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Town finance expert outlines debt, available GRT increment and how tax-increment financing would work
Summary
An RBC Capital Markets analyst told the Taos Town Council that the town holds several low-interest loans and has a 0.325% GRT increment available (estimated to yield about $1.7M annually). He walked through how a tax-increment financing district (TID) would need a feasibility study, take several years to show revenues and generally requires robust private development before bonds could be sold.
Eric Ergen, managing director with RBC Capital Markets, told the Taos Town Council on April 28 that the town’s outstanding debt includes an NMFA loan of $8,195,000 and a $1.7 million solid-waste borrowing, with other joint utility loans in between. He said municipal gross receipts tax (GRT) law lets municipalities levy up to 2.5%, and Taos currently collects 2.175%, leaving 0.325% in theoretical capacity — a new 0.325% increment, if approved by voters, would generate roughly $1.7 million in annual revenue based on the town’s recent collections.
Ergen explained how tax-increment financing (referred to in his presentation as tax-increment development districts or TIDs) captures “incremental” revenue above a baseline in a defined area and can use those captured revenues to finance public infrastructure. He emphasized that TIDs are complex: the district forms its own quasi-governmental entity, often with a management board, and can issue debt that is secured solely by the incremental revenues. That means investors typically expect evidence that new businesses and sustained revenue are present — often two to four years after the district is formed — before a market will support bond sales.
Why it matters: Councilors asked to understand whether TIDs can pay for public buildings or recreation facilities. Ergen said a TID can finance a municipal-owned building only if the town retains title and the resulting gross receipts or property tax changes support repayment; otherwise, private uses can complicate tax-exempt financing and require taxable structures or different arrangements. He also noted recent state law changes that limit the timing for imposing new increments and require voter approval for any increment that cannot be imposed by council alone.
Council response and next steps: Council members probed practicalities — how a proposed gym or redevelopment would generate revenues, what feasibility studies cost (Ergen estimated roughly $200,000–$300,000 depending on scale), and who bears the risk if the development fails to produce anticipated revenues. Ergen recommended a robust feasibility and market analysis and a clear management structure before pursuing a TID. The council did not vote on creating any district; the presentation was taken under advisement and will inform future budget and economic-development discussions.
Quote: “You typically want to have, and generally when it comes with tax increment development districts, you generally don’t see a borrowing against it until like 2, 3, 4 years later where you can kinda prove that these businesses are here,” Ergen said, describing investor expectations for revenue proof.
