/2021/07/18/how-and-to-what-extent-can-los-alamos-county-help-other-communities-in-the-region/ . The idea of the fund is for the County to assist other governmental entities in the region financially with capital projects. Some $2 million has already been assigned to the fund.
Councilor Williams’s approach would allow for more neighboring government entities to receive funds and decide for themselves receiving monies from Los Alamos County to self-determine how the funds would be used. Councilor Izraelevitz and Scott’s proposal focused more on preserving the County’s control.
Councilor Williams said his interest in the topic is that he actually cares a great deal about helping the regional community and that it set off his analytical senses and got him digging into it.
“There’s a political undercurrent in the region that is sort of noticing that the (Los Alamos National Laboratory) creates obligations on the region in terms of infrastructure and people. But the lion’s share of the immediate financial benefits of having the Lab goes to Los Alamos County. So we in fact have every reason in the world to want to be more fair to our neighbors. In fact the current (gross receipts tax) regime is a matter of state law and could be changed, but if we don’t play nicely with our neighbors,” he said.
He said that with those stakes he had started delving into what has been going on with in the County in the past 21 years in terms of investments.
“We do have investment funds as part of the capital improvement projects and those are in fact invested in a mix of bonds and equities so this isn’t a pure low-yield bond situation. We do actually have stocks so there are returns. My first question was how much has the County got from bond funds and this of course brings us into all sorts of caveats. Whenever you see a commercial for a brokerage on TV, they tell you past returns are not indicative of future returns and that’s absolutely true. On the other hand in my experience when you’re doing projections when you’re setting up some sort of investment strategy, my preference is always to be more conservative,” Williams said.
He discussed the trend of the past 21 years and said the likelihood of the County seeing financial crashes over the next 20 years as fairly high. He noted that the County has a return status set that includes the high level of financial turmoil that allows Council to understand what it might be looking at.
“The concept we are talking about in general, is developing an investment fund, the proceeds of which could be used to aid the regional community and I laid out in my written presentation why we might want to do that. So as an investment fund, it’s important what returns we might expect to get particularly the dividents or the principal growth that’s expected to actually be the mechanism for aiding the regional community,” Williams said.
He said he took the returns on the County’s investment on the assumption that in developing another investment fund there would be a comparable investment strategy and that the next 20 years are fundamentally going to resemble the last 20 years. He looked at the looked a the rates of return and inflation and constructed a numerical model of what an investment fund might look like.
“Under most scenarios we might consider, we could extract 3.5 percent per year. If you take that as a benchmark for what could be dispersed from a fund, then you can take an easy rule of thumb which is a $30 million fund balance produces $1 million of disbursements. Obviously you can change it to have the County contribute more aggressively or have the County contribute aggressively over a longer term. You get into committing the County to annual financial contributions over a long period of time, then you get into increasingly uncertain political waters in terms of what the County’s finances will look like five years from now and also what the County Council will look like five years from now – what their stomach for contributing to this is going to look like,” Williams said.
Williams said another basic fact of the region is that the City of Espanola alone has a multi-million dollar operational shortfall in terms of the things they would like to accomplish.
“If we’re looking at $30 million to get out $1 million versus a multi-million shortfall for a single government, and we want to help the region, to me the financial picture starts to look pretty dire,” he said.
In terms of straight-up uses for funds, Williams said the initiative will never in itself support capital projects. He noted that the County spent about $6.5 million for the Leisure Lagoon next to the Aquatic Center.
“Even if we could come up with the money up front to get up to a $30 million fund balance to start making $1 million contributions, that would still tie up the fund for 6-10 years to build something like the Leisure Lagoon which is already not that big of a project relative to the needs in the surrounding communities,” Williams said.
He said while kicking that around, he believes it looks a lot more operational.
“Then we seem to get into what seemed to be the two main schools of thought about the fact that this funding really only makes sense operationally . My perspective on this is we should trust in the self-determination of our neighbors,” Williams said. “One analgous situation to this is our situation. A large portion of our revenues comes from the federal government through the taxes levied on the service contract between Triad and the Department of Energy. The federal government makes no effort to tell us what we can do with the money that comes in through those taxes.”
Williams said that with a local government you generally think about the sources of money as property tax and GRT. In that sense, he said, Council is elected by the public of Los Alamos and is similiarly entrusted with their money, but is in a unique position.
“We also get an awful lot of federal dollars, and yet the federal government doesn’t demand a seat at this table as the citizenry does, but the federal government is by and large fine with us having self-determination over the funds that we get from them,” he said. “My view is that we should extend the same courtesy to surrounding governments and to me the best approach to this whole endeavor is to invest what we can, start getting disbursements, decide who in the region is most in need of our help and just cutting them checks, just bolstering their general fund so that they can ease their own operational problems.”
Williams said part of why he started out talking about the political complexity of how GRT works with the Lab is because he feels Council needs to be quite concerned about how it looks in the situation and “what sort of image we’re giving off in the decisions we make”.
“My worry is that if we try to dictate the uses of the funds from this endeavor is that we will look paternalistic and to me that’s the wrong image to send to the surrounding governments . That’s the other reason that my preference in all of this would be for any disbursements made to be unconditional,” Williams said.
During a prepared slide presentation, Councilor Izraelevitz said the Los Alamos County does not live in a bubble.
“Fundamentally, we are kind of limited in terms of our resources to assist ourselves and to assist our main economic engine which is obviously the Los Alamos National Laboratory. First of all, we can not provide all the employment opportunities for Los Alamos residents that might be necessary to attract expecially dual-career couples where one spouse may be recruited by LANL but then there’s the famous trailing spouse where there is a question as to whether there is a fulfilling and appropriate career path for that spouse. That is a common problem, so having a healthy regional economy helps in a very concrete way to help Los Alamos itself,” Izraelevitz said.
