Sunday, January 20, 2013

New Mexico Windows & the New Mexico Legislature

About This Post

This is another MeanMesa post in the series about job creation and economy growth in New Mexico.  Some of the most recent previous posts on this subject can be found at these MeanMesa links:
It is also important to note that this post is actually intended to accomplish a few things.  Most importantly, it presents an action plan which it would be nice for the Round House to consider.  If, as a New Mexican, you think that some or all of the proposals might actually help the State's economy, take a minute and email a note to Santa Fe.

Second, it contains the rationale behind the MeanMesa proposal to get New Mexico rental owners to participate in the window renovation plan. This part of MeanMesa's proposal is an important one.  New Mexicans with higher incomes are doing well enough, but the "poverty part" of being the "poorest state in the union" extends for miles in every direction from the gated communities -- like tattered wall paper.

State legislatures in more prosperous places have to deal with "pockets" of poverty.  New Mexico has "pockets" where there isn't poverty.

One would assume that Santa Fe is eagerly awaiting some sort of plan to address this!  This post runs through exactly what the role of our State government would be if they really wanted to help.

 A Quick Look At Where We Are

The MeanMesa posting first listed among the links above contains a few direct quotes from the Governor.

Gov. Susana Martinez must have been listening. While addressing local chambers of commerce on Jan. 3, she rolled out her New Century Jobs Agenda that included what has been called a “single sales factor” that would only tax products and services sold within the state. And she outlined a plan to reduce corporate income taxes from 7.6 percent to 4.9 percent for companies generating more than $1 million in net income.

and there was this,

Other aspects of the governor’s jobs agenda include: $10 million to fund the Local Economic Development Act for recruiting companies to the state; $4.75 million for hiring and training new employees through the Job Training Incentive Program; refining the capital outlay process for state infrastructure projects; passage of an “informed consent law” for spacecraft manufacturers and supplies; and increased investment in the New Mexico MainStreet program to preserve downtown historical and cultural locations.

These are "schemes."

Just the kind of "supply side schemes" that ALEC really likes.  The kind of "schemes" ALEC doesn't mind "paying" for, either.

The "supply side" aspect is worth just a little more inspection here.  What the Governor has proposed with the one sided corporate income tax exposure "scheme," has everything to do with making it even cheaper and even more profitable for companies which re-locate to New Mexico. 

Ask yourself.  What does policy like this do for the entire State of New Mexico?  The answer is: "next to nothing" compared to the advantages it carves out for the businesses that won't have to pay State income tax on almost any of what they produce.

The twenty or forty jobs created when one of these re-locations takes place will  probably employ New Mexicans who already had jobs.  Further, these jobs will last until the next state somewhere else offers a larger bribe to re-locate there.

There are two million people living here, and lots of them need jobs.  It's almost inconceivable that schemes like this can even hit the table in our State legislature.  It's like no one in the Round House can so much as think of anything else.

In the first quote, the Governor wants to reduce taxes by excluding any sales made to buyers outside of the state from New Mexico State [Corporate] income taxes.  But wait.  The things which are being produced in New Mexico can, basically, not be sold in New Mexico anyway  -- the poorest state in the union -- because New Mexicans don't have the discretionary wealth to buy expensive German solar panels, space trips, private jets or pricey computer gizmos.

Then in her second quote, the Governor is trotting out another $20 + Mn for "job training" and "bribing" out of state businesses to relocate here.  Maybe ideas like this would have sounded a little better if we had not already practically bankrupted ourselves trying them over and over already.

$20 Mn worth of State of New Mexico funding -- or even loan guarantees -- would pay for a pilot plant to produce windows.

Does this mean that we have to just keep trying these schemes as long as there is a dime left in the Treasury for another "tax expenditure"  financed incentive?  We really need to move on from the idea that New Mexico is at the brink of becoming Silicon Valley if we just throw enough State money at the transformation.

From the previous post on this subject, we can look again at exactly what is being proposed here.

The MeanMesa Windows Modernization Proposal

The over all goal of the proposal is to replace the inefficient casement windows which saturate every corner of our State with very affordable, modern insulated windows.  The replacement windows would be manufactured inside New Mexico.  The financing necessary for the purchase the new windows would be provided by State of New Mexico programs.  The installation labor would be performed exclusively by New Mexicans, trained, bonded and certified to do this work.  Both home owners and renters -- everyone who pays a monthly heating bill -- would benefit from the program.

Of course, that "benefit" that we're looking for here is an increase in discretionary wealth, that is, more money in New Mexican pockets to buy things.  This is absolutely the founding principle of what we have described as a demand economy.  When the discretionary wealth increases, well, " floats all boats."

So, where do we start?

Because it's very unlikely that the State legislature would be interested in managing something like this in the first place, the job will almost certainly be  handed off to a State "enterprise" management commission responsible for setting it, starting the process and running it once it starts.  The legislature might be willing to be responsible for some kind of "over sight" so long as the accounts arrive in Santa Fe in a nice, clean package.

