On April 22, Governor Michelle Lujan Grisham announced that New Mexico has “flattened the curve” and is on track to avoid a shortage of hospital beds as it confronts the coronavirus outbreak. However she still announced that she was extending the quarantine orders to May 15. She also announced that state officials can begin gradually easing up on business restrictions. Lujan Grisham said that her 15-member Economic Recovery Council will provide the Governor’s Office with advice about a “slow reopening” of the state’s economy. She also made is clear that New Mexicans should not expect life to go back to normal any time soon. Large public gatherings will likely remain off-limits for the foreseeable future and restaurants are still limited to take out order. John B. Strong offered his thoughts on what will help New Mexico to recover now that “reopening” of the state is on the horizon.
JOHN B. STRONG GUEST COLUMN
John B. Strong is a private business owner in New Mexico and an investor. Mr. Strong has been investing in startups since 2004. He is a co-founder or board member at several different companies, mostly in technology, healthcare, and financial services. Mr. Strong describes himself as being “obsessed with entrepreneurship and small businesses. Mr. Strong has been a contributor to this blog in the past.
(EDITOR’S NOTE: The opinions expressed in this article are those of John B. Strong and do not necessarily reflect those of the political blog www.petedinelli.com. Mr. Strong was not compensated for the column).
“New Mexico’s economy will recover from the effects of the pandemic. In the aftermath of this pandemic, we will have an historic opportunity to re-make our economy for the new century. To build new technology and industries that can dramatically reshape our workforce and lead us into the future. There has never been a better time to focus on these problems, and they have never been more important. Here’s a few ideas on what we can do to speed up the State’s economy and make it last.
Over the last year, I have written on several different economic and policy subjects for our legislature to consider. Given the current times, I thought it might be a good time to revisit some of them as our elected leaders start to discuss the recovery from this historic pandemic.
Let’s start with Liquor license reform. I wrote about this last July and you can read that here: https://www.petedinelli.com/2019/07/24/a-serious-conversation-on-liquor-license-reform-in-new-mexico/
Not many industries have been devastated during this time as badly as food and beverage. Small locally owned restaurants have never had a level playing field in New Mexico when it comes to alcohol, trying to compete with multimillion dollar chain locations, large hotels, and Casinos who can shell out up to and over $500,000 for the right to sell liquor by the drink, while small family restaurants are limited to beer and wine because of the cost of these licenses.
It’s long past time to get serious about reforming this system. Here’s one way to do it: of the 1, 411 licenses out there about half are retail package (ie: Walgreens, Convenience stores, Grocery stores). About half are restaurants that sell by the drink. The retail package licenses are not the big problem, so leave them for another time. The big problem in inhibiting competition and fairness are the restaurant licenses.
If we placed a small tax (about 5%) on liquor by the drink, and about (2.5%) on package sales at stores we could likely raise about $50-$70,000,000 per year. Bonding against that revenue we could purchase back all of these licenses and cancel them, going instead to a yearly license in the $1,000 per year range. The bond could be paid off over 4-5 years for this and you would then have a very steady stream of income to allocate to something else. I argued that not only would that put these businesses on a level playing field with large chains, but you would also have hundreds of new businesses open, including small music venues, comedy clubs, bistros, and speakeasies.
In addition to this, in cities like Albuquerque and Santa Fe in particular, we can begin to reclaim some of the entertainment dollars that are lost to venues outside of the city. Currently, a large percentage of entertainment dollars by Albuquerque residents are spent at casinos on concerts, dining, alcohol and gaming, depriving the city of tax revenue that is needed to pay for city services.
Of course, many will say this is too complicated, that there are legal challenges, and the lobby for the license holders is too powerful, but that is why we have a legislature … they can address these issues. One thing is certain though. The subject of reform is wildly popular with the public.
Let’s move on the emerging Blockchain economy. I wrote about that here:
I argued here that even though Wyoming is leading the nation in staking a claim to this multitrillion-dollar industry, New Mexico is the logical home for it. We have the highest concentration of PhD level brain power in the world with two national labs, and a competent research University system. Wyoming, has none of that, and yet they have landed millions of dollars in startups and new businesses in this emerging industry simply by-passing legislation making it attractive to locate there. Colorado has tweaked their own laws and attracted more than $100,000,000 in investments in the state.
