Reason for Calif. Business Loss Is on the Rio Grande : Economy: A New Mexico town lures companies with cheap land, low taxes and an effusive welcome.

By JONATHAN WEBER

April 27, 1993 12 AM PT

TIMES STAFF WRITER

RIO RANCHO, N.M. — If you want to know why California is losing businesses to other states, you can find the answer here.

Need financing for a new factory? Meet Ron Smith of Bank of New Mexico. Want the new building up in four months, guaranteed? That’s contractor Stephen Elliott’s specialty. Looking for temporary housing? No sweat.

Water permits? Road access? City development chief Art Corsie will work it out. State worker training funds? Call New Mexico’s governor, Bruce King. He just happens to own the ranch next door.

Lots of places try to lure California companies, many of them with considerable success. But person for person, acre for acre, hardly any place is as successful as Rio Rancho, an unlikely stretch of scrubland above the Rio Grande near Albuquerque.

This embryonic city of 40,000 has succeeded in part by offering the usual potent combination of cheap land, cheap labor and virtually no taxes.

But it also offers something more: an attitude that businesses love. Local officials will walk on coals, practically, to get companies to move here.

Rio Rancho’s success is rich in irony. Its founders did jail time in the 1970s for violating federal law by aggressively hawking barren Rio Rancho lots to far-off working stiffs by mail. And the city is thriving in part thanks to the problems of California, which itself once embodied a similar vision, complete with real estate speculators and nationwide land promotions.

And just as Californians, when they got numerous enough, organized to slow down development and impose more requirements on business, so New Mexicans--a few, anyway--are stirring to do likewise here.

But make no mistake; for now, at least, development is winning. The biggest catch was Intel Corp., which is building a $1-billion factory adjacent to its existing facility here. The new place will cost $200 million less than a comparable facility in California.

Down the road is a cluster of less celebrated refugees: Topform Data, late of Orange County; U.S. Cotton, a recent arrival from San Jose; and California Aero Dynamics, a vendor of aircraft components that has facilities in Sun Valley and South-Central Los Angeles.

Why do they come? There’s lots of open space for brand-new buildings, property taxes can be waived entirely, and average manufacturing wages are one-third less than in most of California. And then there’s that effusive welcome.

That’s not terribly important for big, sophisticated companies like Intel, but it plays a major role in luring the small and mid-sized companies whose growth and job generation make them so important for the future.

“Until people come in here, their motivation is financial,” says Mark Lautman, an ebullient onetime swimming champion who heads the local industrial development team. “But once they get here, what gets them is the attitude and the client service. We put together a group of people to spoil them rotten.”

Indeed, the package of economic incentives and personal services available in Rio Rancho goes far beyond anything a costly, populous state such as California can offer. No doubt much can be done to improve California’s much-maligned business climate, but companies willing to move will always be able to find attractive deals in under-populated, industry-hungry pockets of the American West.

With its peculiar history, Rio Rancho offers insight into the economic and social forces--as well as the marketing tactics--that are drawing businesses away from traditional industrial centers all across the country. It’s a movement that seems inexorable, and yet countervailing pressures, which will eventually push up costs and slow growth in these new places, are already making themselves felt.

Howard Friedman, a co-founder of Rio Rancho, saw some of the trends before they were obvious. In the late 1950s, he and his partners “began to feel strongly that the population base was going to move west. So we decided to do an intensive search for Western properties near fast-growing cities.”

A large tract just 11 miles northwest of downtown Albuquerque fit the bill, in part because Friedman saw that the city was hemmed in on three sides by the Sandia Mountains, a military base and several Indian reservations. He and his partners at Amrep Corp. bought 92,000 acres on an arid plateau above the Rio Grande and set out to create a new town from scratch.

In the early days, the main focus was on selling building lots, mostly through the mail to unsophisticated buyers from the Midwest and the East Coast. Many of them were more than chagrined to discover after the fact that there were few roads or utilities or much of anything else anywhere near their property--and no resale market for land that was allegedly touted as an investment.

In a 1977 trial that drew wide publicity as an egregious example of then-common land-sales scams, Friedman and three other Amrep officials were convicted of mail fraud and violations of federal land-sales law. Each served several months in jail.

Friedman calls the trial a great miscarriage of justice, maintaining that any misleading sales pitches were the work of a few over-ambitious salesmen.

“We believed Rio Rancho was a good investment,” he says, adding: “What we foresaw has happened.”

What happened was that a little city--or rather a suburban sprawl--sprang up on the former cattle ranch. First, in the early 1970s, there was a community of several thousand East Coast retirees, which earned Rio Rancho the sobriquet “little New York.” Then, as Albuquerque grew and the state began to offer mortgage subsidies to home buyers, young families began to move in, attracted by houses that can still be bought for as little as $40,000.

