Incentives Work

New Mexico Business Journal, Sept, 2001 by Lyn Kidder

Alamogordo residents are taxing themselves for the sake of economic development-and the payoff is looking good.

FOR ABOUT $20 A YEAR EACH, Alamogordo residents will reap the benefits of an estimated $450,000 in economic development funds. After a similar measure was defeated in March 1999, voters passed a 1/8 of one percent option gross receipts tax last August, and the resulting revenue is already bearing fruit--or rather, flowers.

Alamogordo was selected by 1-800 Flowers.com as the site for a new call center. The city was able to offer the on-line flower and gift company a five year $1.25 million incentive package.

"This will come in the form of rent or a building purchase subsidy," Ed Carr, executive director of the Alamogordo Chamber of Commerce, said. The company will hire an estimated 450, and the incentive agreement is tied to the number of jobs that are created. "There will be penalties if they don't meet the goal, and incentives if they go over," he added.

"To determine whether it makes sense for us to offer incentives, we look at how much the company will spend in construction costs, the goods and services that the company will purchase, and the salaries they will pay," he said. "We figure that 60 per cent of a worker's salary comes back to the community in some taxable form, whether it's groceries or mortgage."

The company will also receive $940,000 from New Mexico's Industrial Development Training Program as reimbursement for employee training, according to Larry Shulse, president of the Otero County Economic Development Council (OCEDC).

Contracts are currently being negotiated to purchase and renovate a former supermarket. The call center is projected to be operating by October.

"They're a good company," Carr said. "They pay a decent wage-$7 per hour-and they offer medical coverage and a retirement plan. We're looking forward to having them here."

Last year, Stream International, an online technical support company, considered opening a call center in Alamogordo.

"At that point, we had no money set aside for economic incentives," Carr said. "We planned to use money from the city's general fund."

The company held a job fair and more than 1,000 prospective employees showed up. Although Stream International opted to expand their Silver City facility rather than open a new call center, Carr considers it a learning experience.

"We know what the community has to offer much better now," he said. "I can confidently tell a company that we have 1,000 people who will apply for a job."

Last August, a new outbound call center for Roper Starch Worldwide Inc. began operation. The New York-based research and polling company currently has 125 part-time employees, but that can increase to 200 depending on demand, according to operations manager Jim McGowan.

The 75-year-old company conducts market research for private companies and government agencies.

"The company picked Alamogordo because of the untapped work force that the university and the base provide," McGowan said. "Call centers like to expand to different time zones. Being in the Mountain Time Zone, we can take advantage of the two-hour difference with the East Coast."

Because the company hires only part-time workers, they were ineligible for economic incentives from the city, according to Carr.

The gross receipts revenue is earmarked for another economic development endeavor that will take advantage of the nearby U.S.-Mexican border. Carr recently attended North American Free Trade Agreement (NAFTA) seminars, and believes that Otero County is in a good position to benefit.

"With the completion of four lanes on Highway 54, we feel we're well positioned to trade with Juarez," Carr said. One possibility is to attract companies that use the maquiladora manufacturing model, with plants on both sides of the border. Parts are manufactured and warehoused in the U.S. and finished products are assembled in Mexico. Carr said that many parts are now produced in the Midwest, and that locating a plant in Otero County would reduce shipping costs.

Alamogordo will spend $50,000 of its options gross receipts tax in a marketing effort to recruit manufacturing facilities to the area.

"Now we have money to provide incentives, we'll be working to attract manufacturing industry," Shulse said. "We have industrial work force here, including workers with aerospace technology."

Since 1972, Presto Products Manufacturing Company has produced small kitchen appliances like electric frying pans, griddles and deep fryers. The company is a subsidiary of National Presto Industries, which reported net sales of more than $116 million in 2000. The Alamogordo facility employs 310.

Last August, 89 workers lost their jobs when White Sands Forest Products, Inc. closed. The Mescalero Apache Tribe bought the mill in April, and it now produces finished lumber for construction as well as a number of byproducts, according to Jim Bridge, general manager.

"The larger trees are made into 2X4 studs and poles for fence posts and vigas," Bridge said. "The bark is packaged for landscaping and the shavings are sold for animal bedding. We sell a lot of that to Ruidoso Downs Race Track." Alamogordo's climate is an advantage-the lumber dries without a kiln. The mill currently employs 28, and Bridge hopes to expand to 70 or 80.