FARMINGTON — Farmington residents will soon face a choice: find $5 million or cut it from services, such as street maintenance, firefighter response, library hours, park cleanliness or baseball fields.
"Because you can't print the money," said Farmington City Manager Rob Mayes.
In 2015, the city will begin paying New Mexico $5 million, Mayes said. It will pay $375,000 the first year and, after that, make compounding payments for 15 years, he said. The cuts will come when the state lifts its "hold harmless" clause, a measure that has funded cities and counties in lieu of tax money they previously received from food and medicine.
Another hard choice looms, too, Mayes said. A recently completed Integrated Resource Plan shows that in the future the city will demand more electricity. Coal or natural gas, Mayes said, are residents' options.
On Friday, Mayes leaned back in his black chair at the head of his office's wooden table and spoke about the challenges the city is facing.
"We are running lean and mean at this point," he said.
This fiscal year, the city faced a $6.5 million budget deficit, and, to correct it, officials cut $3 million in programs and pulled $3.5 million from the city's cash reserves.
The city's gross receipts tax revenue fell in fiscal year 2013 from $51.6 million to $49.2 million, according to its 2013 quarterly report.
City revenues are 10 to 12 percent below the fiscal year 2009 high point, and the city cut its workforce by 8 percent, Mayes said.
"We've already cut the fat," he said. "We're at the muscle."
The city has a $15 million general fund reserve and a $262 million budget. There have been no discussions and no proposals to raise taxes in the next budget process, something Mayes thinks is not necessary.
But Mayes said the city will have to think of something when the hold harmless clause lapses. More cuts may trim the city's services and make complying with federal standards difficult.
In the next three or four years, when the San Juan Generating Station shuts down more than half its coal burning stacks, 65 megawatts of energy in coal will likely become available, Mayes said.
During the past five years, Mayes said, the city has been buying 65 megawatts from the market. While it was cheap during the global recession, now it's not, and the city needs an alternative, Mayes said.
Contractors who complied the Integrated Resource Plan found that building a natural gas plant is the city's best option for another source of energy.
The plant would cost $100 million and could be completed in 2018, said Mike Sims, the director of Farmington Electric Utility System. The city utility system has saved $60 million, he said.
If residents decide to build the plant, raising the rest of the money would require the city to impose a 0.5 gross receipts tax for 20 years, Mayes said. Sims said residents would pay $6.25 a month in taxes to fund the construction.
That's why Mayes prefers that residents choose the likely soon-to-be abandoned coal. The California shareholders leaving the coal may also be required, under the same state laws forcing them out, to pay years later to decommission the plant, Mayes said, reducing the city's inherited costs from the coal.
"It's equivalent to keeping taxes down for half a percent for 20 years," he said.
But councilors Mary Fischer and Jason Sandel are leery of coal.
Throughout the country, power companies are abandoning coal, Sandel said in an Aug. 6 column in The Daily Times. Coal-fired electricity, he said, is produced out of the city and will cut the local jobs of coal miners, power plant workers and natural gas producer.
But with a natural gas plant, the city could mandate that the gas come from the San Juan Basin, said Sandel, who is also vice president of Aztec Well Servicing.
Regardless, Mayes said, about half the San Juan Generating Station's coal stacks will continue to burn, so why not burn the coal?
"That's the question before council," Mayes said.