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City sales tax income lower this year

Courtesy of the CITY OF RIO RANCHO
Courtesy of the CITY OF RIO RANCHO
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The City of Rio Rancho’s gross receipts tax general fund revenue for the just-ended fiscal year dropped almost 3 percent compared to the year before, according to the city.

Total revenue from gross receipts tax, a sales tax, that went to the general fund after adjustments for other obligations was $24.3 million for the 2012-13 fiscal year, according to a report from city Financial Services Director Olivia Padilla-Jackson. That number was 2.9 percent less than the 2011-12 fiscal year, according to the city.

The drop in gross receipts tax (GRT) income comes after two years of growth.

City spokesman Peter Wells said city staff anticipated GRT revenue would be lower in the 2012-13 fiscal year because the hospital construction projects, which had provided a boost, were over.

“Projections by city staff in the balanced FY (fiscal year) 14 budget for gross receipts tax revenue have it on the rise each year through FY 18,” Wells wrote in an email.

Financial services staff members predict GRT will make up 46.1 percent of this new fiscal year’s budget, he said.

According to the report, 10 sectors that generate sales tax revenue declined and 12 grew from July 1, 2012, through June 30.

The manufacturing sector was the strongest-performing sector this past fiscal year, growing by 133 percent, or almost $400,000. Most of the growth came in the last six months and in large spikes during several months, according to the city.

The reason for the growth is unclear because due to taxpayer confidentiality, the state doesn’t provide the city enough information to discern the cause, Wells wrote.

January through March, 93 companies reported in the manufacturing sector, according to Padilla-Jackson’s report. Of those, 49 percent were in New Mexico and 38 percent in Rio Rancho.

Companies must pay gross receipts taxes for the business activity they do in Rio Rancho, even if their offices aren’t located in the city.

The health care and social assistance sector, combined with the medical hold-harmless distribution, grew 17.3 percent in the just-ended fiscal year, the report said.

Hold-harmless distributions are payments from the state to make up for loss of income to local governments following the removal of gross receipts tax on food and medical care during former Gov. Bill Richardson’s administration. The state is slated to phase out those distributions by the 2029-30 fiscal year.

Also, accommodation and food services grew 3 percent last fiscal year, continuing from growth of 12.4 percent and 10.7 percent in the preceding years. The related food hold-harmless distribution grew 5.2 percent this past fiscal year, following growth of 4.9 percent and 3.4 percent in the two fiscal years before.

Real estate and rental leasing grew 14.7 percent in fiscal year 2012-13, rising above $500,000 in income.

Finally, the administration and support, waste management and remediation sector brought in 21 percent more in the past fiscal year, nearing the $500,000 mark. The sector includes office administration, landscaping and janitorial services and waste management, among other things.

On the other hand, the construction sector experienced the largest decline, 23 percent, the past fiscal year, according to the city. However, that’s an improvement from November, when it was down 35 percent.

This past fiscal year is the second that experienced a decline in construction GRT. Fiscal years 2010-11 and 2011-12 benefitted from construction of Presbyterian Rust and UNM Sandoval Regional medical centers.

“This nonresidential activity supported the construction sector during a time when residential construction reached historically low levels,” Padilla-Jackson wrote in the report. “Staff anticipates that the construction sector will grow moderately in FY14 as single-family housing construction increases, approaching long-term historical averages.”

The utilities, finance and insurance, core retail and educational services sectors also declined last year.

Five-year trends

Despite this past fiscal year’s drop in the utilities sector, overall that area’s GRT has increased over the past five fiscal years. The same holds true in retail, with slow, steady increases over the past five years, according to Padilla-Jackson’s report.

Both sectors had higher GRT revenues in the just-ended fiscal year than in fiscal year 2008-09. Construction revenues have been dropping during the same time period.

Retail, construction and utilities are the largest sectors of Rio Rancho’s economy, bringing in more than $3 million a year each.

In sectors generating between $3 million and $1 million a year, service-related sectors have seen notable growth in the last five years, according to the report. These include information and cultural industries, health care and social services, and the medical hold-harmless distribution.

Accommodation and food services have grown 33 percent since fiscal year 2008-09, and the food hold-harmless distribution has grown steadily, closely following the overall retail sector, according to the report.

In the small GRT sectors, those bringing in less than $1 million a year each, manufacturing, real estate and rental leasing, and administration and support, waste management and remediation have grown significantly, according to Padilla-Jackson’s report. The third-listed sector has grown by double-digit percentages the past few years.

June GRT distribution

The June GRT distribution, based on April economic activity, was almost $1.2 million for the general fund after adjustments. That amount is about $172,000, or 12 percent, below the monthly estimate.

It was also 5.8 percent lower than June 2012, according to the report. The construction sector and utilities sector saw decreases of 33 percent and 35 percent, respectively.

The construction GRT revenue for June was $270,000, $130,500 less than June 2012. However, the city received a refund of about $181,000 from the state, according to the report.

The refund comes after a cost segregation study identified aspects of the Santa Ana Star Center construction project that weren’t subject to tax, Wells said.

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