With Albuquerque city councilors now debating how much tax should be assessed on the sale of everything from jeans to auto repair – and where that revenue should go – the city’s chief financial officer is warning about the perils of any potential tax cut.
Councilor Dan Lewis has proposed slicing the 3/8 of 1% gross receipts tax hike the city implemented four years ago. His legislation would cut the tax to 1/4 of 1%. That effectively saves consumers 10 cents for every $100 spent on most goods and services. It would have an estimated collective impact of about $22 million to $24 million a year.
Lewis argues that the money is almost gravy for the city. Tax revenues have been climbing dramatically, so the tax initiated in 2018 could still bring in nearly as much money as it did then even by reducing the percentage.
But despite an influx of federal COVID-19 relief funds and soaring tax revenues, the top finance official in Mayor Tim Keller’s administration said rising costs could soon hammer the city, “making it the worst time possible to reduce our revenues.”
In a council committee meeting Monday, Keller administration officials noted that the city recently inked a new union contract that raises police officer salaries – which will increase the city’s annual police department costs by $12.8 million – and that the city will have to reckon with inflation across-the-board. Chief Financial Officer Sanjay Bhakta said the city has not yet experienced higher costs, but “it’s coming” and will affect everything from construction projects to labor, as the city likely will have to pay more to find – and keep – staff.
“Inflation will impact everything – our contracts, our operation costs, our energy costs, everything will go up, so this is a bad time,” Bhakta said.
Lewis’ bill would reduce the tax but reinstate a mandate that most of it go to public safety. The council’s 2018 requirement that the city spend at least 60% of tax proceeds on public safety expired two years ago, though finance officials say far more than that percentage still goes to public safety without the mandate.
Lewis’ bill would funnel 60% to public safety and 40% to homelessness and affordable housing initiatives until fiscal year 2028.
Other councilors have introduced a related, but competing, bill. The legislation sponsored by Isaac Benton, Pat Davis and Tammy Fiebelkorn would insert mandates for how to spend the tax money – 60% for public safety and 40% for affordable housing – but without reducing the tax itself.
Bhakta expressed concern about initiating any strict breakdowns, saying flexibility is important.
Both bills are still pending before the council’s Finance and Government Operations Committee.
BACK TO THE BAG BAN: While the tax bills remain in committee, legislation repealing Albuquerque’s bag ban has advanced to the full, nine-member City Council.
The five-member Finance and Government Operations Committee was, however, split on the idea.
Councilors Davis and Benton – who co-sponsored the original ban – voiced opposition to its repeal, matching the sentiment of nearly every resident who spoke during public comment.
Councilor Brook Bassan – who sponsored the repeal bill – and Lewis expressed support for it.
The fifth member, Klarissa Peña, said she is less certain. She voted for the ban in 2019 but said she’s “not sure” where she stands now, citing specific anecdotes. She said she’s personally witnessed germ-averse cashiers afraid to touch customers’ reusable bags, and, more recently, a man’s paper-bag blowout.
“He was carrying two paper bags with groceries, and one of them tore,” she said. “I just really felt so bad for him; he was on the sidewalk picking up his items.”
Jessica Dyer: jdyer@abqjournal.com
