The Santa Fe City Council is in agreement that the city needs a more reliable revenue stream. Yet that’s where its consensus on how to balance the budget appears to end.
Councilor Peter Ives, who represents the east side District 2, is calling for a property tax increase that could raise an estimated $7 million, but that proposal looks dead in the water.
The city must present a final budget to the state Department of Finance and Administration in weeks—the 2013-14 fiscal year ends June 31—and officials have been scrambling under Mayor Javier Gonzales’ new administration to assess the needs of City Hall, where spending has been cut by $6.3 million since 2008-09. Five years later, 336 fewer employees are working for the city government that needs to provide services to more than 13,000 new residents whose homes came into the city limits through annexation.
This fiscal year, the city planned for 70 percent of revenue coming into its $72.6 million general fund from gross receipts taxes on goods and services sold in Santa Fe. Only 4 percent of the fund’s revenue would come from property taxes on land, homes and commercial structures.
Ives argues that property taxes are a more reliable source of revenue than gross receipts taxes. The latter depends on consumer spending, which can suffer downturns during uncontrollable events like recessions and natural disasters, while monies from homeowners are more stable and less regressive.
Ives says his proposal would help pay for a city fire station to serve the newly annexed Southside areas.
But city officials are facing the prospect that the region needs a whole lot more than a fire station. For years councilors have known the city does not have enough revenue to cover the cost of annexation. A March 2012 report from the University of New Mexico Bureau of Business and Economic Research says the city would have to come up with an additional $3.6 million to cover annual, recurring costs to deliver services to residents covered in the latest phase of annexation. That’s on top of $5 million in one-time costs.
That didn’t stop committee opposition to the tax proposal. After 20 minutes of deliberation on June 2, District 1 Councilor Signe Lindell, District 3 Councilor Chris Rivera and chairman Councilor Carmichael Dominguez voted to table Ives’ measure because it didn’t account for how exactly the city would spend the money. A city spokeswoman tells SFR the mayor didn’t have a position on the measure but welcomed the discussion. Don’t expect much more discussion, however, as the vote effectively killed the proposal.
Not all of the spending would have been dedicated to public safety. Ives’ resolution stated the property taxes would help pay for public safety services related to annexation; technology infrastructure for the city; parks and recreation maintenance; and library costs.
The city is just one of the taxing authorities for Santa Fe residents, whose property taxes also go toward public schools, county and state services. Currently the city imposes a property tax rate of $2.87 per $1,000 of net taxable value on a property—far less than the rates of Albuquerque, Las Cruces and Rio Rancho. Ives’ proposal would have increased that rate to $4.87 per $1,000 of net taxable value.
City Hall observers will note Ives’ proposal could have been politically dangerous. In 2011, former City Councilor Chris Calvert faced a recall-petition drive in an off-election year after he and others proposed a property tax hike.
“This is a political decision made by the council and mayor,” says Karen Heldmeyer, a former city councilor who attended budget meetings. “Is it easier to raise taxes and not cut anything? Or is it easier to take a hard look at what the city is spending money on and seeing if anything needs to be cut?”