City tax revenue fell slightly in March

4% drop not as bad as projected, but April expected to be worse

Newly released tax figures show that the early days of the coronavirus pandemic took only a small bite out of local government budgets.

But officials are not breathing any sighs of relief, saying the worst days of this ordeal have yet to hit the books.

Local governments around the state recently received their gross receipts tax distributions for the month of March, and Albuquerque’s dropped 4% compared with the same month last year. The difference amounted to about $1.6 million, some of which was erased by an extra $501,000 in monthly internet sales tax revenue that the city began receiving last summer.

Meanwhile, Bernalillo County’s total March GRT distribution topped 2019 figures by 0.3% when including the internet sales tax.

Officials say the panic buying and hoarding that happened when coronavirus reached New Mexico clearly provided a small boost — a trend that may not be sustained. Albuquerque also had a significant increase in construction.

But they expect to see much more damage when April and May numbers are released, because only part of March was affected by the disease.

“March was a mixed month — half of it we were kind of normal, half of it we … weren’t normal,” said Shirley Ragin, Bernalillo

County’s deputy county manager for finance. “The real telltale will be when we get the April (GRT).”

The taxes reach local governments about six weeks after the month ends, meaning April revenue will come around mid-June.

Albuquerque Chief Financial Officer Sanjay Bhakta is bracing for a major hit.

“We actually think April numbers will be really brutal,” he said.

The city had expected worse from March, and last month it released a budget forecast that anticipated $27 million in lost revenue by the time the fiscal year ends June 30, much of it tied to GRT.

Though March exceeded projections, city officials say, it is too soon to make adjustments that assume a better outlook. Even speculating what the final April report will bring is difficult, city economist Christine Boerner said.

“It’s a really hard time to make a projection about a single month; something like this (pandemic) just hasn’t happened before,” Boerner said.

Gross receipts tax revenue plays a vital role in local government, accounting for about two-thirds of the city’s general fund, which pays for basic city services such as police, parks maintenance and animal welfare operations.

GRT makes up 51% of Bernalillo

County’s general fund budget.

Some GRT also goes to specific purposes, such as the ABQ BioPark in the city and behavioral health programming in the county.

The tax had been trending above budgeted levels for both the city and county heading into the pandemic, but the virus quickly spurred a sweeping economic shutdown and record unemployment.

Effective March 19, indoor malls, gyms and theaters had to shut per state orders, while hotels had to dramatically limit capacity, and restaurants had to stop dine-in service. By March 24, Gov. Michelle Lujan Grisham’s administration implemented a statewide stay-at-home order that forced all nonessential business to close.

The changes were reflected in Albuquerque’s GRT, as revenue from the arts, entertainment and recreation sector plummeted 64%, food service tumbled 31%, and overall retail dipped 11%.

But some areas had growth, including wholesale trade, at about 10%, and construction, which spiked 28%.

Though construction has charted higher than anticipated throughout fiscal year 2020, Bhakta said, the March number was surprising.

Less surprising was city revenue tied to grocery shopping.

Although the state no longer taxes groceries, it still makes

“hold-harmless” payments to local governments based on how much consumers purchase. In Albuquerque, the March payment surged 38% compared with 2019, which aligns with the panic shopping many did at the start of the crisis.

But Bhakta said that may be a March anomaly, and he is not banking on similar gains in the future.

By April, he said, “people will have (been fully) stocked up on food and maybe even some other items like toilet (paper) — I know people who have toilet (paper) for almost one year.”