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Possible county GRT increases latest in tax debate in Santa Fe

SANTA FE, N.M. — Two years ago, when the Santa Fe County Commission was considering an increase in gross receipts taxes, no one showed up at the commission meeting to speak for or against the one-eighth of 1 percent GRT hike that was approved unanimously.

The commission now has a set of possible new GRT increases on the table and, this time, there’s been much more public attention focused on the idea of pushing up the local rate of the tax that consumers pay at checkout for most goods and services, other than food and medicine.

Next week, the County Commission and the City Council will meet in a rare joint planning session, with gross receipts taxes sure to be a part of the discussion.

The County Commission has been considering raising its share of GRT by enacting two separate increases that would go into effect at the end of the year and provide the county with about $6.9 million annually in recurring revenue to fund public safety operations, behavioral health services and other operations.

Consumers could expect to pay an additional 19 cents on a $100 purchase if the commission approves the maximum increase under consideration at its June 27 meeting.

The tax measures were up for a vote at the commission’s May 30 meeting, but the board yielded to a request by the City Council to delay a decision on raising GRT until after the joint meeting next Thursday so the two sides can discuss that matter and other issues.

Any GRT increase approved by the County Commission goes into effect over the entire county, not just unincorporated areas outside city limits.

So an increase in the county’s share of the GRT affects purchases in Santa Fe, as well as in Edgewood and the portion of bi-county Española that’s within Santa Fe County, where, at 8.9375 percent, the GRT rate already is the highest in the state. The GRT rate is now 8.3125 percent within the Santa Fe city limits, 8.0265 percent in Edgewood and 7 percent in unincorporated parts of the county. By comparison, it’s 7.3125 percent in Albuquerque and 6.25 percent in Bernalillo County.

Without the tax increases, the planned operating budget for all county departments for the 2017-18 fiscal year, starting in July, is set at a total of $115.4 million. That includes about $2 million in new spending – for 13 new positions, higher insurance, utility and fuel costs, and 2 percent raises for employees.

‘Hold-harmless’ money

City officials and some residents of Santa Fe County were taken off guard when the commission voted to increase GRT by one-eighth of 1 percent in 2015. The more than $4 million a year from that increment was earmarked for county infrastructure and maintenance, and specifically toward the construction of a new county administration building and renovation of its current building, which will continue to be utilized by the county.

One of the two GRT increases the county is now considering is another one-eighth of 1 percent, expected to generate $4.6 million per year, about half of which would go to pay for more than 30 staff positions at the fire department, sheriff’s office, regional dispatch center and corrections department.

About $2.2 million would go to behavioral health and administrative support for a behavioral health triage center, which would be one of the first of its kind in the country. Voters already have approved, in a bond issue vote last year, capital improvement funding for a behavioral health crisis triage center, likely to be located in Santa Fe, and a community health facility in Edgewood.

The GRT increase from two years ago and the one-eighth of one percent hike now on the table are allowed under a 2013 tax deal struck by Gov. Susana Martinez and the Legislature. Local governments were given new authority to enact up to three-eighths of a percent of GRT.

The new taxing authority was granted as a trade-off for the Legislature’s decision to phase out substantial “hold harmless” subsidies, state payments to cities and counties meant to replace lost revenue from when the Legislature removed GRT from purchases of food items and medicines years earlier.

Katherine Miller

Local governments continue to receive hold-harmless payments, at reduced rates, over the 15-year phase-out period. Santa Fe County still receives about $3.5 million per year in hold-harmless money, according to County Manager Katherine Miller.

So, for now, the county is taking in what could be called double revenue – the still substantial hold-harmless payment, as well as more from the taxes the Legislature allowed the county to implement during the phase-out.

But county officials note that over the past few years, legislation has been introduced to stop the hold-harmless payments altogether, cutting off the remainder of the phase-out period.

“There’s no certainty with the county as far as what the state is going to do with the hold-harmless distribution, which is one of the reasons we put the first increment in place,” Miller said. For that reason, the county moved the hold-harmless money out of the “recurring” category when building its latest budget.

