New Mexico EDD Five Year Plan

 

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New Mexico EDD Five Year Plan

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INNOVATION CREATES DIVERSIFICATION New Mexico Economic Development Department Five Year Plan —for— Strategic economic Growth & Diversification 2013–2018

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Questions or comments should be directed to elizabeth.davis@state.nm.us

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ECONOMIC DEVELOPMENT COMMISSION It is my honor to serve as chairman of the New Mexico Economic Development Commission and to have facilitated efforts to develop the state’s Five Year Strategic plan. As New Mexico works to move forward in its economic recovery, this plan will help guide state leaders on identified areas with the best potential for growth and where we must focus the state’s resources to compete nationally and globally for jobs. It is the commission’s key role to develop the Five Year Strategic Plan for economic development. The commission takes its role seriously. We not only work through the process of its development but will take action on the strategies presented. We made a significant effort to obtain public input. We worked with the Councils of Governments and the Interim Legislative Jobs Council. EDD’s Rural Economic Development Council was also engaged in the process and voted unanimously to approve and support the section of the plan dedicated to what has been dubbed the “Rural Renaissance.” The Commission will consider this a working document and will be monitoring the progress to move the strategies forward for the state. Thank you for your involvement and interest in the plan. We look forward to implementing the strategies listed here which will help support private investment and grow the economy in all parts of the state. Sincerely, Alex O. Romero Chair New Mexico Economic Development Commission

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I am proud of the work that has gone into the Economic Development Department’s five year plan. This effort involved the participation of not only our department, but members of the Economic Development Commission, our statewide economic development partners, and business and government leaders, who all expressed their ideas to facilitate economic growth for New Mexico. Over the last three years our department laid out a yearly strategic plan that focused on reducing regulatory burdens on job creators, fostering a pro-growth tax environment and increasing exports internationally. This strategy aimed to benefit not only the state’s metro areas but also our rural communities. Through this process, we expand our vision for growth through eight priorities that include more effective strategies and programs to improve our capacity to generate new jobs and wealth from ideas and technologies born here, providing new resources and tools to grow rural areas, and capitalizing on natural assets and those we develop. These include taking advantage of our natural resources, our proximity to Mexico, our central location in the NAFTA region and the eastwest and north-south transportation corridors that can move goods anywhere in the U.S. and Canada quickly. That is why the Bi-National Community in southern Doña Ana County is a priority for us to develop and market. It is also important for New Mexico to continue to grow our international trade potential. Exports from this state have doubled in the last two years, leading New Mexico to take the top spot for export growth in the country in early 2013. This is a strategy to grow local jobs, as the U.S. Department of Commerce states: for every $1 billion in exports from a state, more than 6,000 jobs are created. And for our rural communities, two of our most promising new initiatives are the MainStreet Frontier Communities and Historic Movie Theaters Initiatives. The latter provides funding to restore old theaters to their former glory in addition to updating them with digital movie equipment to allow them to show first-run movies. Not only are we preserving our historic treasures, we are encouraging commerce to return to local downtowns where families can spend money and stay in town for their entertainment. Governor Martinez also signed into law the creation of the MainStreet Frontier Communities Initiative to help drive commerce back to the most rural communities. Based on the ongoing input I constantly receive as I travel our state, in October 2012 I established and appointed the Rural Economic Development Council. The purpose of the Council is to provide a formal platform to serve the specific needs of our rural communities, to identify issues and provide solutions through programs or policies. We are developing the Business Resource Center, a one-stop-shop of programs and services provided here and through our partners to better serve our own business community. The Center will include a web portal and business mentoring and facilitation program within the Economic Development Division. We have a wonderful team of dedicated economic development professionals in the Economic Development Department and partners around the state working daily to see these initiatives come to reality for the benefit of all New Mexicans. Jon Barela Cabinet Secretary New Mexico Economic Development Department

