Possible change in Los Alamos lab contract could affect taxes for NM, local government

By Susan Montoya Bryan/Associated Press
Tuesday, December 29th, 2015 at 12:24pm

SANTA FE, N.M. — Tucked into the mountains of northern New Mexico is one of the nation’s wealthiest counties, home to scientists, engineers and other contractors who have kept a federal laboratory that was the birthplace of the atomic bomb humming for decades.

However, the state and community of Los Alamos – long bankrolled partly by millions of dollars in tax revenue from operations at Los Alamos National Laboratory – may now have to prepare for more slender coffers as federal officials weigh the future of the lab’s management contract.

If a non-profit is chosen as the contractor to run Los Alamos National Laboratory, state and local government would lose millions in tax dollars. (AP Photo/Albuquerque Journal)

Federal officials recently confirmed that the $2 billion contract now held by a consortium that includes the University of California, Bechtel Corp. and other for-profit companies will be put out for bid due to repeated failures over the past four years to meet performance goals.

Just this month, the lab managers were warned they would be docked nearly $8 million in incentive fees for potential contamination stemming from the handling of highly enriched uranium at a Nevada facility and for an incident that left one worker with burns over 30 percent of his body.

That followed losses the previous year that stemmed from lab failures that resulted in a radiation leak and the indefinite closure of the nation’s only underground nuclear waste repository.

If new management is selected, its structure will be key to ensuring gross receipts and other taxes continue flowing to the state and local governments. If it is a nonprofit, for example, officials say that would put a dent in revenues.

The federal government is still a long way from drafting a new contract and vetting bidders, but local leaders say they’re be paying close attention given the lab’s influence on the region’s economic security.

“That’s been the community’s history for almost 70-plus years now. Clearly the lab is the biggest employer not only in the county but the region,” said Harry Burg e ss, Los Alamos County manager.

Burgess estimated the majority of the county’s revenues – around $40 million – come from operations at the lab and the remainder comes from local spending by lab employees.

When the lab was managed solely by the University of California prior to 2006, revenue averaged around $28 million a year since the university had a different tax status, he said.

A 2011 study by economists at the University of New Mexico estimated operations and construction at Los Alamos lab generated about $72 million in gross receipts tax revenue for the state for the 2009 tax year, while tens of millions more went to Los Alamos, Santa Fe and Rio Arriba counties.

Experts say gross receipts taxes for lab operations are now in excess of $100 million in most years.

State finance officials say overall recurring revenue for New Mexico reached a record high of more than $6 billion for the 2015 fiscal year, with one-third of that being taxes on goo d s and services.