FARMINGTON — San Juan County commissioners will have to decide sometime in the next few months whether to impose another tax to support county operations as the local economy continues to slump, said chairman Jack Fortner.
"We're just at a hard place," he said. "Our county manager tells us it's likely the only way."
The tax would be one-eighth of 1 percent on all gross receipts in the unincorporated county and also Farmington, Aztec and Bloomfield. The tax would yield an estimated $4.4 million in its first year.
Fortner and Commissioner GloJean Todacheene said they see no alternative to the tax. Commissioner Scott Eckstein said he's uncertain how he'll vote, and Commissioner Margaret McDaniel said she would vote against it.
Efforts to reach Commissioner Keith Johns on Tuesday and Wednesday were unsuccessful.
The commissioners earlier this month imposed a new one-eighth of 1 percent tax on all business in the unincorporated areas of the county. It adds 2.5 cents for every $20 spent. McDaniel voted against it.
Fortner has said passing the tax is the worst-case scenario, and other commissioners speak poorly of the proposal.
"I know that if I don't vote in favor of it, it's going to put the county into millions of dollars of debt," Eckstein said.
McDaniel said in a text message the choice is "a no-win situation." Either commissioners have to raise taxes or reduce services.
"I think we need to seriously look at reducing services in these lean times," she wrote. "Raising taxes is not the answer."
But Todacheene said taxes are often misunderstood. Governments need tax revenue to pay for services such as fire protection, law enforcement and medical care.
"It's the taxes that help the citizens," she said.
Fortner said the proposed tax is intended to address the effects of the newly created Safety Net Care Pool, which was part of legislation passed in the recent session. It mandates the county dedicate about $3 million a year — or one-twelfth of 1 percent of its gross receipt taxes — to a statewide fund.
The safety net fund pays a percentage of health care providers' medical bills for services delivered to uninsured county residents.
But, he said, a multitude of other factors are reducing the county's revenue.
The safety net fund payment also left San Juan County with a $9 million deficit in its indigent health care fund, recently renamed the "health care assistance program." That program also helps uninsured county residents pay medical bills and health care providers pay uninsured claims.
Earlier this month, the county cut nearly in half the reimbursement rates the health care program paid local providers. The rate was at 70 percent — it is now at 33 percent, an averaged Medicaid rate.
The county now faces a $900,000 deficit in its health care assistance program.
The tax would lessen this deficit, but the county would still be about $2.1 million short of being able to pay for all the health care program's services, County Executive Officer Kim Carpenter said.
State statute requires that counties operate these programs.
"We still have work to do even if the commission imposes the one-eighth," Carpenter said.
Fortner said other factors are costing the county revenue. Here are summaries of the expected revenue losses:
· The county loses about $1 million a year with the rollback of the Sole Community Provider Program, the predecessor to the safety net pool, Deputy Executive Officer Linda Thompson said. That program helped San Juan Regional Medical Center pay about $12 million in medical claims a year, which the county's health care program would otherwise have had to pay, she said.
· The county won't get the more than $1 million a year it used to receive from Sun Ray Park & Casino under a lease payment agreement, Chief Operations Officer Mike Stark said. According to the agreement, the casino pays the county $2 million a year on its lease and more if 15 percent of its total annual revenues surpass the lease payment.
In fiscal year 2009, the casino paid the county $3.3 million, but, since fiscal year 2013, the casino has been paying its base rate because its revenue has dropped, Stark said.
· Another change that will drain county revenue is the phasing out of the "hold harmless" payments over a 15-year period. The county will lose $157,000 in fiscal year 2015, Stark said. The payments to counties and cities were meant to compensate for a tax exemption lawmakers passed for food and medicine. He said the county will lose $2.6 million a year once they are phased out.
· The county will lose more money if oil and gas production declines, Thompson said. Since fiscal year 2008, oil and gas revenue has dropped by about 66 percent less oil, according to county documents.
· BHP's sale of the Navajo Mine to the Navajo Nation means the county will lose an estimated $708,000 in property tax revenue each year, Stark said.
And the county lost $270,000 a year in property tax from the closing of three coal-burning stacks at Four Corners Power Plant. County officials anticipate another significant property tax loss when the San Juan Generating Station shutters two of its four coal-burning stacks, he said.
The county will also lose more money in gross receipts taxes from the two power plants' because less coal will be burned and, therefore, less will be sold, Thompson said.
Overall, the county will lose about $900,000 a year in taxes, she said.
· Since Bloomfield and Farmington have annexed significant parcels of land, which removes them from the county tax rolls, the county's fire excise tax and environmental gross receipts tax funds yielded 19 percent less revenue, she said.
· The federal government compensates counties with large tracts of federal land that are not subject to property taxes. San Juan County this year will get about $2.2 million from the fund, called the Payments in Lieu of Taxes, or PILT. That's only because a last-minute effort by the state's U.S. Senators and others restored the program for one year after it had been eliminated by federal budget cuts.
But Congress has not yet authorized future PILT payments, so the funding source is unstable, Stark said.
Fortner said the tax increase is the county's last option. He is crossing his fingers, he said, hoping exploration of the Mancos Shale formation yields significant quantities of oil.
"But after a couple years," he said, "our fingers get tired."