Rio Rancho stepped up its industrial recruiting efforts, scoring a major coup with the Intel plant in 1980.

Now the developed area of Rio Rancho--still just a quarter of the original tract--has incorporated as a city, with the old Amrep building serving as the town hall.

For businesses in search of refuge from the high land costs, expensive worker’s compensation insurance and deteriorating quality of life in Southern California, many parts of New Mexico are appealing.

The air is clear, the mountains close, the people friendly. The streets are safe, and the state is desperate to build a manufacturing base and reduce its historic dependence on mining, natural gas and federal jobs.

Almost any incoming businesses can get property and sales tax exemptions, worker training assistance, cut-rate electric power and “fast-track” approval of environmental permits. If there’s a problem, you can usually get Gov. King on the phone.

It’s a set of lures that simply aren’t feasible in crowded, polluted, cash-strapped California, and it makes an impression.

“They took the initiative, they got all the answers, they gave us alternatives . . . they took care of the paperwork,” said Paul Eskew, president of California Aero Dynamics, in explaining why he chose Rio Rancho.

“When we had our groundbreaking, the governor was there with his wife, the mayor was there and the city council and local business people. It was very nice.”

How does Rio Rancho afford all this? Amrep makes money selling land for retail establishments and houses; it can virtually give away the land for industrial development and absorb a loss on infrastructure and other investments, because jobs raise property values.

Lautman and his cohorts are proud of what they’ve helped build at Rio Rancho.

They boast that in competing with Austin and Salt Lake City and Las Vegas and Tucson (California isn’t even on the map), they’ve never lost a company they really wanted.

It’s all very personal: if you don’t hit it off with Lautman and Elliott and economic development director Sunny Tucker and the rest of the team over dinner at the Prairie Star, you shouldn’t come to Rio Rancho, because you’ll be seeing a lot of them.

To be sure, Rio Rancho is not for everyone. Though the Sandia Mountains hang magnificently in the background--and some of the more expensive lots are right on the Rio Grande--much of the town is a most uncharming expanse of cheap tract houses. It has little of the Latino cultural character that defines most of New Mexico. And for anyone used to California or the East Coast--or for any business that needs easy access to those markets--it all seems very, very remote.

The town also has a bit of a chip on its shoulder because many in New Mexico don’t give it much respect, regarding it as a bizarre foreign entity plopped down from the sky.

Ask residents of Albuquerque what they think of Rio Rancho, and the most common reaction is a giggle.

More ominously for Amrep, environmentalists and others opposed to limitless development are making their voices heard.

Some early Rio Rancho residents who came for the fresh air and fine vistas are not very keen on additional factories.

And some community groups complain that out-of-staters bearing false promises about the benefits of economic growth are ruining the heritage of the Latinos and Indians who have been living in New Mexico for generations.

“It’s a bunch of newcomers from New York and New Jersey, and they want to enjoy our quality of life,” says Jeanne Gauna, director of the Southwest Organizing Project, an activist group representing low-income Latinos. “That’s OK. But they’re our guests, not the other way around. This is our homeland.”

Gauna and other activists worry that too much water will be drawn from the aquifer under the city, and that toxic runoff will pollute the Rio Grande. A controversy is also raging over the construction of new roads connecting Albuquerque and Rio Rancho: they have to cross the river, and they’ll cut through a pristine area known as the North Valley.

Gauna also questions whether the state is really getting a bargain when it subsidizes construction of a plant such as Intel’s.

“Is this sustainable development?” she asks, citing Albuquerque’s disastrous experience with a GTE factory that closed.

“These companies practice economic extortion, whipsawing communities into taking development that may not be in their best interest.”

But others say that good manufacturing jobs are what New Mexico needs more then anything else: the state ranks 46th in personal income, and can no longer count on federal spending to keep it afloat.

Natives of the state, Lautman says, are benefiting far more than any outsiders from the new jobs and inexpensive housing.

Without the tax breaks, he observes, there wouldn’t be anything to tax at all.

If this debate sounds familiar, it’s because the same one--over the costs and benefits of economic development--has raged in California. In Rio Rancho, the developers seem to have the upper hand--for now.

“We kind of like it the old-fashioned way,” says Benecia Wilson, a waitress at the Rio Rancho International House of Pancakes.

And the new Intel plant? “It’s great, they can all come over here and eat lunch,” says Wilson. She’s comforted by the belief that chip-making is a “clean” industry--which it most definitely is not.

As development grows here, so too will anti-development sentiment, which is likely to make business more expensive--and thus slow growth--long before greater Albuquerque looks anything like Southern California.

That’s already happened in Santa Fe, the state capital.

Meanwhile, at Rio Rancho city council meetings, people argue over how to pay for schools and what kinds of social programs the city should offer to keep kids off the streets.

Who knows, before long people could be complaining about the Los Angelization of New Mexico.