Gross receipts tax income going into the general fund was a little more than $2 million after adjustments, 15 percent below estimates and 9.2 percent below last August, according to a memo from city Financial Services Director Olivia Padilla-Jackson. The tax money comes from June economic activity.
Three major sectors — retail, construction and utilities — lagged behind August 2012, and half of all sectors fell from a year ago, Padilla-Jackson wrote.
To varying degrees, nine sectors have brought in more gross receipts tax (GRT) money so far this year than each had by the same time last fiscal year, but it wasn’t enough to offset losses. The two sectors that saw the greatest year-to-date increases are the administration and support, waste management and remedial sector, and the manufacturing sector, according to Padilla-Jackson.
City spokesman Peter Wells said in an email that city staff members can’t say for certain what caused the decline in different sectors.
City councilor and business owner Chuck Wilkins said looking at his business and talking with other business people, it seemed activity slowed down in June and July. Since sales tax money from July activity is distributed in September, he’s concerned the general fund’s GRT distribution will be low for that month as well.
“I don’t know why that happened,” he said of the drop in GRT. “I’m not sure anybody will know why.”
The impact on the budget is “huge,” Wilkins said. If just August and September see low GRT distributions, he expected the city wouldn’t see cuts but would have to take money out of the general fund ending balance.
Such a move would drop the end balance from its initial level of 15 percent of expenditures, the city’s goal, to somewhere around 14 percent, Wilkins said. Still, his business has been picking up this month, so he hopes October’s distribution might be better.
Wells wrote that this month’s GRT distribution is “one data point out of many.”
“It is too early in the fiscal year 14 budget year (currently in month two) for city staff to definitively say what the impact is, as this month’s data could be an anomaly (for example, next month could be above estimates) or a trend,” he said. “Furthermore, other factors that impact the overall budget outlook are other sources of revenue as well as city expenditures. The mid-year budget (January) is normally when the city makes adjustments, if necessary, to the current year budget.”
Getting into specifics, retail fell 16 percent, or almost $117,000, compared to last August’s distribution to the general fund. In July, the retail GRT distribution was 2 percent above last year.
Construction fell 25 percent, or a little more than $110,000, compared to last August. The construction sales tax income this month was $331,000, almost $60,000 below last fiscal year’s monthly average.
This situation comes after strong construction GRT income last month. At almost $423,000, it was 11 percent higher than July 2012.
Wilkins said construction GRT is still high compared to last fall and doing well compared to years that didn’t have an unusual boost from building the two new hospitals in Rio Rancho.
The utilities sector distribution to the general fund was down 26 percent, meaning by $94,000, compared to last August. Still, the income was $277,000, higher than last month’s $134,000 but below last fiscal year’s monthly average of $307,000.
Last month, the utilities sector GRT revenue was below half of the historical monthly average and 48 percent below July 2012, according to Padilla-Jackson.
“As noted previously, timing of tax payments by large payers in this sector can lead to large fluctuations on a month-to-month basis,” Padilla-Jackson wrote.
Manufacturing gross receipts tax revenue had averaged $90,000 per month, unusually high, for the past six months. However, this month, it declined to almost $37,000, closer to the long-term average, Padilla-Jackson wrote.
State Taxation and Revenue Department personnel indicated that the previous increases in manufacturing GRT and decreases in utilities sales tax income were caused by new legislation that requires manufacturers to pay sales taxes on the utilities they use, instead of the utility companies paying it. That shifts the GRT income from the utilities sector to the manufacturing sector, until newly approved manufacturing tax deductions are phased in.
“This month’s amount (of manufacturing GRT income) is counter-intuitive to that assertion, and staff will attempt to gather information as to why this distribution dropped so significantly,” Padilla-Jackson wrote.
However, according to charts she provided, the city has received quite a bit more manufacturing sales tax income to the general fund to date this fiscal year, compared to the same time last fiscal year.