Hits and misses

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Officials say loan program has been successful despite pulling plug on some companies

By Carol A. Clark

Using the recent contract cancellation case of Hytec/Imtec as an example, Los Alamos Commerce and Development Corporation Executive Director Kevin Holsapple said that the county comes out ahead in its loan program.

“Los Alamos County loaned the company roughly $2 million a year ago and instead of gaining 1.5 percent interest or $30,000, it is getting more than 6 percent interest or $120,000,” he said.

The county council terminated its 2006 contract with Hytec LLC, Imtec Real Estate LLC and 3M Imtec Corporation Tuesday.

The company announced last March that all related business operations in Los Alamos County would close and all jobs would be eliminated, which put the company in default of its contract terms with the county.

“It’s so important for people to gain an understanding of the history, intent and source of funding of the county’s Economic Development Financial Assistance Program,” Holsapple said. “This has been a good program and I encourage a true assessment of the costs and benefits be conducted, which I believe will reveal just how good it really has been. Even with the Hytec/Imtec deal – there’s been a $4 million investment made in this community.”

In the last several years, the LACDC has assisted several businesses with their economic analysis plans.

“This is all a lot more complicated than most people realize and it’s been compounded by the tough economic environment,” Holsapple said.

He added that some people think the economic development funds should be put into retail business, not realizing that the state won’t allow it to be used for that purpose.

The program said County Chief Financial Officer Steve Lynne, is still in effect.

“Annually the county appropriates funds from the Economic Development Fund for the program,” Lynne said. “For FY11 they have budgeted $4 million.”

The history of this program dates back 20 years.

From 1990 to 1994 the county supported the Committee to Amend Nine, which formed to amend Article Nine of the New Mexico Constitution to permit local governments to support certain economic development projects.  

In 1994, the state’s voters approved a referendum authorizing that support, and creating the New Mexico Local Economic Development Act (LEDA).  

Los Alamos County has used the provision of the LEDA to contribute to the building and infrastructure for the Los Alamos Research Park.  The county’s contribution to this effort was $1.6 million ($800,000 loan and $800,000 grant).

In October 2001, staff presented to council the concept of using a portion of the interest from its Self-Sufficiency Fund to assist small research and development businesses to locate to the Research Park.  

Council endorsed the concept. The original and modified program to date has committed a total of $7.48 million in loans to eight companies.  

Two additional loan requests were presented to council in April 2008, which were approved for $3 million. These loans never progressed to a stage that allowed them to meet the prerequisite conditions for loan disbursements.

At its June 24, 2003 meeting, county councilors requested a review of what was then known as the “Small Business Financial Assistance Program.” Council approved the continuation of the program in September 2003.

In 2005, county staff presented the results of another in-depth review of the Small Business Financial Assistance Program. The revised program was structured to facilitate the accomplishment of the council’s adopted goals and objectives.

In June of 2009 the county council adopted Ordinance No. 543, which amended and restated the Economic Development Plan to reflect state legislative changes. This changed the 5 percent limitation to 10 percent in relation to the annual amount of public money that can be expended for economic development projects.  

Lastly, the Self-sufficiency fund was renamed and is now known as the Economic Development Fund.  

According to the county’s financial policies, the purpose of the Economic Development Fund was initially to account for the receipt, management, investment and expenditure of the $22.6 million lump-sum buyout payment from DOE that was the negotiated payment the county received under the Atomic Energy Community Act.  

It was established as a special revenue fund in recognition of the unique circumstances under which the county received the funds and because the use of the funds is intended to be limited. This fund is not intended to be a permanent fund.