FARMINGTON — Gov. Susana Martinez's decisions are forcing county and city governments to raise taxes even as her campaign ads claim she hasn't raised them, Farmington and San Juan County officials say.
"The pledge not to raise taxes during her first term as governor rings a little hollow at this point," Farmington Mayor Tommy Roberts said.
State lawmakers passed House Bill 641 in the last legislative session, which in July will begin phasing out multi-million-dollar payments made by the state that New Mexico cities and counties have received for years. Farmington has gotten more than $5 million from these payments each year since 2010, and the county's annual average has been about $2.4 million, according to city and county documents.
These subsidies were called "hold harmless payments." The state paid local governments the money in exchange for not collecting sales tax on food and medicine.
Repeatedly, Roberts said, Martinez had promised city and county officials she would veto legislative efforts to repeal the payments. But the house bill phasing out "hold harmless" passed, he said, and is now law.
"She cut a deal that got her some things she wanted (in the bill's tax package), but at the same time she reneged on her deal with local governments to protect them from legislative actions," he said, adding that the tax package contains some statewide benefits.
Martinez's spokesman, Mike Lonergan, said in an email that cities and counties won't need to raise taxes.
"Responsible budgeting will allow local governments to simply adjust over time, making any increase in taxes completely and totally unnecessary," he wrote.
Martinez, a Republican, is running for reelection against Attorney General Gary King, a Democrat, in the Nov. 4 general election.
When asked for comment, King in a written statement didn't directly address the hold harmless issue but pointed to federal budget-cutting activities that also could negatively impact state and local governments.
"I offer the services of my office to help in whatever manner we can," he said.
During a ceremony on Friday at Process Equipment and Service Company, known as PESCO, Martinez told more than 100 people gathered there of her promise to not raise taxes on New Mexico families and businesses. In an interview afterward, she said her actions have not led to counties and cities raising taxes.
"No one in the state has lost a penny yet," she said, adding that local governments have years to plan. "And so they do not need to raise taxes on families and businesses."
Hold harmless payments, she said, are a subsidy program from former Gov. Bill Richardson, and they aren't sustainable.
Hold harmless payments cost the state's general fund in fiscal year 2013 about $140.5 million, according to legislative finance documents. And that expense is expected to rise, costing the state more than $150 million by fiscal year 2017.
Legislative Finance Committee Director David Abbey said hold harmless payments were difficult for the state to make as it wasn't generating the revenue it was paying local governments.
"We continued to share what we weren't getting," he said. "It wasn't sustainable."
The senate bill repealing the hold harmless payments phases out the state subsides over a 15-year period starting next fiscal year.
The bill authorizes local governments to impose three separate one-eighth of 1 percent gross receipts tax increases to compensate for the loss in funding.
According to state documents, 33 counties and cities will be automatically phased-out, including all counties with more than 48,000 people and cities with more than 10,000 people. Small counties and cities that impose the authorized taxes will also be phased-out. So, unless they impose the taxes, Aztec and Bloomfield will not be affected.
San Juan County commissioners will likely be voting soon whether to increase taxes. According to the agenda for their Tuesday evening meeting, they will consider adopting three tax increases, one of which is authorized in the house bill phasing out the hold harmless payments.
San Juan County will lose about $157,000 in the phase-out's first year and about $2.6 million a year after the hold harmless payments are completely phased out, according to county documents.
San Juan County Executive Officer Kim Carpenter said the alternative to raising taxes is deep budget cuts. The county would be forced to cut law enforcement, health care, mental health, public works, the fire department and many other services. He said doing that would add to jail populations and public drunkenness with possible fatal consequences for some.
"That's really the only choice we have," he said of increasing taxes.
Farmington will lose about $388,000 the first year of the phase-out, but each year following — like the county — the loss compounds, according to city documents. By fiscal year 2030, Farmington will lose about $5.8 million a year, according to city documents.
That's about $46.6 million in total over the 15-year period, according to city documents.
"We're like the frog (gradually) boiling in the water," City Manager Rob Mayes said. The city could likely absorb the first few payments in its reserves, but, each year following, those payments increase by almost $400,000.
Eventually, he said, the city will need to decide — as the county is doing now — whether to cut services or raise taxes.
"That $5.8 million dollars, we're going to wake up and be boiled," he said.