Economic challenges have led San Juan County Commission to consider tax increases

Hannah Grover
Farmington Daily Times
The San Juan Generating Station is seen, Friday, Nov. 9, 2018, from Twin Peaks in Kirtland.

AZTEC — San Juan County Commission is considering raising gross receipts tax by 1/8 of 1% amid economic challenges.

The commission on Aug. 18 unanimously approved publishing a notice of intent to adopt the new GRT increment during a meeting that can be viewed on YouTube. This tax is similar to a sales tax.

The notice of intent provides the public with the opportunity to weigh in prior to the County Commission voting on the measure.

The county balanced its fiscal year 2021 budget by freezing positions and tapping into the cash reserves, but those measures are not something that can be continued in future years.

A 1/8 of 1% GRT increment could generate $3.3 million of new revenue and the burden would be borne by a larger group of people than other options like raising property tax rates because San Juan County serves as a regional economic hub.

Economic challenges pre-date COVID-19, include energy sector changes

County Manager Mike Stark said the economic challenges began before COVID-19 but have been worsened by the pandemic restrictions.

The top 10 property tax payers in the county in 2010 provided 47% of the county’s property tax revenue. Many of those major corporate players have since pulled out of the basin. In 2019, the top 10 property tax payers provided about 23% of the property tax revenue.

The county has been taking steps to balance the budgetary challenges as major oil and gas companies have left. Since 2010, 50 county jobs have been lost through attrition and never replaced. Another 27 positions were frozen as of March 1.

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Large numbers of vacancies and businesses closing will lead to reduced property tax revenues and decreased property values.

And the county faces various uncertainties as the state transitions away from fossil fuels.

Stark said he doesn’t think the region will ever see the types of natural gas booms that the basin has previously experienced.

Steam comes from one of the four units at the San Juan Generating Station. The emissions from the power plant are monitored with equipment placed on each unit.

The electrical generation situation is also changing. The county hopes that Enchant Energy can successfully retrofit the San Juan Generating Station with carbon capture technology and keep it open after 2022, which would prevent the loss of property tax from the facility. It is also hoped that Public Service Company of New Mexico will replace the power it currently gets from the San Juan Generating Station with 430 megawatts of solar and battery in San Juan County, which was approved by the New Mexico Public Regulation Commission.

The solar and battery replacement would generate $1.2 million in property tax, slightly less than the San Juan Generating Station and its associated mine currently provide.

Stark said the county is hopeful that both those projects will be successful, but that doesn’t mean the county should hold off to see what happens.

“We’re not in a situation where we can wait to hope to see that in 2023 that some of these projects come to the finish line,” he said.

These pulverizers once crushed coal for unit 3 at the San Juan Generating Station. They have since been shut down along with the unit.

Annexations by the municipalities as well as the incorporation of the Town of Kirtland also mean less revenue for the county, and Farmington is considering annexing an area along U.S. Highway 64 that includes PESCO.

On top of all that, San Juan County saw GRT revenue declines in many sectors due to the COVID-19 pandemic. The revenues are coming in about 16% below last year. County officials say it will likely take eight years for the economy to recover to pre-pandemic levels.

“It’s going to be a slow, long climb out of the hole,” Stark said.

Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652 or via email at hgrover@daily-times.com.

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