Higher taxes in the offing for Truth or Consequences’ residents and businesses

Reporting and comments by Kathleen Sloan

Local gross receipts taxes will go up in January and two general-obligation-bond questions will be on the November ballot, which will double property taxes if approved by voters. The Truth or Consequences City Commission passed both measures at the June 22 meeting.

Gross receipts taxes

The city’s current gross receipts tax, called a sales tax in other parts of the country, is $1.6875 for every $100 purchased—except for food purchases, which are not taxed. The city’s GRT will go up to $1.8125 on Jan. 1, 2023, an increase of .125 or one-eighth of one percent.

The state will lower its 5.125 GRT by .125 on July 1, therefore people purchasing goods will not detect a difference at the cash register. Currently people buying goods in T or C pay a total GRT of $8.50 for every $100 purchase: $5.125 to the state, $1.6875 to Sierra County and $1.6875 to T or C.

Laws governing local GRT have loosened up. About two years ago state legislators passed a law stating that cities no longer had to abide by local ordinances that allocated GRT revenue for specific purposes. The city has ordinances on the books that allocated revenues generated by .75 to the general fund, .25 to capital projects and debt, .25 to streets, .25 to the police department, .25 to Sierra Vista Hospital and .1875 to “environmental” or water and wastewater department expenses.

Such allocations are no longer required, unless other agreements prevail. The city has “intercept” agreements with the New Mexico Taxation and Revenue Department that diverts GRT revenue to loan agencies to pay off debt. In addition, the city, as part owner, is obligated to send revenues from .25 of its GRT to Sierra Vista Hospital, spelled out in a joint powers agreement with other local- government owners.

City Manager Bruce Swingle said the increase will generate about $180,000 since it will be in effect for half the fiscal year. The fiscal year runs from July 1 to June 30. He did not state specifically where the money will be spent, but generally referred to the “40, 50, 60 years the city has not put any money into its infrastructure.”

Swingle said the city can increase the GRT to 2.05 without going to referendum, “and to much more with a referendum.” Ruidoso’s GRT is 2.90, he said.

During the public hearing Rick Dumiak spoke. He noted that tourists will pay GRT, alleviating the local citizen burden. Since the decrease in state and increase in local GRT is “a wash, it’s a no-brainer.”

The city commission passed the resolution unanimously.

General obligation bonds

The city commission unanimously passed a resolution that puts two questions on the ballot:

“Should the City of Truth or Consequences be authorized to issue up to $1 million of general obligation bonds for the purpose of laying off, opening, constructing, repairing and otherwise improving municipal alleys, streets, public roads and bridges, or any combination thereof?”

“Should the City of Truth or Consequences be authorized to issue up to $2 million of general obligation bonds for the purpose of enlarging, improving or extending the City’s water and wastewater systems?”

Swingle said the city has a general obligation bonding capacity of $4.2 million, which is based on state law that sets capacity at 6 percent of the assessed property value within city limits. “But it is important not to go to the maximum,” he said, with no further explanation.

“The current property tax is 2.225 and it will go up 1.54 from the G.O. bond,” Swingle said. “A $100,000 home will pay about $100 more a year.”

Sidebar: That is not quite accurate. According to county records, homeowners pay $1.542 for every $1,000 of taxable value. Commercial property owners pay $2.225 for every $1,000 of taxable value. State law sets taxable value at one-third of the assessed value.

• A $100,000 house owner currently pays about 33 times $1.542 or $50.89 to the city. If the G.O. bond questions pass, the owner will pay 33 times $3.082 or $101.71, about a $51 difference.

• A $100,000 commercial-property owner currently pays about 33 times $2.225 or $73.43 to the city. If the G.O. bond questions pass, the owner will pay 33 times $3.765 or $124.25 to the city, about a $51 difference.

If Swingle was referring to a $300,000 property with a taxable value of $100,000, then:

• A city homeowner currently pays $154.20 and will pay $308.20, about a $154 increase.

• A commercial property owner currently pays $222.50 and will pay $376.50, also about a $154 increase.

“It is important for the community to understand the city is in dire straits,” Swingle said. “We’ve got to put serious money into the infrastructure. We have zero capacity to take on more debt in the water and wastewater departments. We have a little remaining capacity in the electric department. The questions will go to referendum in November.”

Mayor Amanda Forrister said, “I’m sure the public will understand and understand the need for it.”

City Commissioner Merry Jo Fahl said the city already has bond debt and asked how it relates to the potential general obligation bond debt. Swingle briefly replied that one does not relate to the other.

Sidebar: Fahl is evidently not aware of the difference between revenue bonds and general obligation bonds. The city has obligated citizens’ utility-fee revenue to pay off revenue bonds. The financing agents, such as U.S. Department of Agriculture, have examined the city’s water and wastewater fee structures and insisted the city raise rates before loaning the city money. There are no state laws that cap utility fees or prohibit how a city spends them. There are state laws that require the city to only expend revenue from revenue bond issues on the capital project described in the bond documents. The city has also obligated gross receipts tax revenues to pay off revenue bonds. On the other hand, general-obligation-bond debt is paid from property taxes, which can be increased without limit to ensure the debt is paid off. The city currently has no general-obligation-bond debt. When the New Mexico Department of Finance and Administration evaluates a city’s debt load and bonding capacity, it only looks at general-obligation-bond debt. Citizens are on their own in making city commissioners account for the utility, GRT and property debt load they carry.

“How are we going to educate the public? We can’t use city staff,” Fahl asked.