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EDD gratefully acknowledges the participation and contributions of many talented individuals and their organizations in the development of this plan: NEW MEXICO ECONOMIC DEVELOPMENT COMMISSION: Alex Romero, Chair, District 3 Sharmyn Munoz, District 1 Larry Stolarcyzk, District 2 Trent Dimas, At-Large Member Ron Solimon, Native American Representative Doug Redmond, District 4 Joseph Semprevivo, District 5 Janet Green, District 7 ---------------------------------------------------------------------------------------------------------------------Advanced Insights Group Angel Fire Chamber of Commerce Arrowhead Center at New Mexico State University (NMSU) Attendees of the 2011 Rural Economic Development Forum in Gallup Attendees of the New Century Economy Summit Town of Bernalillo The BioScience Center John Brown, Silent Falcon UAS Clovis Industrial Development Corporation Cottonwood Technology Fund Village of Cuba Economic Development Action Group EDD Rural Economic Development Council EPSCoR City of Espanola Enterprise Center at San Juan College Greater Springer Economic Development Corporation Guadalupe County Harding County Economic Development Corporation High Tech Consortium of Southern New Mexico Dr. Jack Jekowski, Innovative Technology Partnerships LLC Village of Jemez Springs Patricia Knighten, Prescient 360 Inc. Dr. Pete Lammers, New Mexico State University Las Vegas-San Miguel Economic Development Corporation Lautman Economic Architecture EDC of Lea County Los Alamos County Los Alamos National Laboratory Technology Transfer Office Lovington Economic Development Corporation Mesilla Valley Economic Development Alliance Mora Valley Community & Economic Development Committee

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Nano Network New Mexico Angels New Mexico Handmade New Mexico Interim Legislative Jobs Council New Mexico Recycling Coalition New Mexico Start-Up Factory, LLC New Mexico Technology Commercialization Council New Mexico Water Resources Research Institute at NMSU NewMARC (New Mexico Councils of Governments) PNM Village of Questa Village of Red River Regional Development Corporation Roswell/Chaves County Economic Development Corporation Sandoval County Santa Fe County City of Santa Fe Santa Fe Business Incubator City of Santa Rosa Dr. Richard Sayre, New Mexico Consortium South Valley Economic Development Center STC.UNM City of Taos Taos County Economic Development Corporation Technology Ventures Corporation Greater Tucumcari Economic Development Corporation Union County Economic Development Corporation WESST Enterprise Center

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Table of Contents Executive Summary ……………………………………………………………………………….. Innovation Creates Diversification …………………………………………………………. Vision, Mission & Introduction…………………………………………………………..... Indicators ……………………………………………………………………………………………… Strengths, Weaknesses, Opportunities and Threats (SWOT) …………………. Innovation → Enterprise → Economic Development …………………………….. Innovation ……………………………………………………………………………………………………. Enterprise …………………………………………………………………………………………………….. Economic Development ……………………………………………………………………………….. 1 3 4 8 12 14 16 22 24 Rural Renaissance: Prosperous Rural Communities ………………………………. Rural Commercial District Revitalization ………………………………………………………. Restore Rural Programs and Funding …………………………………………………………… Rural Business Incubation …………………………………………………………………………….. Statewide Commercial Kitchen and Growers Program …………………………………. Preserve and Encourage Extractive Industries ……………………………………………… Rural Business Recruitment ………………………………………………………………………….. Strategic Use of Capital Outlay Funds …………………………………………………………… Rural Infrastructure & Project Funding Committee ………………………………………. Prioritize Fiber Development Statewide ……………………………………………………….. 28 29 34 35 36 38 39 39 42 42 Borderplex and Logistics Industry Development ……………………………………. Transportation and Logistics Potential…………..……………………………………………… Borderplex: SantaTeresa/Las Cruces…………………………………………………………….. Columbus-Deming Corridor………………………………………………………………………….. Antelope Wells-Lordsburg Corridor………………………………………………………………. 44 44 45 51 53 Business Resource Center: One-Stop-Shop ………………………………………….... Center of Excellence in Water Research ………………………………………………… Workforce Development ……………………………………………………………………….. Job Training Incentive Program …………………………………………………………………….. Collaboration with the Department of Workforce Solutions …………………………. Employability Partnership ……………………………………………………………………………... 56 58 59 59 60 60

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Recruit New Industry to the State: New Mexico Partnership ………………….. Film and Emerging Media ……………………………………………………………………….. Production Recruitment and Assistance …………………………………………………………. Emerging Media …………………………………………………………………………………………….. Film Tourism …………………………………………………………………………………………………… Statewide Film Liaison Network ……………………………………………………………………… Workforce Development ………………………………………………………………………………… 63 64 64 64 65 66 67 Appendix ………………………………………………………………………………………………… 69

