SANTA FE, N.M. — Reducing payroll, privatizing some city services, selling off assets and merging some city of Santa Fe operations with those of the county are among more than 40 recommendations a Santa Fe Chamber of Commerce ad hoc committee came up with to help fix a projected $15 million city budget shortfall without raising taxes.
The nine-page report was sent to members of the City Council on Tuesday, the same day the Finance Committee held a workshop to address the city’s budget situation. The chamber’s ideas were not discussed as the committee, instead, considered two proposed frameworks for closing the budget gap, but took no action. Both of those proposals, however, include a revenue increase equivalent to a one-eighth-of-a-cent increase to the local gross receipts tax.
“As all courses of actions are considered, the option of raising taxes should not be considered prior to a detail level examination of operations, revenues and corresponding expenditures,” says the chamber’s report.
Chamber President and CEO Simon Brackley said the ad hoc committee, made up of 16 to 20 people of various backgrounds, formed organically after hearing Mayor Javier Gonzales speak about the city’s budget challenges at a Rotary Club meeting late last summer. The group formed subcommittees and met for several months to prepare the report.
The underlying message, he said, is: “This is serious. We had a recession, people were not surprised that revenues were down during the recession, but we’re coming out of the recession and revenues are still down.”
Brackley said the report provides “suggestions” for how the city might address the deficit without raising taxes, such as reducing expenses, increasing revenues, addressing growth and systemic issues.
One suggestion the council may have a hard time swallowing is cutting payroll. Through the recession, the City Council avoided laying off workers and cutting jobs.
City Councilor Carmichael Dominguez, who chairs the Finance Committee, has said that everything is on the table to address the budget gap, but noted, “If you’re going to be talking about balancing budgets on the backs of employees, that’s not an easy conversation to have.”
Dominguez said he appreciates the ad hoc committee’s work and said the recommendations would be helpful to the governing body.
“I think any time we can get the community involved in discussions is a good thing. I thank them for their willingness to contribute to the conversation. But it’s not always as easy as it seems,” he said.
Dominguez said some things in the report were “contradictory,” such as the comment that enterprise funds “are not returning revenue adequate to cover their expenses.”
“It’s not the enterprise funds that are in trouble,” Dominguez said. “There is work to do to make sure they are self-sufficient, but they are not the cause of the problem.”
He also disputed the report’s contention that, while gross receipts tax revenue adjusted for inflation has dropped steadily since 2008, there has been no corresponding adjustment to the city’s payroll.
“It’s not true … . We’ve made $13 million in cuts,” he said.
Dominguez said another contradiction was that the chamber report recommends privatizing utilities, while also scrutinizing the use of contract services.
And while the committee’s recommendation to sell land and property assets is worth considering, he notes that those are one-time revenues that don’t help the city over the long haul.
Cutting cost, increasing revenues
Without saying the city needs to cut jobs, the report states that payroll and related expenses are disproportionate to the size of city government, “with salaries and benefits representing approximately one third of the City’s total appropriations.”
It says that employee benefits make up about half of employee compensation and one-sixth of the city’s annual expenses.
“Private industry has had to adjust compensation models for all employees in response to changing economic factors and benefit costs and the City needs to do the same,” the report states.
Suggestions for reducing payroll include limiting or eliminating overtime in noncritical areas, soliciting volunteers to work reduced schedules, offering early retirement or voluntary exit incentives, requiring employees to take unpaid vacation days and making employees pay a larger portion of benefit contributions.
Another controversial recommendation is for the city to consider selling a portion of the Railyard property and disbanding the nonprofit group that manages it.
“With 96% of the Railyard property being leased, there doesn’t seem to be a viable way to increase revenue from the property in its current structure,” the report says.
The report also suggests privatizing parking operations and solid waste pickup.
Dominguez wasn’t keen on that idea.
“That’s not something I would support,” he said. “If we ever moved toward that, there are a lot of things that would need to happen to protect workers.”
Other ideas for increasing revenues include cracking down on collections of delinquent water bills and parking tickets; going after lost gross receipts taxes from high dollar retail sales that are purchased in person, then shipped out of state, and GRT and lodger’s taxes that are lost through illegal short-term rental units; and increasing fees and removing waived charges for people using the city’s recreational facilities.
The city also needs to focus on a strategic approach to smart growth, according to the report, which it says will lead to greater GRT revenues.
The recommendations end with the suggestion that the city look for efficiencies that can be gained through city-county collaboration.
“We believe the time is right to begin conversations about merging City and County operations such as HR, technology, accounting and transportation,” it says.
No time to lose
Dominguez said the Finance Committee will take the recommendations into consideration as it works to fix the budget problem. He said he’d rather take a methodical approach than a draconian one, but things need to start happening now.
“Sooner, rather than later, we have to determine what framework to use if we want to use one at all,” he said. “Once we do that, we can start working on policies consistent with the creation of the budget and then we can talk about making cuts.”
Asked for his take on the chamber’s report, City Finance Director Oscar Rodriguez said he agreed with much of it, but added, “Some of the things in there we’re already doing in one fashion or another.”
Though he told the Finance Committee the budget deficit doesn’t need to be fixed in just one year, Rodriguez agreed that there needs to be a sense of urgency. He said he was disappointed the committee didn’t select from one of the two deficit-closing frameworks presented Tuesday. That set the budget process for the next fiscal year back two weeks, he said.
Rodriguez says either framework would work, but there needs to be some direction from the City Council before staff can proceed.
“If they don’t tell us what the priorities are, it’s going to be very frustrating for everyone,” he said.