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The House Thornburg Lost

Behind Santa Fe’s devastated mortgage company lies an American story of triumph and loss

April 8, 2009, 12:00 am

While delighting investors, Thornburg angered neighbors. The issue was relatively pedestrian: traffic.

In 2003, a large landowner, Santa Fe Estates, announced plans to sell hilltop property to Thornburg. Neighbors had thought the land would stay vacant, and feared development would make Tano Road a death trap.

“Everybody’s happy and, all of a sudden, here’s Thornburg,” Patrick Collins says.

Calling themselves Concerned Citizens of Santa Fe North, Collins and few other well-heeled residents sued to stop the construction of Thornburg’s planned headquarters on Ridgetop Road. For many years, his companies had rented space downtown on Marcy Street.

The lawsuit, which failed, took years to work through the courts. It was divisive. “People were getting really pissed off,” Collins says.

Meanwhile, Thornburg’s political allies pushed the project forward.

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Mallorie Gura

Thornburg’s new campus on Ridgetop Road was built thanks to property tax breaks for his companies.

On Jan. 4, 2007, Gov. Bill Richardson summoned Concerned Citizens to his office, Collins says. He felt Richardson wanted his group to back down.

The governor said Thornburg was a good friend of his, that Thornburg was a good civic leader, that the financial businesses that Thornburg had created in Santa Fe created high-paid jobs. And that he wanted that building—he being the governor—to be a monument of the potential of Santa Fe to be a financial center,” Collins says. “And so we smiled and said, ‘That’s wonderful, but we haven’t changed our minds.’”

Richardson spokesman Gilbert Gallegos refused comment “on someone’s impression of a private meeting [the governor] may have had.”

Whether Thornburg got an assist at the state level is unknown, but he openly lobbied at the local level. Thornburg wanted the city to help finance his new campus with a $45 million industrial revenue bond, similar to the deals he had arranged in New York. Critics were a minority.

“We were targeted,” Santa Fe Councilor Miguel Chavez, who voted against financing the Thornburg campus in 2007, says. Thornburg funded Chavez’ Council opponents in the 2004 and 2008 elections.

Former Councilor Karen Heldmeyer, the other “no” vote, says she grew frustrated by “backroom deals” and decided not to seek re-election. She says it’s fair to say that Thornburg bullied the city.

“Rather than just rolling over and playing dead, the administration could’ve said, ‘There’s good points on both sides. Let’s see what we can negotiate. Let’s show some leadership.’ That wasn’t the case,” Heldmeyer says. “It was, ‘Oh my god, it’s Garrett Thornburg…He’s rich. He provides jobs in town. He backed several people’s Council races. Therefore, we should give him what he wants.’”

Other local institutions rallied for Thornburg. The New Mexican said residents “should be glad the company didn’t grow weary of NIMBYism and forsake Santa Fe for Santa Barbara or some other la-di-dah address,” in an editorial against Concerned Citizens.

“Any way they could find to put a favorable slant on this, they did. The [Albuquerque] Journal asked a few questions. Nothing ever came of it,” Collins says.

The New Mexican’s headline when the City Council approved the bond: “Thornburg deal benefits schools.”

That was an overstatement, at best.

The new Thornburg campus, which opened this year, looks down over the city like a citadel. The bond deal behind it resembles a labyrinth.

“That deal was done to avoid taxes,” Lewis Pollack, another Concerned Citizen, says.

When most people buy a home or office building, they pay annual property taxes. That money goes to the state, the city, the county, the public schools and Santa Fe Community College.

Thornburg got a better deal than any ordinary homebuyer would be able to negotiate. Under the terms, the city owns the campus property and leases it to Thornburg. The city then uses the rent money to pay down a $45 million, tax-exempt bond it sold directly to Thornburg at 15 percent interest. In 2037, when Garrett Thornburg is 91 years old, his company will purchase the land and building for $1. Then and only then will the company pay property taxes.

In theory, the deal is a wash for the city. Yet Thornburg’s counsel estimated on paper the deal would save his companies $397,000 a year in property taxes, because Thornburg doesn’t technically own the property.

Instead of taxes, Thornburg agreed to pay the city a flat sum of $25,000 a year. However, according to Thornburg’s possibly lowballed estimate, the state, the county and the schools are out $368,000 a year.
“I don’t think it ever came up,” former County Commissioner Jack Sullivan says. “There’s nothing we could’ve done except jawboned if we thought it was a bad idea.”

In their bond application, Thornburg’s team noted that he donates $35,000 a year to Partners In Education Foundation, a nonprofit, and more than $100,000 a year to Santa Fe Public Schools. SFCC is supposed to get $15,000 a year for the next decade starting later this year, spokeswoman Janet Wise says.

Donations are voluntary. Unlike taxes.

“Shouldn’t we all go through the same process?” Chavez says. “We don’t know where the money’s going, what the impact is or what the rate of return is.”

Peter Dwyer, a former Santa Fe city attorney, says industrial revenue bonds are “an inducement to try to get things that are of benefit to the community as a whole.” The supposed public benefit of the Thornburg campus? The companies pledged to “create 100-200 new permanent jobs.”

That’s unlikely, with Thornburg Mortgage now bankrupt. Does the city have recourse?

“No. Because we’re not at risk. We haven’t put out any money,” City Attorney Frank Katz, who signed off on the bond, says.

Katz’s predecessor, Dwyer, says the public doesn’t care. “They don’t want us to spend our time fighting with a mortgage company that’s already failing over whether it’s producing enough jobs,” Dwyer says.

City Housing and Community Development Division Director Kathy McCormick agrees. “The real issue is, what are you trying to achieve?” she says. Now, she’s focused on “pulling together the community.”

The legalese in the deal states repeatedly—and in ALL CAPS—that the city is at NO RISK if Thornburg vacates the space. Thornburg spokesman Miller says that won’t happen anyway and that the payments are up-to-date.

According to Heldmeyer, city officials feared for the health of the mortgage company even before the deal was struck—and kept those fears private.

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