Cashcoaster

As recently as their March 30 meeting, the governing body continued to hammer out the details of a deficit-closing framework to balance the budget for the fiscal year that begins in July.

Yet the process has seen officials swinging widely from plan to plan. Increase gas taxes? Never mind. Increase property taxes? Not enough votes. Squeeze out a few more bucks some way? Somehow? They're on it.

They still don't appear to have landed on a solution. And ideas like taxes on part-time residents are still popping up.

Take that last council meeting, for example, when Finance Director Oscar Rodriguez literally got out a marker and drew lines through previous calculations as a hush fell over the crowd in the room.

The final numbers he jotted down outlined $10.7 million to $11.5 million in increased taxes and fees or cuts, with reserves covering the balance remaining between what the city estimates it will earn and what it needs to spend.

City administrators are now facing a mandate to recommend $4 million in cuts as prescribed by a "budget framework" plan that the council adopted. City councilors failed to approve a property tax that was on the agenda but did vote to increase the gross receipts tax on goods and services by ¼ cent on Jan. 1, 2017, enacting a tax that replaces one that expires then, taking a net-zero effect on local pocketbooks. As a marker of just how fluid these talks were, though, the expected cashflow from that change was the first edit Rodriguez made to the figures at the last City Council meeting, walking in and making notes to show the hunt was on for another $800,000.

A franchise fee for the water fund is also expected to generate somewhere between $700,000 and $1.5 million. It's another bureaucratic move that isn't due to have an immediate effect on ratepayers. The remaining roughly $3.5 million of the projected $15 million deficit in the city's general fund will be covered by cash reserves.

Plugging that hole with cash isn't necessarily prudent, Councilor Carmichael Dominguez, who chairs the finance committee, tells SFR.

"I don't think that it's necessarily a wise choice in creating a balanced budget," Dominguez says, yet he called the approach "plausible" since it's a "one-time expenditure."

The plan also makes a big assumption: that revenues largely dependent on luxury spending will continue to increase as projected. If that doesn't pan out, they'll have to look at other sources of increasing revenue, such as increasing fees or borrowing even more from the water department, or additional cuts, Dominguez says.

As the night wore on, councilors floated ideas on the fly that left City Attorney Kelley Brennen shaking her head and saying, "No…"—as in no, the governing body can't pass a resolution with a range instead of a set number. The debate even earned a muttered "This is crazy," from recently elected Councilor Renee Villarreal.

A property tax failed on a 4-4 vote, with Mayor Javier Gonzales explaining he voted against it "because I don't think it's right to use a property tax to fix the deficit," but he added that doesn't mean the city shouldn't pursue a more balanced revenue stream.

That keeps the city on the financial rollercoaster ride it's been on since the recession hit and gross receipts taxes dropped, and it continues a tax that councilors often concede is regressive—hitting the poorest in the community hardest.

"What got us into this mess is reliance on gross receipts taxes and how they don't perform. It's a fluctuating revenue source," property-tax supporter Councilor Joseph Maestas said during last month's meeting. "We're kind of using the same bad medicine to correct this problem, and that's why diversifying our revenue enhancements will help protect us in the future."

Maestas is not alone.

Recently elected Councilor Mike Harris, who also voted in favor of the tax, says the city needs to do a better job of establishing "an understanding on the part of citizens" about how it would work. "Over time, that's what we really have to move towards to have something we can anticipate with a little more confidence certainly than we have now," Harris said at the meeting.

That 73 percent of the city's revenue comes from gross receipts tax, and less than 10 percent from property taxes, fails to provide the blend of revenue sources that would stabilize the government during economic downturns, the mayor agreed, but he pointed to challenges with property tax increases pricing out people on low or fixed incomes. He indicated a tax that takes aim at the 4,000 homes owned by people who don't live in New Mexico full time, but see the same level of city services delivered to full-time residents, might be more in order.

Finding cuts to programs and operations is not expected to be easy, with months already having passed since officials started talking about bridging a serious gap and not many such cuts emerging.

The work to balance the city's checkbook will also continue during budget hearings, in which the public will be invited to weigh in.

Former city councilor Karen Heldmeyer compared the discussion to throwing darts at a board.

"They wanted to correct the budget, but they didn't want to do anything that might offend somebody, so everything that was suggested that might offend some subgroup was rejected—and they ended up not balancing the budget," Heldmeyer says. "The savings amounts that they were predicting were going to be difficult to reach as it was, and by increasing the amount of savings, they've made it even more difficult."

The budget is due to the state for approval in May.

Santa Fe Reporter