Intel has requested financial assistance and tax breaks from the Sandoval County Commission, the City of Rio Rancho and the State of New Mexico to convert its factory between Corrales and Rio Rancho. Agreements with those governmental entities follow Intel’s announcement May 3 that it would invest $3.5 billion to upgrade and renovate Fab11X for mass production of its innovative laser-driven three-dimensional computer chips.
The Sandoval County Commission’s June 3 meeting included an ordinance “authorizing the use of County Local Economic Development Act [LEDA] funds between the County and Intel Corporation and sharing certain limited gross receipts taxes.”
Similar agreements have been composed involving the City of Rio Rancho and the State of New Mexico. The agreement with Sandoval County means that half of all gross receipts tax and compensating tax generated by Intel’s construction project will be reimbursed to Intel, and secondly, up to $500,000 in LEDA funds from the County’s program would be paid to Intel.
The “Project Participation Agreement” considered at the commission’s June 3 session has similar benefits for Intel except that the State LEDA funds would amount to $5 million.
Rio Rancho’s participation is described this way in the agreement. The City of Rio Rancho has agreed to support this expansion with local City LEDA assistance in the amount of up to $250,000 (City LEDA Funds”) This assistance is subject to appropriation approval by City’s Governing Body and the approval of an intergovernmental agreement between the City and the County.”
A fact sheet produced for the June 3 meeting stresses the point that “This is not an industrial revenue bond and does not negatively impact property taxes; no pilot payments.
“Over the next four years, [Sandoval County] pays t Intel $500,000 from existing LEDA funds. These funds already in account set aside in 2017 for economic development —no impact on County budget or general fund!
“Over next 10 years, [Sandoval County] pays Intel 50 percent of gross receipts tax or compensating taxes derived from their construction at the plant not required for any County debt service.”
All of these grants and tax reimbursements are predicated on Intel spending up to $3.5 billion on the plant expansion and equipment, as well as a hiring “target of 700 net new full-time employees at the facility by December 31, 2024” which would be expected to generate gobs of gross receipts tax.
But the participation agreement does contain a “clawback penalty” which Intel would have to pay if a minimum number of those jobs failed to materialize. It also includes a “facility closure clawback: “If the facility ceases operations in the county on or before Decembr 31, 2031, the company will repay to the County all LEDA funds that the company actually received from the County as of that date.…”
Curiously, the County Commission’s Ordinance No. 6-3-2021.8A cites a finding that would justify those benefits for Intel as follows. “The board hereby declared that it has considered all relevant information presented to it relating to the project and the agreement, and hereby finds and determines that the provision of economic development assistance for the project is necessary and advisable and in the interest of the public and will promote the public health, safety, morals, convenience, economy and welfare of the County and its residents.”
It was not clear from the agreement recitals how the plant expansion or the new computer chips will improve the citizenry’s morals. But there’s probably an imbedded algorithm for that.
During an announcement May 3, Intel officials said Fab 11X and other parts of the complex will be re-built and reconfigured to mass produce the innovative 3-D, layered chips referred to as Foveros technology that allow customized mix-and-match assemblages, expected to be most useful for advanced artificial intelligence and 5G applications.
The $3.5 billion project apparently will not need yet another round of industrial revenue bonds (IRBs) since proceeds remain from earlier bonds. Intel New Mexico began in 1980 with an IRB offering of $2 billion; another $8 billion was provided in 1993, and then $16 billion in 2004. In June 2019, the Sandoval County Commission extended Intel’s time frame for using the last bonds.