City’s finances to be impacted by national inflation levels

Experts predict Santa Fe will receive more gross receipts tax revenue, but cost increases are also expected

Inflation issues that are encroaching into the nation’s economy will ripple into the city’s finances, but just how much is still unknown.

Professor Reilly White, principal with the consulting firm Erebor, said inflation spurred by the coronavirus pandemic likely will result in more gross receipts tax revenue for municipalities like Santa Fe, though he warned city officials should brace for cost increases to large, capital projects as prices for building materials skyrocket.

“There is good and there is bad, and both of those are significant,” White said.

“Inflation is sort of this double-edged sword,” he added. “Of course, it will help boost the bottom line of the revenue takings, but it will increase cost and increase wages.”

Which variable will outpace the other is a tossup, White said last week.

He said the consumer price index — the average change over time in the prices paid by consumers — rose 0.9 percent in October, exceeding the consensus estimate of 0.6 percent. Over the past 12 months, the index has risen by 6.2 percent, the largest surge since 1990.

But White said the index, which has been a primary indicator of inflation for consumer spending, often measures items that likely won’t hit the city’s bottom line, such as food costs. But city government may be more vulnerable to increases in commodities costs, like energy and building material prices.

“Wages for individuals, hiring — those shouldn’t be increasable or adversity affected by inflation,” White said. “But the big concern are capital projects. That is where you will see the highest increase.”

The city’s capital outlay budget is approximately $8 million for fiscal year 2021-22.

City Finance Director Mary McCoy said the city historically has provided budget overruns in the case that prices exceed budget.

White shared his outlook with the City Council Finance Committee last week, a meeting highlighted by McCoy’s

announcement of better-than-expected gross receipts tax revenue early in the current fiscal year.

According to a city memo, Santa Fe pulled in almost one-third of its expected gross receipt tax revenue during the first quarter of the 2022 fiscal year, spurred by a rebound in the city’s retail, tourism and recreation sectors.

White said the city should expect economic growth and recovery to continue, especially the tourism industry but, he added, that sector also is constrained by a nationwide labor shortage.

White added Gov. Michelle Lujan Grisham’s proposal to slash state gross receipt tax levels by 0.25 percent to 4.875 percent won’t have any impact on the city’s bottom line.

Businesses pay gross receipts taxes to the state, which then disperses shares to cities and counties, which also can issue their own GRTs as well.

White said there is very little data on how cutting state GRT rates affects consumer spending at the local level.

“At the end of the day, the effects the decrease will have will probably be less than the effects that are derived from the overall economic situation,” he said.

White added inflation is likely to diminish next year as supply chain issues are resolved, but Federal Reserve chairman Jerome Powell recently said the the Fed cannot be sure price increases will slow in the second half of next year, as many economists have predicted.

Powell in the past has said supply chain issues would ease as the pandemic waned. His tone changed slightly last week.

“The point is, we can’t act as if we’re sure of that,” he said during a House Finance Services Committee meeting. “We’re not at all sure of that. Inflation has been more persistent and higher than we’ve expected.”

The Empty Stocking Fund is a 40-yearold project of The New Mexican. Each year, hundreds of people receive aid from the fund during the holiday season to help cover rent payments, medical bills, utility costs, car repairs, home improvements and other needs.

Who it helps: Applicants, who must live within 50 miles of Santa Fe and must provide documents that provide proof of their identity, are considered without regard to race, age, ethnicity, gender identity or sexual orientation. The process for applying has closed; received nearly 800 applications.

How it works: Applications for funding are carefully vetted. Members of the Empty Stocking Committee review requests, meet with each qualifying applicant to examine records of outstanding bills or other needs and verify the applicant’s income. If a request is approved, the committee sends a check directly to the service supplier. The cap for most requests is $1,000 but can be as much as $2,500 per household, depending on the need. 2021 goal: $275,000

This holiday charity project, which began in 1981, is jointly administered by the Santa Fe Community Foundation, Enterprise Bank and Trust, the Salvation Army, Presbyterian Medical Services, The Life Link, Habitat for Humanity, Esperanza Shelter, Youth Shelters and Family Services and a private individual.

To donate: Make your tax-deductible donation online at santafenewmexican. com/empty_stocking or mail a check to The New Mexican’s Empty Stocking Fund c/o the Santa Fe Community Foundation, P.O. Box 1827, Santa Fe, NM 87504-1827. Donors can remain anonymous.

If you can provide a service such as roofing or home repairs, contact Habitat for Humanity at repairs@santafehabitat.org. If you can contribute food, clothing, toys, housewares, furniture, firewood or other items or services, call the Salvation Army at 505-988-8054.

DONATIONS

Brian Goldbeck & Naraa Shirendev: $20 Byron Gross and Ricky Tovim: $500 Cynthia: $54

Dawn Wright: $100

Diane Addis and Adam Latham: $50 Dorothy Patinka: $100

Earl Potter: $500

Erin Currier: $25

Georgellen Burnett: $50

Gloria Kratz and David Gratson: $100 Hilary and Byron Gangnes: $250 Jacqueline Jadrnak: $100

Total: $1,849

Cumulative total: $86,935.20