The point here is that the companies in this emerging technology are not asking for money, but legislation to create a favorable climate to do business, and experiment in an industry that is so new and groundbreaking that there is little law and regulation that covers it. Wyoming has had great success by creating a “sandbox” that exempts these companies from certain rules and regulations while they experiment with new products and technologies.
Let’s be clear, the blockchain will revolutionize all aspects of business and communication, and it is likely the only industry that can grow enough to actually replace our dependence on the Permian oil fields. It would be irresponsible not to do what we can to make New Mexico a national leader in this space.
Lastly, let’s talk about Boot Camps. I wrote about that here:
https://www.petedinelli.com/2019/10/31/john-strong-new-mexico-needs-a-moonshot-in-technology/
Boot Camps, specifically for software programmers and engineers, as well as Data Scientists are in critical need in New Mexico. Local companies such as RS21, Real Time solutions, and many others are having difficulty in recruiting and hiring programmers and Data Scientists. The need is real, and people like Charles Rath at RS21 will tell you it is much larger than we think. The problem is that these boot camps are not covered by traditional student loan programs, and instead rely on cobbled together bits of funding from philanthropic groups, the state itself, and grants from companies in the industry.
Most of these camps cost approximately $10,000 and in completion have a placement rate of over 85% in jobs that start at or above $50,000 per year. Instead of graduating dozens from these boot camps each year we should be graduating hundreds. The need is there and the State should simply find the money to implement a tuition program for these students. The return on this investment would far outstrip other economic development incentives such as rebates to the film industry. Once you place someone in the job market in this industry, they are self-sufficient and need no further help.
Coupled with the job multiplier of 4.3 for these positions, and the fact that that multiplier is heavily weighted to professions is reason enough to find a way to fund as many students as possible. It is becoming very clear that traditional 4-year degree programs are simply not adequate for the new economy, where specialized technical and computer related jobs are quickly gaining in importance. We would do well to mimic the medical fields, where technical certificates and short degree programs are now a staple in training everything from dental assistant, phlebotomists, and medical technicians are now the norm.
Finally, let’s talk about small business startups. New Mexico has a very vibrant and active startup industry, and many notable emerging companies in technology, healthcare, and bio-science. We are fortunate that informal groups such as Kevin and Diana McDonald’s Entrepreneurs club have have brought this community together to meet, mingle, and discuss the needs of these young companies. Most of them rely on “Angel” funding, and the small grants from incubators from ABQ ID and T.J. Cook. Other important players are Kyle Lee at CNM Ingenuity as well as Stuart Rose and his Bio-Science center as well as John Chavez, Bill Bice, and Harold Lavender.
There are a number of state programs available for small business startups to seek money and funding, but they are onerous to apply for, and frankly, not well known or understood. It would be much more efficient to simply put an amount of money into the hands of these players, who know these businesses and founders well, and are in front of them often. They have made many investments already, and would likely want to double down on some, and make investments in others if they had the funding. Giving them the ability to make these investments would be the most efficient way to help the startup industry and ensure that most of these companies can survive this time of upheaval. Many of these companies have proven their concepts and already have revenues and partnerships, but will need that runway for survival while they grow a bit more. Business leaders such as Dale Dekker and Paul Silverman have written about these issues recently as well. You can read their comments here:
Not many of us will argue the importance of these issues, but unfortunately, the ones who will argue, are the ones who can solve it…. our legislators, who have not, with a few exceptions, shown much appetite for bold actions, and investment in our future, so it is up to each and every one of us to let them know we are counting on them to pay close attention to the recovery, and our future.
And one final comment: We are very fortunate to have had Governor Michelle Lujan-Grisham at this critical time. She has been ahead of this pandemic from the beginning and arguably performed better than any other Governor and kept our state as safe as possible, but in the end, I would caution, that people will forget that they may have been saved from illness, but they will remember if they’re jobs, their businesses and their families futures were saved.”
Below are links to other Dinelli Blog articles written by John B. strong:
A Serious Conversation On Liquor License Reform In New Mexico
John B. Strong: Damage From The Failed ART Project Goes Far Beyond Just Central Avenue