Tuesday, May 19, 2009

A Letter From Albuquerque: Not Just Another Pretty Face; Recession Ravages Large Swaths; Plus: Meeting A Prez; Insider Take On Rio Rancho Visit 

If you didn't look closely, you might not notice it, but a long Sunday drive reveals the commercial face of Albuquerque is changing in dramatic fashion and there's no telling what the future holds. A lengthy meandering along the city's main arteries-- Eubank and Menaul Boulevards, Central Avenue--"The Mother Road"--and North Fourth Street--shows vacancy after vacancy in what were once small roadside retail outlets and bustling strip malls. On Central, where the city in recent years has condemned and torn down multiple old motels for safety reasons, the land remains vacant, as if selectively bombed from high above. The buildings next to the motel holes stand, even if many are empty vessels begging for tenants.

The numbers--which can barely keep up with the reality--confirm the depression that has descended on retail space in the state's largest city, and what worries the experts is that a permanent change in consumer behavior--they spend less and save more--means these buildings are destined to remain vacant, giving huge swaths of the sprawling Duke City not only a Third Worldish look but depriving the city treasury of taxes created from buying and selling. And if the owners of some of these buildings start tearing them down, they will be worth even less and the property tax owed on them will plunge. The city's projected deficit for the budget year starting July 1 already ranges up to $68 million. That's close to a stunning 15 percent of the $475 million budget for basic services.

When you drive up to some of these buildings still adorned with signs advertising their services, you discover when you peer inside that they are actually vacant. That's when you really get a sense of how historic and dramatic this economic decline has been. In stark contrast, Albuquerque's major neighborhoods remain almost verdant, dotted with parks and kids frolicking in the streets as they do in these warm weather months. Residents there can remain oblivious to the war for survival that rages on the commercial avenues only blocks away, but rage it does. More and more of Albuquerque's business districts have become shabby in recent months and in some cases simply undesirable.


There is much work to be done. To avoid laying off city workers, ABQ Mayor Chavez is seeking City Council approval to divert bond money normally dedicated to maintain roads, parks and other needs into the city's general fund budget. But he may be fighting a losing game. Politically sensitive layoffs or furloughs could come after the October city election. The major drivers of the city and state economies--federal spending and energy royalties--is no longer in high growth mode. The decline in the multiplier effect of the fewer millions coming in has combined with the overall recession to create a perfect storm. The city is now experiencing its worst downturn in memory. Metro unemployment is pushing 7 percent and very likely will break 8 percent, and that doesn't count those who have given up looking for work or are working part-time.

The National Association of Realtors reports that the median ABQ home price peaked at $199,400 in the second quarter of 2008 and now stands at $182,600, a decline of over 8 percent. Until the job losses abate, prices will very likely head lower. Commercial property values are tanking at an even faster rate.


Meanwhile, the downturn continues inexorably, like a snowball that refuses to stop rolling until its natural conclusion. Longtime ABQ retailer Unpainted Furniture just announced it is going out of business. Quality Jeep Chrysler is the latest auto dealership marked for closure as Chrysler reorganizes nationally and Isleta Casino laid off two hundred, according to media reports. These businesses were all heavy media advertisers, delivering another body blow to that already stumbling industry which has seen numerous ABQ jobs eradicated.

The Obama stimulus plan ($1.8 billion for NM) should help, but the long-term solution for our area seems perplexing. Perhaps an adjustment in expectations is in order. Even a rebounding economy is not going to give us the retail and real estate conditions that resulted from the bubbles we recently experienced. And federal budget dollars--excluding the temporary stimulus--are not going to be what they once were. All of this could mean a lower standard of living may be the order of the day for a substantial number of New Mexicans. It also may mean slower population growth.

There is a bright spot or two. Schott Solar is plugging along with its ABQ plant where it employs 350 and hopes to expand some day to 1,500. Other "green" initiatives will also plug a hole or two. Wal-Mart announced it will hire over 400 at a NE Heights location at salaries of about $11 an hour. But we still are losing more jobs than we are adding. As long as that is the case, the value of ABQ real estate will continue a slow decline, tax collections will lag and downsized city and state governments are inevitable unless taxes are raised.

The macro problem of replacing thousands of lost jobs in what appears to be a secular change in how people spend and save money remains the great political and economic challenge facing policy makers and the public. Certainly it's food for thought on a long Sunday drive.