He noted that more specifically LANL depends on out-of-county employment at this point of 50-60 percent to support the Laboratory mission.
“In a sense, the Laboratory itself cannot fulfill its own mission without a healthy economic environment whether that’s housing, whether that’e employment, whether that’s education in the surrounding region. I think we see that right now when we see the commuting, we see the pressure on Laboratory employees that went to move into Los Alamos. There’s housing pressure. Collaboration across the region improves not only the economic status of Los Alamos County but this collaboration also results in increased political support for Los Alamos County in many different ways,” he said.
Izraelevitz said at the federal level, he believes having a regional approach has helped in increasing funding for cleanup for legacy waste sites because there’s a communal regional interest in cleanup at Los Alamos.
“At the state level, a key reason why there is this reliable taxation of LANL activities is because the legislative changes that were done a few years ago were done with the support of our region and similarly more recently the Local Economic Development Act changes that we are looking forward to taking advantage of in terms of being able to apply to retail and similar issues is something that came about because of regional support,” he said.
Izraelevitz said Los Alamos County of course has the Laboratory as an economic engine but there are many regional capital needs that are unmet and could benefit from a similar reliable ongoing financial source. He said Councilor Scott and other prior Council members have had conversations with the County’s neighbors about the challenges of moving forward with some of their projects. He discussed the possible need for design studies to allow for shovel-ready projects.
“Anther thing that has been mentioned is matching funds for a state or federal project. Our surrounding region has large operational needs and maybe they’ll have the latitude to dedicate some funds for these matches. Some discussions have also led to the possibility of supporting some initial employment of short-term – getting the ball rolling on certain projects that might require staffing like economic development, grant-writing, financial support, financial expertise like what Los Alamos enjoys,” Izraelevitz said. “The question is how do we support the regional needs, which are long-term needs that require a multi-year synoptic view of what the needs of the community are, without compromising the fact that Los Alamos County has the direction and control of its own funds as does every municipality.”
He asked given that context, how do Council can “thread that needle of providing long-term ongoing regional support in the sense comparable to what Los Alamos enjoys in a way that retains our role in use of our own tax funds”.
“The idea is to commit to financing a combination of immediate funds as Councilor Williams suggests but also having a long-term fund, which Councilor Williams also discussed, and there is the issue of the return on the long-term fund, so it’s similar to the way Los Alamos County has a long-term capital fund and the state has the permanent fund what was established at the time or before New Mexico became a state, and similar kind of sovereign funds that are helping other entities,” Izraelevitz said.
He said he and Scott propose that initially the program partner with just the City of Espanola and Rio Arriba County.
“I think there are pretty obvious reasons for that initial collaboration. We would establish a memorandum of agreement with each community to understand what the relative contributions are in terms of documentation or types of projects and as we build on the success of this program, we could expand it to other communities as this program and the fund matures,” Izraelevitz said.
He said the benefits of the more integrated approach include that it is a mechanism for partnering in a way that eventually becomes self-funding and does not have the political pressures for continual funding or the uncertainties of future Los Alamos County finances.
“It becomes a sustainable funding source for regional projects, with less reliance on needed appropriations. The long-term outlook also allows us to refine the program so it becomes something that has momentum of its own and also the region can start looking at multi-year, multi-project initiatives where there might be a certain economic or other area of interest, and the region can look long-term for how to have multiple cross-study programs that might attack that problem that has longer than a single year horizon,” Izraelevitz said. “It’s a clean and clear way to grow that economic impact but it but again while preserving ultimate Los Alamos County authority and control.
He said that although Council might think about allocating a certain fixed amout a year toward the long-term fund and a certain amount toward the short-term immediate needs, almost $2 million has been accumulated over the last two years “to kind of juice up this long-term fund”.
“This is a good start and there may be circumstances where we might feel the latitude to add to this fund a one-time allocation that would not be expended immediately but would help to grow that fund more quickly,” Izraelevitz said.
He noted that the proposal is that the the New Mexico Investment is the County’s advisor for its own fund and would assist with the regional fund.
“We understand that the initial investment income would have to be augmented to provide meaningful regional support. So even though from the financial point of view, in the initial years it might be the current year appropriations that might have more financial impact in terms of contribution to a regional support, I don’t think we should underestimate the message and enduring utility of having this commitment by Los Alamos County to provide this long-term support,” Izraelevitz said.
Councilor Scott in her comments reflected on how the discussion and interest in the initiative began.
“It started with our neighbors – folks from the pueblos, municipalities around us and counties. They came to us and wanted to talk to us. They let us know how much they really appreciated past and ongoing collaborative efforts but they noticed that they had ongoing challenges related to getting traction on other types of initiatives for example working on larger things like capital projects that could have broader and longer term impacts and benefits,” she said.
Scott said after Council discussion, the decision was made to proceed with doing something different – investing and considering how to move forward with a new partnering initiative as a part of the County’s Progress Through Partnering effort.
“We understood and we do now that there’s no wholesale fix for some of the problems out there… but it’s something we can do and there’s an impact that we can have. So the timing is good for proceeding with our discussions,” she said.
Scott noted that Council has made a good start in funding the initiative.
“Additionally there’s a real need now for support for regional projects. For example, by supporting these projects through some amount of matching funds, which are being required by a number of current grant opportunities out there in the region. I really look forward to our future discussions in formulating the next level of detail for administration of this initiative and what I’d like to propose that the chair propose a working group or subquorum committee to work together and take into account all the points made tonight and come back to Council with some ideas and the next level of specificity regarding next steps and how we can proceed,” she said.