A controversial vote by the Senate on Tuesday night is sending shockwaves of fear among city officials statewide.
The Senate approved a measure that would remove tax from food and medical practitioners, but would put local governments in harm of losing millions of dollars.
Officials in eastern New Mexico said the move would seriously hamper their budgets if it becomes law.
Gov. Bill Richardson had proposed increasing the gross receipts tax rate on businesses and nonfood goods and services. His plan would have potentially offset the loss of revenues from the tax cuts.
The new plan that was approved on Tuesday would increase the gross receipts tax rate by one-half cent within New Mexico cities. It would generate more than $140 million that would flow to the state.
But unlike Richardson’s proposal, local governments wouldn’t get any funds to deal with the losses of revenue, which are expected to be anywhere from $60 million to $70 million statewide.
Sen. Gay Kernan, R-Hobbs, supported the alternative measure, because she didn’t like what the governor’s proposal would have done.
“We don’t want to do anything to harm cities,” Kernan said. “The bill is still going through the process. It’s still too early to tell what kind of impact this will have. Our intention though is not to harm cities.”
While lawmakers may not be out to hurt local government budgets, many municipal officials believe that’s exactly what they are doing.
“Every community depends greatly on gross receipts,” said Portales Mayor Orlando Ortega. “If there’s nothing to replace that funding I don’t know what we’re going to do.”
Portales officials estimated they would stand to lose about $450,000 if the Senate’s vote gets approved.
“We just hope this doesn’t pass,” Ortega said.
Clovis would lose $1.6 million through the new plan, according to a press release from the city manager’s office.
“Gov. Bill Richardson promised to hold cities harmless on food and health practitioners,” the Clovis statement says. “The city of Clovis needs citizens to call and help us with this legislation. The city of Clovis cannot take this type of cut.”
Clovis Mayor David Lansford said the bill concerned him.
“My take on this is not favorable,” he said. “I’m for lowering taxes but there needs to be a provision in this tax decrease that doesn’t adversely affect municipalities.”
Lansford said the average citizen would lose if the bill is approved.
“If this passes, local services will be reduced,” he said. “Local government’s ability to meet the needs of citizens will be reduced.”
Officials will have to either cut services or raise taxes, Lansford said.
“They (lawmakers) are making a move to make themselves look good at the expense of local governments,” he said. “I don’t know any local citizen who wants to see their local government have to raise taxes or reduce services.”
Portales City Manager Debi Lee said the picture for local governments would be bleak if the plan was approved and said the city would have to take tough steps to deal with the funding loss.
“We would have to analyze what exactly the loss is,” she said.
“We would need to analyze what the dollar amount would be. We would begin to look at every single line item and any extra expenses. Merit increases would all be gone.”
She said the city would have to identify revenue sources.
But she thought it was unlikely the bill would make it into law.
“I talked to several legislators (on Wednesday) and they said they wouldn’t do anything that would hurt local governments,” she said.
Rep. Jose Campos, D-Santa Rosa, called the tax “very upsetting.”
“It was stupid what they proposed,” he said. “I was surprised with their action. It just hurts all kinds of municipalities, it would hurt everything.”
Rep. Anna Crook, R-Clovis, said she supported the Senate’s vote, but didn’t want anything negative to happen to local budgets.
“I loved the vote,” she said. “Of course if I thought that it would remain I would be concerned. I don’t think it will remain in the form it is now. I support the concept, but don’t think it’s good tax policy.”
If the Senate doesn’t reconsider the plan it would next go to the House.