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Commission to consider Intel bond

Traditions zoning change also on meeting agenda

By Eric Maddy
The SCORE

Sandoval County commissioners will consider a resolution tonight that may allow Intel to restructure a portion of $16 billion industrial revenue bond it received four years ago, allowing more tax relief for the company.

The resolution is just the first step Intel would needs to take to turn $250 million into private activity bonds, which allow companies to earn tax credit when money generated from municipal bonds is used to improve infrastructure In Intel’s case, money being spent on water treatment as part of a $1.5 billion retooling of the factory would be tax exempt.

 “It doesn’t cost the county anything. It doesn’t cost the state of New Mexico any money. But the state and the county have a say,” said Jami Grindatto, director of corporate affairs for Intel’s New Mexico site. “This private activity bond inducement resolution is just the first step where the state can say yes or no, and  the county can say yes or no, because there is a tax benefit. It will allow us to reduce our costs and make us more competitive in New Mexico.”

Intel would still need approval from the State Finance Board before it could seek the private activity bonds.

Tommy Hughes, bond counsel for the county, stressed that the resolution does not involve any new money or commitment.

“It is just another part of the deal that was made in 2004 as part of the $16 billion industrial revenue bond,” he said. “Private activity bonds are issued all the time as a form of tax incentives. If they can get approval from the State Finance Authority, these bonds are gong to be used to treat waste water, recycling, sewage and solid waste on the Intel campus.”

Grindatto said PABs have worked well for Intel in other states.

“We have a big precedent in Arizona. It has been very successful in Arizona, and currently we are on the second (cycle) of such bonds because we just built Fab 32, our first 45-nanometer facility,” Grindatto said. “New Mexico is going to follow in another nine months in starting to build the latest microprocessors and the most advanced product in the world, right here by New Mexicans. It’s pretty exciting.”

Although Intel’s factory is bordered by Rio Rancho and Corrales, it actually sits on land annexed by the county. Therefore commission approval is required.

The Municipal Securities Rulemaking Board, which makes rules regulating dealers who deal in municipal bonds, municipal notes and other municipal securities, defines a private activity bond as “a municipal security,  the proceeds of which are used by one or more private entities.” On its web site, www.msrb.org, the MSRB notes that a municipal security can be considered for a private activity bond if it meets one of two conditions, including “with certain exceptions, the amount of proceeds of the issue used to make loans to non-governmental borrowers exceeds the lesser of 5% of the proceeds or $5 million (the ‘private loan financing test.’)

“Interest on private activity bonds is not excluded from gross income for federal income tax purposes unless the bonds fall within certain defined categories” which include exempt facility bonds, which are “private activity bonds issued to finance various types of facilities owned or used by private entities, including airports, docks and certain other transportation-related facilities; water, sewer and certain other local utility facilities; solid and hazardous waste disposal facilities,” and other infrastructure.

The commission is also expected to approve a rezoning proposal that would allow a California man to turn the former Traditions shopping site film studio and post-production facility. According to the meeting agenda, developer Michael Harbert  plans to remodel the current 168,000 square feet of building space and add more than 250,000 square feet of buildings on the current 49-acre site.