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Saturday, June 20, 2009
June Gross Receipts Tax Revenue Down 15%
By Kiera Hay
Journal Staff Writer
Just weeks after passing a reduced budget for the coming fiscal year, the city of Santa Fe may be in for further pain.
The city's June gross receipts tax revenue dropped 15 percent compared to the same month in 2008 — the steepest decline the city has seen since at least the beginning of the decade.
Though the city had expected the numbers to be down, the 15 percent drop was worse than anticipated.
June GRT revenue, which is based on business conducted in April, clocked in at about $6.1 million. In June 2008, the figure was around $7.2 million. These latest numbers mean that the overall annual drop in GRT revenue for the current fiscal year, which ends June 30, is now 3.2 percent instead of the expected 2 percent.
"It's a concern when you see a drop like that, but we're in a position to make good solid recommendations and to handle this," City Manager Galen Buller said Friday.
The city has taken a "prudent and conservative" approach to its budget in the face of the recent economic downturn, he added.
A "restructuring" committee, as well as department heads, will gather next week and begin investigating budget balancing measures, Buller said. A contingency plan will be put in place in case the steeper-than-anticipated drops continue through August.
"The topics we're going to discuss are the ones we've been discussing as we've looked at that budget up until now," Buller said.
In the meantime, all future hiring, promotions and transfers of permanent nonsafety employees will be frozen for at least 30 days pending further revenue information.
A 43 percent decrease in tax revenue from construction caused the most damage, according to the city. Other financial pain came from a 12 percent drop in the "accommodations and food" sector, an 11.6 percent decrease from "professional, scientific and technical" areas, and an 8 percent decline in retail.
"The city has taken a prudent and cautious budget approach in the face of this unprecedented economic downturn. Despite the gross receipts downturn for April, we are taking action to reach the end of the fiscal year in the black," Mayor David Coss said in a press release issued Friday. "The city can accelerate additional cost savings and efficiency measures already proposed in the budget approved by the City Council for next fiscal year."
The June revenue reduction will leave the city's general fund with $700,000 less than expected. The city press release said, "This will reduce the undesignated fund balance in the General Fund by half to $700,000." Finance director David Millican was not available Friday for questions.
The budget passed by the City Council on June 10 contained several million dollars in cuts, though the general public shouldn't feel too much of an impact over the next year.
It was based on predictions by city staff that the first half of the 2009-10 fiscal year, which runs from July 1 to June 30, would see a gross receipts tax reduction of 9 percent, while the latter part of the year would experience an upswing of 1 percent.
Several councilors expressed concern that the forecast was too optimistic. An amendment attached to the budget passed June 10 mandated that the city create a budget balancing contingency plan if revenues dipped below estimates.
The City Council will ultimately decide whether to take up more budget balancing measures. Ideas will be discussed by the Finance Committee on July 20. If the downward GRT trend continues, action could be taken as soon as mid-August.
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