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City Faces Money Crunch

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Four consecutive months of reduced sales tax collections have put City Hall on track for a $10 million revenue shortfall this year.

The city, however, has slowed its spending to offset the reduction, and a budget surplus from last year should help cover the expected shortfall, officials said.

The real problem is the next fiscal year, which starts July 1, said Gerald Romero, Albuquerque’s budget officer.

“I’m certain we can close the gap (this year) if it should hold” on the current trend, Romero said in an interview Monday. “What I’m worried about is (next year). Fiscal ’14 is going to be the scary one.”

The city’s $476 million general operating budget for this year was built on an assumption of 2.4 percent growth in the revenue derived from gross-receipts taxes, which are similar to sales taxes. Instead, through the first four months of this year, the revenue is down 0.9 percent, compared with the same period last year.

That would put the city on track for about $10 million in reduced revenue from that source this year.

Romero said he and other city officials are going over the numbers to find out why revenue has been so sluggish. One big drop has been the “professional, scientific and technical” category that covers architects, attorneys and some construction-related professions, he said.

Retail trade and many of the other big sectors of the economy are basically flat, Romero said.

Rio Rancho also has seen a decline in gross receipts tax revenue, and Bernalillo County’s figure is just about flat, Romero said. This year’s shortfall in Albuquerque would reduce the baseline for the following budget year.

The bulk of the city’s general-fund costs are employee salaries and other personnel expenses, leaving the city little discretionary spending that’s easily reduced, Romero said.

“It would have to be positions, hours or programs — if we have to go there. I’m hoping we don’t,” he said. “… As far as department directors getting their services on the streets, it will hurt.”

Complicating the outlook for next year, Romero said, is that the state may make changes to the retirement system for public employees, which could raise city costs.

Also, the voter-approved hike in the minimum wage will raise the pay of some city workers — temporary employees, for example — about $1 million, he said.

The cost of utilities and medical insurance generally climbs too, Romero said.

On the positive, he said, voter approval of bonds to improve the Paseo del Norte and Interstate 25 interchange could boost the parts of the economy that depend on construction.

Next year’s budget crunch is still a ways off. In the meantime, the city is holding open many vacant positions, except for jobs that deal with public safety, such as police officers and firefighters.

The city is also hoping for better gross-receipts tax revenue in the remaining eight months of the year.

The city received its last report on the revenue Friday, showing the drop of 0.9 percent so far this year.

“It wasn’t good,” Romero said. “This is four months in a row of negative growth, and we’re supposed to be averaging 2.4 percent.”

Municipalities in New Mexico rely heavily on economic activity for their revenue. The gross receipts tax rate in Albuquerque is 7 percent, though much of the money goes to other agencies, including the state, not just city government.

The tax is similar to a sales tax, meaning it’s added to shoppers’ bills.

Gross receipts taxes tend to be a volatile revenue source, and it’s not unusual for the city to make adjustments to its budget during the year.

In late 2009, for example, when Mayor Richard Berry took office, he inherited a projected shortfall of at least $14 million. The city tends to save money when it faces such a shortfall by not filling vacant jobs. Berry also cut employee pay the year after he took office, but avoided widespread layoffs.

City Councilor Ken Sanchez said he hopes Albuquerque residents will spend money at local stores this holiday season — generating revenue for the city — rather than shop online.

At Monday’s council meeting, Sanchez said he hopes people “shop locally and invest back into your community.”
— This article appeared on page A1 of the Albuquerque Journal

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