ABQ nets over $5M from the state

City using money from a GRT adjustment to purchase a helicopter for APD

The city of Albuquerque received a $5 million to $6 million windfall this summer in money it was owed by the state, which it will use to purchase a $5.2 million helicopter for the Police Department.

The city received about $40.2 million in gross receipts tax revenue in July for business transactions conducted in May, according to the New Mexico Taxation and Revenue Department, an increase of about 20.6 percent from the $31.9 million it collected during the same month last year.

About $5 to $6 million of that extra money was “hold-harmless” money the state had failed to pay the city last year. When lawmakers in 2005 did away with gross receipts taxes on many food items and medicine, they agreed to pay cities additional funds to make up for that loss — termed hold-harmless money. This spring, the city noticed a discrepancy in the amount of hold-harmless money it had received last year compared to previous years and started making inquiries with the state.

The $5 million to $6 million windfall is a non-recurring GRT adjustment, and that money became part of the city’s fiscal 2018 general fund, according to Gerald Romero, the city’s budget officer.

After the windfall was discovered, Albuquerque city councilors

earlier this month approved a $5.2 million appropriation to purchase a new helicopter for the Police Department to replace a 17-year-old Eurocopter EC120B that department officials have said is not well suited for full operation anymore, especially during the warmer months.

Mayor Tim Keller said utilizing surplus funds for the helicopter and other police department needs is “something that we worked on with City Council as soon as we identified those dollars.”

“You want to be nimble if it works out in your favor and put that money for use in ways that are urgent needs,” Keller said. “For us, to be able to bite off a big chunk, like the helicopter at nonet cost to the budget, that’s a reward for conservative budgeting and an economy that’s picking up a tiny bit. We were able to move at an appropriate speed and cut out the usual bureaucracy and politics.”

The city’s surplus funds are in sharp contrast to the financial picture the city had anticipated six months earlier.

In March, city councilors voted to raise the city’s gross receipts tax rate by three-eighths of a percentage point to address what officials at that time said was a $40 million deficit in the city’s budget as well as to confront a public safety crisis. They also approved an amendment that stipulates at least 60 percent of the revenue generated by the tax increase would go toward “the city’s public safety budget goal priorities” and the remainder to general municipal purposes.

The gross receipts tax increase went into effect in July, the same month the city received the “windfall” from the state.

The city will acquire the new helicopter in six to eight months, following the usual bidding process.

The bill to purchase the helicopter, sponsored by Councilors Ken Sanchez and Trudy Jones, also included $65,000 in funding for cellphones that would allow police officers to access LanguageLine interpreting services when interacting with non-English speaking residents.

The City Council is also expected to consider a measure to appropriate $3 million from the surplus 2018 GRT funds that would allow the police department to seat a class of 40 officers transferring from other departments that would graduate in January. subhead Budget officials in the city’s Department of Finance and Administrative Services in April saw unexpected decreases in food and hold-harmless distributions during the fiscal year, triggering concerns that something was wrong.

In 2013, lawmakers voted to phase out hold-harmless money over a 15-year period beginning in 2015, so the city expected to see some decrease. But suddenly that decrease in revenue was larger than expected.

“Every year it would drop by $2.2 or $2.3 million,” Romero said of the food hold-harmless revenue distributions. “We were seeing it drop by more than that, so we knew something was up.”

He said correspondence and conversations took place this spring between city officials and state revenue officials regarding a possible misreporting of food sales by some grocery stores, he said.

“We even offered in April … (to) work with them by sending out a reminder to local grocers that although they are not paying tax for food, that they report those gross receipts so that the state would make the distribution back to us,” Romero said. “That’s the whole idea. It’s coming out of the state’s general fund based on those reports.”

New Mexico Taxation and Revenue Department spokesman Kevin Kelley said in an email the agency’s Audit Compliance Division, charged with proactively identifying instances of non-compliance, found “cases of misreporting and reached out to these taxpayers to correct those reporting issues.”

“It is ACD’s intention to engage these entities with proactive compliance efforts, to not only deal with this issue, but all issues that involve compliance.”

Misreporting errors originate from the taxpayer reporting issues, Kelley said, not the Taxation and Revenue Department or the Audit Compliance Division.