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EXECUTIVE SUMMARY The Economic Development Commission, appointed by Governor Martinez, is statutorily responsible for the development and approval of a five year plan for the economic growth of the state. The planning process began in 2011 at the Gallup Rural Forum. There have been countless meetings with partners and stakeholders since then, including the October 2012 New Century Economy Summit. Many of these partners will have a role in the implementation of the plan. This serves to ensure its comprehensive inclusion of strategies that will assist all of New Mexico’s communities, ranging in population size from 38 to 545,852. We chose Innovation as the theme of the plan because innovation leads to change and we have tremendous potential to creatively diversify our economy. New Mexico has a long history of creativity; from the earliest native artists and farmers, to Robert Goddard – father of the space industry. We face daunting challenges just as the earliest New Mexicans did. Data and the strengths, weaknesses, opportunities and threats analysis (SWOT) (page 13) call out many of these challenges and informed this plan. Poor educational attainment compared to other states (Indicators, page 8) has been a competitive disadvantage for New Mexico. An important component in changing our current position is creating a knowledge economy that provides jobs which will keep well-educated New Mexicans here. Nearly twenty percent of the state’s employment base is reliant on the government sector. No other state is more dependent on federal spending (page 6). Realizing the serious impacts of sequestration on New Mexico, Governor Martinez and Secretary Barela worked with legislative leaders to pass comprehensive tax policy changes that reduce the corporate income tax rate and exempt consumables used in manufacturing (including electricity). These changes have generated new interest from businesses outside the state, kept businesses from leaving here, and resulted in Kiplinger’s recent recognition of New Mexico as having the “9th most friendly tax climate.” Another critical challenge to our state’s future is water availability and quality. Beginning in FY2015, Governor Martinez will direct strategic resources toward water infrastructure. A longer-term goal is the creation of a premier Center of Excellence in Water Research. Successful economic development is the legacy we leave coming generations of New Mexicans. Toward this legacy we chose two primary goals:   Create a diversified knowledge-based economy that will provide opportunities for our graduates ranging from creative entrepreneurship to PhD physicists Develop programs and initiatives requested by our rural communities that represent the diverse economic goals of every region of our state Innovation → Enterprise → Economic Development represents the continuum of successfully growing IP and technologies developed in New Mexico into profitable companies creating new jobs and wealth here. Many talented individuals provided their knowledge, experience and ideas for this section of the plan. Policy and regulatory issues that hamper technology transfer are called out. Addressing all of 1

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these will require collaboration with New Mexico’s Congressional Delegation and the dedication of a significant level of resources. There are many examples of comprehensive state technology transfer programs that represent successful collaborations of the elements necessary to create an optimal “culture of innovation.” Successful I → E → E requires investment in infrastructure and talent, support for the research institutions where much ideation occurs, and resources for the network of technical assistance necessary to grow ideas into “gazelles.” These programs are generally economic development initiatives with economic development goals and metrics. The Rural Economic Development Council, appointed by Secretary Barela in 2012, provided the strategies in the Rural Renaissance section. These programs address the diversity of our state and the unique challenges facing our most rural regions: commercial district revitalization, business incubation services, commercial kitchens, small business recruitment, and infrastructure development. New Mexico’s border with Mexico is a unique asset with a great deal of potential deserving of its own section beginning on page 44. Governor Martinez and Secretary Barela have collaborated with Chihuahua Governor Duarte to develop a bold economic development plan for the Borderplex. This plan includes a progressive “Bi-National Community,” the six-mile overweight cargo zone, ports of entry improvements, water and wastewater treatment upgrades, and the rail relocation project. The Union Pacific Intermodal Facility has been a catalyst for this undertaking and has already stimulated business growth in Dona Ana County. More than a dozen new companies have located to the County in the last three years. Progress with Mexico and a strategic focus on international trade have led to unparalleled export growth with New Mexico products reaching every region of the globe. The Business Resource Center one-stop-shop is part of Secretary Barela’s commitment to make New Mexico a more business-friendly state. The Office of Business Advocacy was established by Governor Martinez and Secretary Barela early in 2011 and has been a huge success with more than 200 businesses assisted since its inception. Business recruitment remains a priority under the auspices of the Economic Development Corporation or New Mexico Partnership, established by statute in 2003. After experiencing severe budget cuts beginning in fiscal year 2009 the program is rebuilding itself. Implementing the strategies presented here will further improve New Mexico’s competitive position to recruit new jobs. 2