“We’ll talk to our financial advisor [Bosque Advisors of Albuquerque, Mark Valenzuela] and put together an elevator speech and bullet points,” Swingle said.

“Great, then we can all use it and the messaging will be the same,” Fahl said.

“How can the community see the budget?” City Commissioner Shelly Harrelson asked. “We are getting pushback on social media that we misappropriated money.”

“I think the public means that historically we took money from the utilities and used it for other things,” Swingle said. The $45 million budget—a lot of that is pass-through funds. The general fund receives $4.2 million in revenue. The utility funds are in dire straits. Nothing was illegal. Money was not misappropriated. We wouldn’t be asking for this if we didn’t need it.”

“People need to know we can’t use this money unless it’s appropriated,” Harrelson said.

Sidebar: Harrelson implies the city’s budget is a static appropriation. The budget is just a projection. The city commission approves budget amendments nearly every meeting without a word of discussion, changing their “appropriations” nearly 20 times a year.

Sidebar: I don’t know what Swingle means by “pass through.” The city has a $22 million budget for operations and a $23 million capital-projects budget. If he is referring to grants that fund a portion of city capital projects, citizens pay federal, state and local taxes that fund those grants and the city’s match. In the budget sessions capital projects were not discussed, on which the G.O. bond money is to be spent. The draft budget turned into the DFA at the end of June was not required to include capital projects and it did not. It is yet to be seen if capital projects will be discussed for the final budget.

Sidebar: Harrelson seems to imply money was and is well spent if it is “appropriated.” The city commission for 50 years or so—including this upcoming fiscal year—transfers about $2 million out of the utility funds. The spaghetti-like trail of transfers hide what is essentially a hidden tax—taxation without representation. In addition, about $400,000 more will be transferred out of the utility funds to pay for the utility billing office staff and operations, citizens paying $2.4 million and more yearly than what is stated on their utility bills for utility services. When utility fees are increased, the city ignores the huge transfers in its rate calculations. This is not transparent government. This is not good fiscal management. The city may need the money, but it needs to change from an authoritarian-type government that secretly exploits citizens’ utility fees to a representative democracy that accounts to its citizens where their money is spent and why.

Mayor Pro Tem Rolf Hechler said, “Sometimes we don’t apply for grants. Can’t we use the money [bond revenue] to leverage more money [get grants and use the bond money to meet matching requirements].

“I think that is excluded [bond money can’t be used to match grant money],” Swingle said.

“It is allowed if it is within the question [on the ballot]. You can use it for water, wastewater and streets [grants],” Mark Valenzuela said.

Swingle said engineering plans for water projects totalling $102 million are done, but those estimates are off and will probably cost about $150 million. “We’re trying to get wastewater engineering plans done.”

Sidebar: Swingle’s statements demonstrate there has been no effort to coordinate or to prioritize water, wastewater and road projects. A master plan authored by engineers that replaces all three infrastructures at once and prioritizes and explains the rationale for the order of phases does not exist. Without a master plan the city can’t apply for grants that fund all three at once. The scattered approach Swingle is proposing ensures citizens will pay top dollar to repair its in-crisis infrastructure.

The city commission approved the resolution putting the two G.O. bond questions on the ballot in November.

$7.46 million in purchases over $20,000

 Shortly after Swingle took the job of city manager in May 2021, he presented a resolution to the city commission that in part said it must approve any expenditure over $20,000. For over a year the city commission has approved these expenditures with no discussion, exercising no further fiscal oversight than it had in the past before the measure was passed.

City Finance Director Carol Fitzpatrick introduced the June 22 expenditures over $20,000, which she acknowledged totaled over $7.4 million, “but we discussed everything in the budget.”

The city commissioners approved the expenditures with no discussion.

Sidebar: I attended every budget session and many of the expenditures were not discussed. For example:

• The solid waste department budget states vendors will be paid $800,000 in the upcoming year. The only vendor with a contract is the South Central Solid Waste Authority in Las Cruces. That contract states the yearly fee is all inclusive, which is evidently $480,000 according to the $20,000 and above document. It includes upkeep and replacement of a trucking fleet to transport trash from the transfer station, fuel and tipping fees. This department’s costs and the volume of trash have risen at a precipitous rate with no explanation since the transfer station was opened and the landfill was closed in 2013.Although no ordinance has been passed creating another trash collection service, the city commission tacitly approved Solid Waste Department Director Andy Alvarez’ request that he collect trash throughout the county and Elephant Butte by approving the purchase of a $250,000 truck, as they did last year during budget sessions. How long this off-the-books collection has been going on is unknown. Past yearly city audit documents indicate the city customers paying $31.50 a month and more to have their polycarts picked up once a week are subsidizing the off-the- books activities. Rates will go up another 5 percent on July 1, as they have for the last four or five years. This is more evidence that the city is not curbing its exploitation of citizens’ utility fees.

• City debt was not delineated and only generally mentioned during budget talks. Among the over $20,000 payments are about $117,000 to Capital One, about $330,000 to New Mexico Finance Authority, over $55,000 in “interest payment” to Bank of the Southwest for the downtown water project, the only one listed in the document. The project hasn’t broken ground, yet interest payments are already being paid? Swingle, in a past city commission meeting, said the project went out to bid, but the responses were 55 percent higher than estimated.

• The landfill was not discussed during budget talks. Over $300,000 in “utilities” for this facility was among the over-$20,000 purchases listed.

• Electric power contracts were also not mentioned during budget talks. The city will pay Sierra Electric Cooperative $2.65 million, Western Area Power Administration $580,000, Tristate $445,000 and SSA Solar $330,000.