FARMINGTON — Farmington will not incorporate a tax increase into next year's budget, Mayor Tommy Robert said after a budget hearing on Thursday in the Bonnie Dallas Senior Center.

"We're not even talking about increasing taxes at this point," he said.

At least 30 people — nearly all city officials — met in the senior center's cafeteria to view a slide show presented by City Manager Rob Mayes about the budget process, the budget's health, threats to the budget and city services funded by the budget.

At least 60 citizens who were not city officials attended another public hearing for the budget on Wednesday afternoon, Roberts said.

Three more budget hearings are scheduled throughout the month and into June, and city council will likely adopt the document at its June 3 meeting. After that, the city will submit the proposed budget to the New Mexico Department of Finance Administration.

Mayes said the city hasn't imposed a tax increase in about 20 years, but in July, when the state begins phasing out its "hold harmless" payments to cities state-wide, Farmington will be in trouble.

"Frankly, we don't have a solution at this point," he told those gathered at the hearing.

Food and medicine sales since 2004 in New Mexico have been tax-exempt. To compensate cities for taxes they normally would have collected on those goods, state lawmakers imposed a 0.5 percent increase on non-food item gross receipt taxes and began dolling out annual "hold harmless" payments to cities and counties.

In fiscal year 2013, Farmington received $5.7 million in "hold harmless" payments, according to city records.

But in July, the state will begin cutting back those payments by 1 percent for 15 years, Mayes told the crowd. That amounts to a $384,000 loss the first year, and, by fiscal year 2030 when the last of the payments are phased out, the city will have lost more than $46 million, according to the figures Mayes presented in his slide show.

"This is a serious problem," he said.

The state's solution is to allow cities to raise taxes in three separate one-eighth of 1 percent increments, he said.

Today, the city's tax rate is about 7.2 percent, and for every taxed dollar, it receives 34 cents, Mayes said.

After the meeting, Roberts said he doesn't anticipate the city needing to impose any of the incremental tax increases. He said he expects the city will create more jobs to expand its tax base and that will make up for the loss in revenue caused by the "hold harmless" payments.

Lynn Love, a citizen who attended the meeting, agrees a tax increase is probably unnecessary. City officials can likely rearrange revenue in certain funds to compensate, he said. But, he said, he will leave that up to his elected officials.

"I'm just really happy to know we have people on board that tend to maintain our budget," he said.

Dan Schwartz covers government for The Daily Times. He can be reached at 505-564-4606 and dschwartz@daily-times.com. Follow him @dtdschwartz on Twitter.