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NEW MEXICO ECONOMIC DEVELOPMENT DEPARTMENT FIVE YEAR STRATEGIC PLAN FOR ECONOMIC GROWTH AND DIVERSIFICATION Innovation Creates Diversification There are many definitions of “innovation.” Simply put, it is the process of translating an idea or invention into a good or service that creates value. In economic development, it represents the evolution from a production-based economy to a broader view that embraces innovation and the development of a knowledge economy. It is believed that Socrates introduced the concept that higher learning and knowledge lead to prosperity. Today, there are volumes of data that make that correlation as well. In today’s global economy it is evident that economic development cannot succeed without education and even the well-educated population are unlikely to achieve prosperity without economic growth. Traditional economic development programs have been heavily reliant on incentives, financial packages and cost comparisons - an extremely-competitive high-stakes game to lure new industry. Bill Mehlman, of the U. S. Department of Commerce in 2003, stated “America must never compete in the battle to pay workers least – and it will take sustained innovation to ensure that we don’t have to.” Wouldn’t it be great if a business-friendly state rich with talent and innovation was all the competitive edge New Mexico needed to lead the nation in economic growth? For centuries, New Mexicans created beauty and prosperity from what the land gave them. They built farms, grew crops in harsh desert climates and created art from flowers and soil. Innovation leads to Enterprise which leads to Economic Development, or I → E → E, is the 21st century version of New Mexicans using ingenuity to create great things from within. Based on our diverse heritage, talent and natural resources, this strategic plan is built on the premise that New Mexico must create a business culture and environment that fosters economic innovation and growth. The New Century Economy Summit, convened by Secretary Jon Barela, focused on strategies necessary to drive innovation in order to diversify the New Mexico economy. The Summit included specific areas of discussion around emerging opportunities for aerospace, bioscience and health, as well as digital media and water. The final report recommended, among other things, integrating workforce development, economic development and education systems. Tax reform and establishing a state capital outlay plan were also advocated. Consistent funding for technology commercialization was deemed essential to achieve economic diversity. These recommendations and others gathered from a number of forums and contributors are incorporated into the pages of this strategic plan and will be moved forward by department staff and our partners as resources become available. 3

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Vision Innovation is the basis for economic change in today’s global, national and state environments. New Mexico will diversify its economy by encouraging greater innovation in educating its children, in diversifying and growing its economy and in competing for economic opportunity for all its citizens. Mission Enhance and leverage a competitive environment to create jobs, develop the tax base and provide incentives for business development. INTRODUCTION The New Mexico Economic Development Department is statutorily required to produce a five-year plan which is reviewed and approved by the Economic Development Commission. The plan is then submitted to the Governor’s office for final consideration. New Mexico faces many economic challenges and begins its next 100 years as a state transitioning from a government-reliant economy to an entrepreneurial economy by investing in job creators, workers, infrastructure and rural communities while supporting the mission of vital government programs. We have made progress. Working with the Governor and the Legislature we made significant changes to New Mexico’s tax policy and these changes have been recognized nationally. Most recently, Kiplinger ranked New Mexico the “9th most tax friendly state in the U.S.” We must continue this momentum toward our goal of economic diversification and prosperity. Through the long process of developing this plan EDD has worked to coordinate the strategies presented here with many partner stakeholders, including the Interim Legislative Jobs Council and the NewMARC economic development planning process. The implementation of this plan will include collaborative programs with many of these partners. Specific examples include the Rural Infrastructure Project Funding Committee (page 42), a collaborative group of funding agencies, the Councils of Governments and New Mexico MainStreet developed within EDD’s Rural Economic Development Council; Rural Business Incubation (page 35) and the Business Resource Center (page 56), supported by the Business Incubator Consortium and our many small business assistance partners statewide. 4

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The graphs graphs provided provided below below bring bring into into stark stark reality reality the the reasons reasons why why New New Mexico Mexico can can no no longer longer rely rely on on The government dollars dollars to to bolster bolster its its economy. economy. Federal Federal entitlement entitlement spending spending grew grew from from $24.2 $24.2 billion billion (26 (26 government percent of of the the federal federal budget) budget) in in 1960 1960 to to $2.3 $2.3 trillion trillion (66 (66 percent percent of of the the federal federal budget) budget) in in less less than than 50 50 percent years. Today, Today, discretionary discretionary spending spending is is less less than than 30 30 percent percent of of the the federal federal budget. budget. Fewer Fewer dollars dollars will will be be years. available for for New New Mexico Mexico to to pay pay for for infrastructure, infrastructure, education, education, transportation, transportation, basic basic research research and and available government contracting. contracting. government Government Transfers Transfers Government to Individuals, Individuals, to in Current Current Dollars, Dollars, in in Trillions Trillions in $2.5 2.0 1.5 1.0 0.5 0 1960s ´70s ´80s ´90s ´00s Source: U.S. Bureau of Economic Analysis New Mexico Mexico isn’t isn’t the the only only state state to to feel feel the the pinch pinch of of federal federal efforts efforts to to balance balance the the budget budget compounded compounded New by sequestration, sequestration, but but we we are are more more susceptible susceptible to to federal federal budget budget maneuvers maneuvers than than are are other other states. states. The The by graph on the following page shows federal spending received by states as a percentage of gross graph on the following page shows federal spending received by states as a percentage of gross domestic product. product. In In 2010 2010 about about eight eight states states received received federal federal dollars dollars making making up up about about 30 30 percent percent of of domestic their output output with with New New Mexico Mexico at at about about 36 36 percent. percent. their 5 5

