San Juan County, New Mexico, residents will see yet another increase to their gross receipts tax rate starting in 2021, which county officials said will help fill a $4.6 million funding gap.
The multimillion-dollar gap was caused by declining industry revenues, compounded by the economic impacts of the COVID-19 pandemic. Budgetary belt-tightening alone won’t replenish the money, county officials said during a county commissioners’ meeting in mid-September.
The one-eighth of 1% tax increase, which drew some community debate and one No vote from a commissioner, equals about 5 cents for every $40 spent. It taxes anyone engaging in business in the county.
The county’s gross receipts tax rate was 6.563% before the vote, according to the New Mexico Taxation and Revenue Department.
“In one meeting, leaders wanted to do 12%,” said Commissioner GloJean Todacheene. “I think this is manageable. I know times are hard right now, but it’s not really exorbitant.”
Since the COVID-19 pandemic hit, revenue from the tax has been about 16% less than the projected amount in the budget, county staff members said.
Commissioner Jim Crowley, the only member to vote against the increase, shared concerns about affordability and short-term solutions. Drawing from community feedback, he said people with the lowest incomes would likely be impacted the most.
“Ultimately, we have to look at a long-term plan. In some ways, this is a one-year fix. And we’ve been working on one-year fixes for at least five years and we have trimmed greatly,” Crowley said. “It’s time we look at other things.”
This is the third gross receipts tax increase since 2015. The county would have to hold an election to increase it again.
Two of three community members who submitted comments to the public hearing supported the idea, while one said the county should make budget cuts instead of asking the community to pay more in taxes.
“We’ve been making cuts as we can through time,” said Mike Stark, county manager.
The county has eliminated 78 positions by means of attrition since 2010. Almost 30 of those were eliminated after the pandemic hit New Mexico in March.
San Juan County faces the continual decline of its mainstay industries, oil and gas and coal-fired power. The county is also facing changes to legislative mandates. Then, there are challenges related to economic development projects that are in progress, but nowhere close to completion, Stark said.
“With the losses we’re anticipating going into next year ... it’s going to be services and programs that have to get eliminated, and ultimately that means people,” he said.
If the tax was not approved, Stark said the county would face an 11% reduction in its workforce, or 70 jobs. Building inspection services, McGhee Park events and activities, and the golf course would be the most likely cuts. There would be less road maintenance and fewer recreation programs.
Public safety would also have been impacted. The San Juan County Sheriff’s Department would first look at eliminating non-mandatory efforts, like the helicopter program, school resource officers, the GRIT self-defense program and the internet crimes against children program. Then it would have to consider cutting up to 15 positions.
Without cutting public safety jobs, “we would have radical changes in the levels of service that we provide,” Stark said.
Because commissioners passed the increase – which covers much, but not all, of the $4.6 million funding gap – those cuts will be less severe.
“I’m truly supportive of this thing,” said County Commissioner Michael Sullivan. “I think that it’s a good step. I would much rather do gross receipts taxes than property taxes. I’d like to see our services stay at the same level.”