We'll need to match up the actual work with folks who are competent to do it.  This is not a theoretical proposal.  With respect to schedule, this same Governor should appear on local television still in this term -- hopefully her last -- with the first window emerging from the new factory in New Mexico.

The Legislature's Part

 Of course most New Mexicans reading this post will assume that our State Legislature will do nothing.  The Governor will be too busy chasing after a electronic umbrella maker who is looking for a totally unregulated "profit paradise" where wages are as low as China, relocation incentives are high and folks will "look the other way" while his plant's effluent dribbles into the river.

All this brings up what might be one of the first things on the Legislature's "to do" list.

The State needs to establish a state "enterprise commission" to not only watch out for our state by watching over some of the relocated businesses which are already here, but to protect new enterprises such as the windows project from New Mexico's "natural predators" which have traditionally been able to crush dreams just as handily as, say, the US Senate.

1. Drunk, corrupt or incompetent locals who have no interest in an enterprise's success, and see it only as an opportunity for mismanagement, misdirection and theft.

2.  State Legislative ideologues -- such as ALEC "cross interest" politicians -- who will eagerly wreck even a sunny afternoon if it means a political advantage.

3. Ruthless out of state competitors who are equally eager to lay waste to an enterprise in New Mexico, take whatever loot breaks away easily -- usually complicit with someone in Santa Fe -- and leave with the cash.

It's time for New Mexico to quit being so surprised when this happens here, over and over.  Realistically planning for it can make all the difference in the world.

The necessity of improving the individual economic status of individual New Mexicans is not theoretical.  Sure, we've tried some things that didn't particularly work in the past, but that is no reason to allow the prospects for the task to grow an exaggerated difficulty or even slip into the realm of "impossibilities."

Let's look at the chart of legislative activities.

1.  Conduct the preliminary research for the pilot program:
  • plant site options
  • window design
  • area for pilot program window installation
  • financing criteria
  • program cost estimates

Site options:  The legislature has already constructed and paid for a fair number of unused buildings across the state.  Commercial real estate vacancies in Albuquerque -- including a few dreams about the use of the old rail way terminal -- are at an all time high in Albuquerque.  MeanMesa thinks the pilot program should probably go in somewhere which currently has a crippling unemployment problem.  There's no reason to wait to attack the problem.

Window design:  Low cost, high efficiency, cheap installation are all high priorities.  A window factory is nothing remotely similar to a computer chip manufacturing facility.  The window design could provide a good engineering contest for the technical universities the State supports.  The prize could be a scholarship.

[MeanMesa will have more designs to be engineered -- coming in later posts.]

Pilot Program Installation:  The pilot program is just that.  By limiting the region of the state which will receive the first windows, much of the transportation and installation labor issues will be more manageable. The experience derived from the pilot program's first installation phase will be invaluable.

Financing Offer: The  State's "enterprise management" entity can respond to unanticipated difficulties, mistakes and innovation advantages.  The pilot program installation will also be a good opportunity to work out the details of credit qualification, financing and other, business issues.

Cost Estimates:  Of course there will be a projected cost estimate for the pilot project along with a preliminary estimates for the cost of the project once it enters its matured state. The costs for manufacturing windows can be fairly well contained, but installation costs may be another case.

In any event, the actual costs for the pilot project should provide good data for the overall cost of the program once it is fully under way.

2. Write legislation to start the windows pilot project and fund it

Santa Fe wrote legislation to fund the New Mexico Space Port for $210 Mn.  That "enterprise" is now teetering at the edge of becoming the equivalent of a New Mexico Afghanistan.  The local news last night reported that the subsidized value of the facility investment which could be recouped in case of the project's failure would be worth around $3 Mn if the current trends continue.

With this as a preface, MeanMesa will be interested in hearing Santa Fe's arguments that the windows pilot project -- or at the very least, something similar to it -- is not needed, too expensive, too complicated or simply can't be attempted.

The space port provides around 60 jobs. Most of these employees would have been employed even if the space port had never been built. Even in the reduced scope of the windows pilot project there would be hundreds of jobs.  Many of these employees would have been unemployed without the windows project employment.

The manufacturing and installation work of the windows project can be located where the jobs are needed most and where the windows are needed most.

3. Set up a bi-partisan oversight committee to monitor project schedule and costs

First, there are no parts of the windows proposal which cannot be entirely transparent.  There are no convenient niches for technical secrets, financing secrets or political secrets.

Second, the folks in the Round House have to actually be capable of managing something.  This is not an unfair expectation.  MeanMesa doesn't even see the possible necessity of consultants for this mission.  New Mexicans have not had the best results from legislation which depended on consultant services.  Public service responsibilities and loyalty seem to vaporize somewhere "down the hall" in the consulting company offices.

4. Establish pilot program landmarks to verify project progress
5. Establish regular reports to New Mexicans about the project's progress
6. Set up an educational program to completely explain the project to citizens

Program transparency with respect to both State policy and public interest needs a bit of rethinking here in New Mexico. In the past a theoretical trail of data which could be followed to finally reveal the facts has served as "transparency."  The predictable result is that common citizens find that they know less and less of the actual process under way in Santa Fe.