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Federal FEDERAL Spending SPENDING in IN the THE States STATES Types of Federal Spending Across States Relative to State Gross Domestic Product, 2010 NEW NEW MEXICO MEXICO Kentucky Kentucky West West Virginia Virginia Alabama Alabama Mississippi Mississippi Maryland Maryland Virginia Virginia Hawaii Hawaii Montana Montana South South Carolina Carolina Vermont Vermont Missouri Missouri Maine Maine Arkansas Arkansas Tennessee Tennessee Alaska Alaska Oklahoma Oklahoma Pennsylvania Pennsylvania Arizona Arizona Idaho Idaho Connecticut Connecticut Florida Florida South South Dakota Dakota Michigan Michigan North North Dakota Dakota Rhode Rhode Island Island Louisiana Louisiana Georgia Georgia Kansas Kansas Ohio Ohio National NATIONAL Average AVERAGE Wisconsin Wisconsin Indiana Indiana Massachusetts Massachusetts North Carolina North Carolina Washington Washington Iowa Iowa Utah Utah Colorado Colorado Texas Texas Oregon Oregon Nebraska Nebraska New New Hampshire Hampshire New New York York California California Wyoming Wyoming Illinois Illinois New New Jersey Jersey Minnesota Minnesota Nevada Nevada Delaware Delaware 0% 0% 10% 10% 20% 20% 30% 30% 40% 40% Direct Direct Payments Payments for for Retirement Retirement and and Disability Disability Benefits Benefits Medicare and Other Medicare and Other Direct Direct Payments Payments to to Individuals Individuals Grants Grants Procurement Procurement Salaries Salaries and and Wages Wages Source: Pew analysis of Bureau of Economic Analysis and U.S. Census Bureau’s Consolidated Federal Funds Report. FY2010 Notes: Total federal spending in the District of Columbia was equivalent to 59.2 percent of the District’s GDP, composed of direct payments (2.7%), Medicare and other payments (3.8%), grants (10.5%), procurement (20.4%), and salaries and wages (21.8%). Figures do not measure the federal government’s contribution to state GDP, but rather the dollar value of federal spending relative to the size of each state’s GDP. © 2013 The Pew Charitable Trusts Reid Wilson. “State reliance on federal dollars near all-time high.” Washington Post. September 23, 2013: http://www.washingtonpost.com/ blogs/govbeat/wp/2013/09/23/state-reliance-on-federal-dollars-near-all-time-high/ 6

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Thegraph graphbelow belowclearly clearlyoutlines outlinesthe theeffect effectof offederal federalbudget budgetdecisions. decisions. The Thestate statemust mustdevelop developpolicies policies The thatwill willensure ensureNew NewMexico Mexicoresidents residentsare areless lessaffected affectedby bythe thereduction reductionin infederal federaldollars. dollars.Government Government that andprofessional professionaland andbusiness businessservices servicessectors sectorsaccount accountfor forthe thelargest largestpart partof ofour ourstate’s state’sjob joblosses. losses. (The (The and nationallaboratories laboratoriesare aremanaged managedby byprivate privatecontractors contractorstherefore thereforetheir theirjob jobreductions reductionsare areprimarily primarily national countedin inthe theprofessional professionaland andbusiness businessservices servicescategory.) category.) To Tomitigate mitigateor orminimize minimizethe theeffects effectsof ofthis this counted reliance,New NewMexico Mexicomust mustinvest investin inthe thedevelopment developmentof ofthe theprivate privatesector sectorto toachieve achievea adiversified diversified reliance, economy. economy. NM Job Gains & Losses: Oct. 2012 over Oct. 2011 Leisure & Hospitality Health Services and Education Manufacturing Transportation, Warehouse, Utilities Mining and Logging Wholesale Trade -4,500 -3,400 -1,300 -900 -800 +400 +400 +200 +200 Government Professional and Business Services Construction Information Financial Activities +2,500 +2,500 -600 Retail Trade Source:New NewMexico MexicoDepartment Departmentof ofWorkforce WorkforceSolutions, Solutions,Labor Labor MarketReview ReviewOctober October2012 2012 Source: -600 OtherMarket Services -4,000 -3,000 -2,000 -1,000 0 1,000 2,000 Source: New Mexico Department of Workforce Solutions, Labor Market Review October 2012 7 7

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