The $40 MILLION QUESTION
Tax increase may be needed, but voters should decide
We don’t envy Mayor Tim Keller or members of the Albuquerque City Council who must figure out how to plug a projected $40 million deficit in next fiscal year’s budget.
They are considering multiple options to patch the deficit and address the city’s public safety problem, including imposing a three-eights percent gross receipts tax increase. City Council Pnresident Ken Sanchez, a Democrat, and Councilor Trudy Jones, a Republican, introduced a bill to impose that tax last month, and the ccuncil is scheduled to take it up during Monday’s meeting.
Pushing a tax hike through without voter approval may be the most expedient solution, but it’s the wrong move — particularly given Keller’s repeated pledges on the campaign trail that voters would have final say on any tax increase.
“I remember my stance on that, and I want to try and keep that stance, and I believe in that stance,” Keller told Journal editors and reporters last week. But, “it would be fiscally irresponsible for me to say we should wait three years to get funding for law enforcement.” He called the proposed tax hike the “least worst option.”
A three-year wait? That’s questionable. Keller argues that the Local Election Act adopted by lawmakers and awaiting action by the governor could make a public vote on the increase impossible until the general election in 2020. Yet the bill’s sponsor says the city could actually hold a special election on the tax in the near future with council approval.
And it’s fiscally disingenuous to foist a tax on the public because the state gave the city limited authority to do so to recover revenue lost when the Legislature first repealed the tax on food and medicine, then decided to phase out “holdharmless” checks it was sending to make up for the loss. The state is allowing local governments to unilaterally implement a 3/8 percent gross receipts tax without voter approval to fill the revenue gap. Bernalillo County quickly went to that trough and now rakes in tens of millions of dollars above and beyond what it lost in food and medicine taxes.
In the same way, this proposed city tax increase will bring in far more revenue than the city is losing. Albuquerque will be down $10 million in hold harmless revenue next year, but the proposed tax will bring in an estimated $43.7 million — costing Albuquerque consumers an extra 38 cents on every $100 purchase made in the city. The gross receipts tax rate would jump to 7.875. Even in 2030, when the checks stop and Albuquerque will be down $34.5 million, it will actually be taking in almost $10 million extra.
But as slippery as this tax move is, there’s no reason to disbelieve that the city is in a financial bind.
Keller says the situation is due, in large part, to the prior administration’s refusal to make the tough decisions. “Years of onetime fixes, vacancy savings, cost deferrals and wishful thinking have run their course,” he said Friday in a statement. “We can’t have a vibrant economy until we have a safe city. We can’t have a safe city without investing in the resources to protect our kids and businesses. The public safety crisis can’t wait, and we must come together with the City Council to find ways now to address these challenges.”
Consider that next year, in addition to the $10 million loss in hold harmless funds, Albuquerque has to account for the economy not growing at the expected rate, lower-than-anticipated gross receipts tax revenue, city health care costs up $6.2 million, water rates up $2.1 million, the city’s fund to cover claims against it up $3 million, and Department of Justice reforms taking $4 million. And to Keller’s point about public safety, city officials say they need to invest more in the Albuquerque Police Department so it can hire more officers, make pay for officers more competitive and address the fingerprint, DNA and rape kit backlogs.
So, sure, the city needs revenue. But simply imposing the tax — without voter approval — is the wrong move. Especially if a special election can be held in a timely fashion.
Granted, if the council and mayor adopt the tax in the next few weeks — without going to voters — then the state can begin collecting it on July 1, meaning the city can include that revenue to build next year’s budget. Asking voters to decide would likely mean the state wouldn’t begin collecting that tax until Jan. 1. That would force city officials to figure out how to plug much of the $40 million deficit without the extra revenue from the tax.
Still, it’s the right thing to do. To turn Keller’s phrase, worse worst options include imposing 12 furlough days on city employees, increasing fees, closing at least one golf course and cutting Animal Welfare’s budget by 25 percent.
So if the mayor and council believe this tax is the only way to address the city’s financial woes and the APD’s officer shortage, they should make their case to the voters and let them decide. Failing to go that route creates a credibility deficit for Keller, and that’s no way for him to begin his term as mayor.