Because of its supreme importance as a driver of the economy here, we wanted to nail down where we stand on Sandia Labs funding. We also were curious about a blog from the ABQ Journal's science writer that stated that Sandia Director Tom Hunter told the ABQ Chamber of Commerce that "Work For Others"--or "WFO"--now makes up 40 per cent of the labs' budget. That left the impression, at least with us, that Sandia was getting more of its revenue from private sources--not government.

We rang up Sandia budget guru Ernie Limon to confirm what our Alligators have been saying: the "WFO" money---over $900 million-- is almost entirely from other government agencies--much it from the Department of Defense-- not the private sector. That means it is subject to the same political whims as the nuclear research money Sandia gets from the Department of Energy. In addition, the WFO money coming into Sandia since budget year 2008 has been basically flat, and that's not accounting for inflation. The percentage of Sandia's WFO money is growing because DOE nuclear weapons funding for the labs is going down. That causes the WFO dollars to represent a larger portion of a flat or overall shrinking budget.


In the federal government's 2008 budget year Sandia employed 8,308 of what they call "full-time equivalents" (FTEs). For the 2010 budget year, Limon says Sandia is proposing to Congress that Sandia employ about 8,150 FTE's. What Sandia calls contractors who augment staff have grown a tad in the last few years. If we look at DOE projections for the budget years beyond 2010, Sandia's budget would recede further, although the politics can change from year to year. The total Sandia budget for the current budget year is $2.249 billion, with next year's total proposed budget--including non DOE sources--proposed at $2.346 billion, a slight increase.

The primary point is that Sandia National Labs remains a critical driver of the ABQ economy, but it is not in a growth mode. In fact, it appears it is slowly shedding well-paying jobs. The multiplier effect of the loss of these jobs, we believe, is already being felt in ABQ's retail environment. Sandia deserves all the luck in the world in its efforts to diversify its revenues away from government, but it is the Albuquerque and New Mexico economy that urgently needs to diversify to compensate for what appears to be a gradual and subtle but very real downsizing of Sandia National Laboratories.


We think Senator Jeff Bingaman's statement following the release of the Prez's proposed budget bears repeating. After all the parsing and sparring over what is growing and what isn't and the tendency of the mainstream media to downplay economic news that is not a day brightener, the Bingaman statement on NM DOE funding stands starkly:

The president’s budget request would result in about $4 billion of spending from all DOE programs in NM in FY 2010, down from the $4.3 billion voted by Congress for the comparable DOE programs in NM in FY 2009.

Maybe we restore some of that lost $300 million. Maybe not. Stimulus money? Remember, that's temporary, not permanent. But if you still don't believe we have problems here with long-term federal funding, we have a couple of hundred vacant buildings around town we'd like to sell you.


Definitely get us some happy pills because we're getting slammed with even more depressing pay-to-play news. The ABQ Journal came with this late Monday:

A federal grand jury has subpoenaed state procurement documents for a $1 billion behavioral health services contract that has been challenged by the losing company. ValueOptions New Mexico is protesting the award of the state's behavioral health contract to OptumHealth of New Mexico, a subsidiary of UnitedHealth Care Inc.

Both companies retained consultants with close ties to Gov. Richardson. ValueOptions hired Richardson's former chief of staff and campaign manager, Dave Contarino, and OptumHealth brought on Michael Stratton, a Denver political adviser to the governor during his presidential bid.

We hit the scandal beat heavy on our Monday blog. Some are going to say this new news is evidence the federal grand jury is on a fishing expedition. Others will say we're about to have a record season for catching fish.


We can't get you any closer to the insider action than this. It is a report on one of the two political meetings President Obama had backstage Thursday at Rio Rancho High School where he conducted a Town Hall meeting on credit card reform. Direct from a Senior Alligator on the scene:

Here’s who was in the first meeting at Rio Rancho with the President. (Lt. Gov) Diane Denish, (NM House) Speaker Lujan, (State Senate Majority Leader) Michael Sanchez, and (ABQ) Mayor Chavez. After somewhat of a dust up, Marty was allowed to bring his son (Zeke) into the room (Prez’s security/political teams were miffed). Pictures were taken, talked about the stimulus money with Gov., and predatory lending issues...The Governor came in room just in front of the President. (take away: short and sweet and cordial). Those who get most out of it were those who had later meetings about 2010 with the White House political team. Obama press secretary Robert Gibbs and political aide Bobby Schmuck were also in room. The Governor also had a press person in the room. It lasted maybe ten minutes.

Do you feel like a fly on the wall after reading that? Now we're really bloggin'.

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