Pub. 16 2019 Issue 4

Issue 4 • 2019 3 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S During our trip, we had the opportunity to discuss many issues facing the banking industry in New Mexico and the na- tion, as well as many issues and opportunities facing our state in general. Something I found in common among everyone we spoke with is that we all share the same love and appreciation for our state and we are all working to make New Mexico an even better place to work and live. A major topic of discussion at our meetings had to do with the oil boom currently taking place in Eddy and Lea County. I shared my own experience of what it’s like to live in Carlsbad today as compared to even just a few years ago. In 2015, Carls- bad had a population of approximately 30,000 people. Today, Carlsbad’s population is estimated to be anywhere between 80,000 and 130,000 people. There are at least twice as many people presently living in Carlsbad who are not originally from here than there used to be. This has taken an enormous toll on our city. Because our infrastructure was not built to handle this large of a population, our roads are deteriorating before our eyes. The farm roads that surround Carlsbad are crumbling. What used to be just a few ranch trucks that drove down each road every day has turned into tens of thousands of trucks, most of them being 18-wheelers. Our businesses are over- whelmed. It is not out of the ordinary to go into a grocery store or gas station and see empty shelves because it is impossible to keep up with the demand. There are long waits at many of our restaurants. Hotel prices typically range from $300-$450 per night. There are thousands of “man-camps” spread throughout the city and surrounding areas due to the lack of housing. Local businesses are having difficulty finding enough employees to work the jobs outside of the oilfield. Because of this, starting wages at fast-food restaurants have risen to $15 per hour. All of our schools are at capacity. It will take a minimum of 10 years for our infrastructure to catch up to what is going on today. Although there are many issues caused by the boom, there is also an incredible amount of opportunity and prosperity. Eco- nomically, most people and businesses in Eddy and Lea County are doing very well. Because of this modern-day gold rush, New Mexico has hit the revenue lottery. The increase in tax revenue from oil and gas production has contributed billions to the general fund. However, we cannot forget that the industry by nature is extremely volatile. There is no guarantee that this additional revenue will be there in the future. I think there is a consensus that the number of oil reserves in the Permian Basin will generate production for many years to come; however, the price of oil will dictate the amount of production. As anyone who has lived in the oilfield will tell you, the only thing we know for certain is that a boom will not last forever, and about the time everyone says it will never fall again, it does. Therefore, it is imperative that we are particularly diligent with what we do with this extra tax revenue. It would be detrimental to our state if this increase prompts many new recurring revenue projects and programs. We could easily find ourselves in the same pre - dicament we were just several years ago when we had a budget deficit of over $300 million, the difference being this time that it could be much, much worse. We must also not forget where this money is coming from. Take care of Eddy and Lea Counties and send some of the money back to help build our infrastructure. The investment we make in these two counties will only pay dividends in years to come through increased efficiency and increased revenue/production. At the very least, we ask that our legisla- tors refrain from passing legislation that would impede what Southeast New Mexico and the oil and gas industry is doing for the New Mexico economy. Being that the 2020 legislative session was about to begin in Santa Fe, we also discussed other issues affecting New Mex - ico. As this will be the 30-day session, topics will be limited to budgetary and revenue matters and those items placed on the governor’s agenda, or “call.” One of the largest issues that New Mexico faces today is the deficits in the state retirement programs (PERA and ERA). As I understand, these programs are underfunded by several bil- lion dollars. We cannot put our heads in the sand and continue to ignore this problem. With the windfall in revenue from oil and gas, now would be a good time to take on this major prob- lem that will only continue to grow. Another proposal that was discussed that is highly sup- ported by the NMBA is the need to repeal the state income tax on social security benefits and military pensions. We are one of only 13 states that tax social security benefits and one of only eight states that tax military retirement. This adversely impacts our senior citizens and is a deterrent to other retirees who may be looking to move to our state, and should be a clear bipartisan issue. Likewise, our military bases play a signifi - cant roll in the economy of many of our cities, and we would like to incentivize those retiring from the military to stay in New Mexico, rather than incentivize them to leave by taxing their retirement. And of course, there is the seemingly never-ending issue of the State Bank. No matter how many experts or studies conclude that opening a state bank is a terrible idea for a mul- titude of reasons, it never fails that someone in the legislature introduces a bill on the subject. The NMBA will continue to do everything we can to fight against a state bank. In conclusion, I thoroughly enjoyed the time I spent with John on our travels and the many productive and philosophical conversations that we had. I am also extremely grateful to have met and visited with many new fellow New Mexicans. The trip was very informative and educational for me, and I hope the same can be said for those that joined us along the way. It is a pleasure and an honor to serve as your NMBA President, and I sincerely appreciate your support and confidence. n No matter howmany experts or studies conclude that opening a state bank is a terrible idea for a multitude of reasons, it never fails that someone in the legislature introduces a bill on the subject.