Taxation and Representation

Cities of Española and Santa Fe want district court to nullify latest county tax increase

For years, dozens of businesses along Riverside Drive in Española have been coughing up the money for a variety of taxes imposed on them by Santa Fe County while receiving what they describe as a bare minimum of services in return.

It is just a fact of life of doing business in a city that straddles Rio Arriba and Santa Fe counties. When the county boundaries were drawn up, fate would have it that a portion of the thoroughfare would fall within the northern jurisdiction of Santa Fe County, for better or for worse.

But now comes the latest increase to the gross receipts tax, an additional one-eighth of one percent, scheduled to be levied against the businesses and the rest of the county starting July 1.

Only this time around, a few businesses on the south side of Española are calling foul. They're arguing that the state Legislature never intended for the city's businesses to pay what amounts to a county tax for purposes of funding county services.

And now they're suing the county in district court, where a hearing is scheduled Friday, June 26, before Judge Sarah M Singleton.

Attorneys for the city of Santa Fe will also be on hand and armed with the same script—that the county tax, approved by the Santa Fe commissioners in March, should not be applied inside the boundaries of the City Different.

In short, it's a tax burden without representation.

The tax increase creates an uneven playing field in the world of business, they claim, where the total sum of nickels and dimes and dollars are passed on to the customers in a city that already has imposed its fair share of taxes and increments inside its own house.

While the Santa Fe City Council and Mayor Javier Gonzales have remained relatively mum on the matter, citing the pending litigation, at least one councilor, Bill Dimas, says that from a personal standpoint, he doesn't think the gross receipts tax is effective.

"It's a regressive tax. It only serves to hurt businesses and the economy as a whole," Dimas tells SFR. Redress, he adds, should be sought in tax code reform.

The intent of the tax, passed by the Legislature two years ago, gives cities and counties the authority to increase their gross receipts tax rates to make up for millions of dollars in revenues lost from not being able to tax food and medical services.

Cities like Santa Fe and Española can levy their own version of gross receipts taxes as well but have yet to do so.

Which is why the latest county tax can seem so unfair: It will only serve as a double whammy when and if the cities of Santa Fe and Española decide to hike their own gross receipts taxes, their backs against the wall, their budgets in need of balancing.

Frank Coppler is the attorney in the case for the city of Española and a handful of businesses along Riverside Drive. He offers this analogy to drive home his point.

"If I'm having coffee with you and I'm talking to you and we're talking about where we live or where we do business, we either say the city or we say the county," says Coppler. "We refer to them as separate entities, right? Well, taxes should be no different, at least as it applies to this gross receipts tax."

Among the Española businesses he is representing: Johnny's Standard Motor Parts, Richard Lucero's Country Farm Supply and ACCU Blueprint and Copy, all on Riverside Drive.

That's just a sampling of 25 percent of the Española businesses that pony up tax money for Santa Fe County while their brethren, just a few blocks away in Rio Arriba County, pay a lower rate due to geographical circumstance.

Other businesses that shoulder the same burden but aren't named in the lawsuit include a host of retail shops, fast food restaurants like Burger King and McDonald's, a car dealership, an office supply shop and a series of gas stations.

As the taxes keep piling up in Santa Fe County, Rio Arriba County, by contrast, hasn't raised taxes in four years; the last increase was for its correctional center operations, says Deputy County Manager David Trujillo.

Cities in New Mexico can impose their own taxes, but they also pay the rate of the county in which they’re located. Here are the current tax rates:

  • Unincorporated Rio Arriba County 6.5%
  • City of Española (in Rio Arriba) 7.875%
  • City of Santa Fe 8.1875%
  • City of Española (in Santa Fe) 8.5625%
  • Unincorporated Santa Fe County 6.875%

Source: New Mexico Department of Taxation and Revenue

And Christopher Madrid, in charge of the county's economic development, says Rio Arriba County commissioners are opposed to raising taxes

"Our commission fights hard to not even raise one increment," Madrid says. "We understand our community doesn't need more taxes."

Which is why it comes as no mystery that some of those businesses along Riverside Drive would like to hold a special election and opt out of Santa Fe County's jurisdiction, in effect creating a tax safe haven.

It's a perennial thought that surfaces every time a tax increase is imposed.

"It's been rumbling around for some time now," Madrid says.

A much easier and quicker solution would be to seek resolution in court, which is what Coppler hopes to accomplish.

He's hoping Judge Singleton hears their concerns and postpones the tax until Jan. 1.

The way Coppler sees it, a delay in the tax would make perfect sense in the event that the cities of Santa Fe and Española win their case. That way, Taxation and Revenue officials won't have to backtrack and recoup the revenues collected between July 1 and the time of resolution.

"This way, we avoid a lot of headaches," he says.

Editor's note: An earlier version of this story gave the wrong rate for unicorporated Santa Fe County and the city of Espanola within Rio Arriba County in the table. 

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