Soda tax debate: Does city have surplus or not?
Officials: Recurring program needs reliable financing
The campaign against a proposed soda tax in Santa Fe is working to capitalize on what has been billed as the city’s multi-million-dollar surplus, using Mayor Javier Gonzales’ words against him.
Gonzales, who proposed the 2-cents-per-ounce tax on the distributors of sugary drinks that is expected to raise $7.7 million per year to help fund early education programs, suggested during his State of the City address in February that a projected revenue surplus of $4.5 million could be used to give city employees a 5 percent raise.
Weeks later, the mayor tweeted “good news,” announcing on the first day of hearings on the 2017-18 budget that the city was looking at a $15.5 million surplus headed into the new fiscal year, a statement that turned out to be based on faulty information. Newspaper headlines also highlighted the big surplus.
Better Way for Santa Fe & Pre-K, the political committee opposing the tax, jumped on it. Part of its message to voters ever since is that the city can fund pre-K without the so-called “soda tax” by using its “multi-million surplus.” Others opposed to the tax have also used that argument. On Thursday, former New Mexico Gov. Jerry Apodaca put in his two cents, saying priority issues like funding pre-K should be built into the budget.
“As a policy maker you put your money where your mouth is and you find the funds in your budget,” he said in a statement. “What you never do is go back to hard working taxpayers when you have a surplus. That is irresponsible.”
Is there really a multi-million-dollar surplus?
Mayor Gonzales and city government officials say yes ... and no.
City Finance Director Adam Johnson says that the $399 million operational budget approved by the City Council on Wednesday was indeed built on an $8.6 million surplus. But he said it’s not the kind of surplus that can be counted on year after year to fund an ongoing program like the proposed pre-K effort. Only $1.2 million of the surplus was in the general fund.
“The general fund sustains core operations,” Johnson said. “All other
funds are specific to accounting compliance requirements or other state and city laws.”
A big part of the surplus, $3.8 million, is within “enterprise” funds, which include the water utility and solid waste operations. Johnson says those operations should be run like private corporations, where the revenues generated are intended to be used solely for the purpose of running the enterprise.
Water funds used in past
The city hasn’t always run things that way. At the end of the recession, when money was tight and the city was reluctant to lay off people, the city dipped into its flush water fund to pay other expenses. Amid criticism that the city was using the water fund as a “bank,” the City Council passed an ordinance that restricted that practice.
But couldn’t the city still dip into the water fund, which has been fueled by rate increases intended to encourage water conservation, for other purposes if it really wanted to? “The council could take action to use fee revenues from the water fund, but they’d have to change the ordinance to do that,” Johnson said.
And it’s not something the finance director would recommend. “Certainly, it would not be a best practice, nor would it be advisable to use the utility to pay for something else,” he said.
About $800,000 of the surplus is in special revenue funds. “Special revenue funds are used in places where you receive a lot of grants specific to a purpose, or some type of tax for a legally specific purpose,” he said.
For example, revenues from lodgers’ taxes on hotels and other short-term rentals can be used only to promote tourism and pay off debt for the Santa Fe Community Convention Center. Funds in the Law Enforcement Protection Grant fund can be used only by the police department.
The same goes for the $2 million surplus in capital funds. It can be used only for capital projects or to pay off debt for such projects, said Johnson.
The budget approved by the council on Wednesday set aside the $1.2 million surplus in the general fund for possible use to pay off debt on the property now being leased to the Santa Fe University of Art and Design, which recently announced it would close next year and is expected to stop paying $2.2 million annually to lease the city-owned campus.
City officials have said a surplus is not a reliable source for a pre-K program that is projected to cost more than $7 million per year.
“I have been troubled to read that the PAC funded by the soda industry is trying to confuse voters by suggesting that any kind of a one-time surplus at the city level could be used to fund pre-K, a recurring program,” City Councilor Carmichael Dominguez said in a news release this week. “As chair of the city’s Finance Committee, I can say definitively that the city cannot use a one-time surplus to fund a recurring program. It is foolish to even suggest so and calls into question the motive of the opposition.”
“We cannot use the surplus to fund pre-K,” said Councilor Renee Villarreal, who is a member of the Finance Committee. “It’s not an option.”
David Huynh of Better Way for Santa Fe & Pre-K isn’t buying it.
“For months now, the city has been touting this multimillion-dollar surplus, until people started saying, ‘Hey, why don’t we use that to fund pre-K?’ Then, all of a sudden, the city says we don’t have a surplus anymore,” he said.
He added that two weeks ago Mayor Gonzales brought forward a resolution to give the New Mexico School for the Arts charter school $5 million to help pay for its relocation to the former Sanbusco Market Center in the Railyard district. “The idea that these funds are restricted in a way that can’t be used for pre-K is mind-boggling,” said Huynh.