The results bring three dilemmas.  First, the frustration with the difficulty of establishing good information about the actions of State government leads to a stoic cynicism.  New Mexicans simply, and perhaps even somewhat understandably, "shut down."  What goes on in Santa Fe stays in Santa Fe.

Second, as citizen interest diminishes, citizen over sight also suffers.  This presents the less than entirely honorable folks in the State government with the cover needed for all sorts of corruption.  This claim could be more easily discharged as a simple exaggeration if we had not seen so many repeated examples.

Third, even when the efforts made in Santa Fe to govern the state fail miserably, the legitimate of outrage among voters has long since been exhausted.  The Round House should be filled with a continuing presence of voter outrage, but the voters have, instead, adopted a level of tacit acceptance.

The missing idea is not all that complicated.  Citizen interest must be courted.  The information to form a solid opinion about State policy still needs to be "marketed."  MeanMesa isn't entirely sure whether or not this is a foundational under pinning of the democracy idea, but, facing facts, it seems necessary.

Part of the legislative role in the windows project is to not only present the entire program to New Mexicans, but to also keep everyone informed along the way.  As mentioned before, there is nothing about this proposal which can be served by secrecy or reasonably be obscured by being deemed as "too sophisticated" for general consumption.

7. Legislative incentives for land lords to participate in the program

There are, to make things simple, three basic groups of New Mexicans as we consider the windows project.

a.] Home owners who already have installed high end thermal windows
b.] Home owners  who are currently unable to afford to install high end thermal windows
c.] Renters living in rental units which need efficient windows but with land lords who have no incentive to install them

While both the second and third groups comprise the target market locations for the project, the "incentive question" really affects the third group.  In terms of spurring growth in the state economy by increasing discretionary wealth by lowering non-discretionary spending on home heating, this third group is what we can call a "gold mine."

Any reductions in heating bills will immediately leave more money in the pockets of this group -- money which we know will be spent.  When this happens, demand increases.  We already know that the jobs the windows project will introduce will help the economy, but when renters have lower heating bills, that will increase the economy even more. When demand increases, the economy grows.

We clearly need to "break the habit" of distributing thermal efficiency subsidies exclusively to home owners.  The real pay back is waiting when we can offer these advantages to renters.

Let's just allow this narrative to enter the realm of imagination.  Of course, there's legislative work to do, but instead of threading through all of that, we can envision what things would be like after it was done.

If you are a land lord, you would have hired a thermal imaging service to make winter time infra red pictures of the apartments you want to rent.  These would provide the information needed to calculate the over all "R" factor -- the apartment's thermal efficiency based on the heat loss shown in the survey photograph.

When you show your apartment to a potential renter, you could then tell that renter what this "R" rating was.  While the renter would naturally be interested in the amount of rent for the apartment, he would also be quite interested in the apartment's insulation efficiency.  The information about the "R" factor would be a good way to estimate how much the heating bill was going to run during the winter.

While MeanMesa is sure that the ALEC "free market" influence in the Round House would prevent this from ever becoming an actual law, as a land lord, you would realize that the other apartments your potential renter was considering were, most likely, offering this information.

The apartment with good thermal insulation -- and, consequently, lower heating bills -- would be chosen even if the rent were the same.  The way things are now, land lords don't have to compete with the heating efficiency of the apartments they offer.  In the terms understandable to the "free enterprisers," this means that renters enjoy no advantage from competition on this basis.  

It means that there is very little possibility for one of the "free enterprisers'" favorite things -- a "market correction."

"Hello.  We were looking at the apartment you advertised.  Can you tell us the unit's 'R' factor please?"

"I ain't lettin' no big government thugs tell me what I gotta' do with my own property."

"Oh, I see.  Good bye."

If the land lord winds up with crappy thermal efficiency for his apartments, he's not simply stuck.  The Windows Modernization Program will include State financing or loan guarantees for this land lord to improve the "R" factors of his rental units by installing efficient windows made right here in New Mexico.

Hmmm.  Window manufacturing jobs.  Window installation jobs. Window and supply transportation jobs.  Manufacturing facility construction and maintenance jobs.  Financing access jobs. Infra red photography jobs.  Informed renters.  Increased discretionary wealth.  More demand.  Growing economy.

8. Lay out full scale windows modernization program

With a pilot project accomplished, and the inevitable challenges addressed and solved, the path forward to a full scale project becomes quite manageable.  All the "moving parts" of this program won't magically appear over night, but none of those "moving parts" are imponderables.  They are all quite straight forward.

They can all be managed.

This means that whatever might "come up" during the process can be handled, fixed, adjusted, replaced, rethought and so on.  All we need is the will to get busy and start solving our economic "poverty" problem.

Stay Tuned!  There's More To Come

While this post is primarily about the legislative leadership we will need, the next MeanMesa post in this series will be all about what will happen "on the ground."

We hope you're not getting tired of proposals.  There are more after the windows modernization program.

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