Second proposed tax

The other GRT increase the county is considering is a choice between either one-twelfth or one-sixteenth of a percent. A one-twelfth increase would generate about $3 million per year, while one-sixteenth would add about $2.3 million annually to the county’s coffers. In this case, the commission has to take action by June 30 or lose the opportunity.

“In 2015, the state passed legislation that required counties to contribute an amount equal to one-twelfth of one percent in GRT to the state for the safety net care pool. That’s about $3.1 million per year that the county has been paying out of existing revenues,” Miller explained. “In that legislation, the county was authorized to enact either one-sixteenth or one-twelfth, but we have not done that and, after June 30, the opportunity goes away.”

While some have questioned the need for the county to raise GRT, especially after raising the tax two years ago, the county says it needs the funding to adequately provide public safety protection.

Regarding expanding behavioral health services, the county points to an advisory question that appeared on the ballot last November asking, “Should Santa Fe county enact a county-wide gross receipts tax for behavioral health services that would increase the aggregate gross receipts tax by up to one-eighth of one percent (.125)?”

Fifty-two percent of more than 63,000 voters said “yes.”

County Manager Miller said the behavioral health triage center will relieve some of the pressure on sheriff’s deputies who many times have no other choice when dealing with a person going through a mental health crisis or substance abuse problem than to take them to jail, as well as on emergency medical personnel who respond and jail personnel who then have to provide inmate care.

“A high percentage of inmates at our facility have behavioral health issues and other concerns. Frequently, an individual doesn’t need to be going to jail in a crisis situation, but that’s the only place an officer has to take them,” she said.

Letter to council

Anna Hansen

The county laid out its other arguments for raising GRT in a letter from Vice-Chair Anna Hansen to the Santa Fe City Council in response to the council’s request to delay a decision. Hansen wrote that while the county’s main source of revenue comes from property taxes, gross receipts taxes are the second most significant source of income. But even so, much of what it receives in GRT is already allocated to state-mandated obligations.

“Many of the county-wide GRT increments, authorized by state statute, are provided to the County for the purpose of providing mandated state and county services for the benefit of county citizens regardless of whether they reside in the incorporated or unincorporated areas of the County,” she wrote.

For example, about $5.5 million per year goes to the state to fund its Medicaid program, she wrote. The county has also been paying its obligation for health services with GRT revenues for the past two years “at the expense of other health care services.”

The county also is responsible for operating the local jail. And while municipalities pay part of the cost for housing the adult inmates it sends there, the county bears the cost of the jail’s operation and assumes the cost burden for all juveniles. “Adult detention, youth detention and electronic monitoring and all the related services comprise approximately $21 million of the County’s annual operating budget, the majority of which is paid for by general tax dollars,” Hansen wrote.

She also noted the county invested more than $70 million in the district attorney and public health offices, and continues to pay millions annually in debt service, maintenance and security. She said between 35 percent and 40 percent of the one-quarter percent GRT increment goes to paying for the operation of the Regional Emergency Communication Center, which she said saves the city about $2.5 million a year.

The letter came after the commission met for a special meeting on May 9 to discuss the budget for the upcoming year. At that meeting, Miller noted that of the 7 percent GRT rate in Santa Fe County, county government gets only a fraction of it.

“While sometimes it may look like the county collects a lot of GRT in that 7 percent, in reality all that we at the county control is about 1.6 percent,” she said. The 7 percent figure includes a 5.125 percent state GRT levy.

A new twist in the debate arose during the commission’s meeting last week when County Attorney Greg Shaffer told the commission that the state’s tax policy office is of the opinion that the one-twelfth or one-sixteenth increment in the GRT would require voter approval. Shaffer said he disagreed with that assessment.

The fine print on a slide used as part of a PowerPoint presentation from a May 2 budget study session states, “Although no election is required, voters may petition for an election to approve or disapprove the ordinance imposing these increments of the tax.”

Miller noted that the county’s correspondence with the tax policy office wasn’t a formal opinion and didn’t come from legal counsel, the department’s director or cabinet secretary.

“We’re working to get further clarification on that issue,” she said.