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Farmington, Aztec contemplate gross receipts tax rate increases
Farmington City Council scheduled to vote Tuesday on tax increase
FARMINGTON — Aztec is considering raising the gross receipts tax rate by up to a quarter of one percent while Farmington is looking at a greater increase of 5/8ths of one percent.
If both cities pass the maximum proposed increases, the total gross receipts tax rate in Aztec and Farmington would be 8.25 percent, however most of that comes from the state’s gross receipts tax rate.
This would mean people shopping for certain goods in Aztec and Farmington would pay a higher tax rate than if they shopped in Bloomfield, Kirtland or unincorporated areas.
Bloomfield currently has the highest rate at 8.1875 percent. Kirtland’s gross receipts tax rate is 6.625 percent. Unincorporated areas of San Juan County have a gross receipts tax rate of 6.625 percent.
Aztec’s current rate is 8 percent and Farmington’s current rate is 7.625 percent.
Aztec hopes for increased revenue after facing cash crunch
Aztec faced diminishing reserves and, during the first budget workshop, the city finance director warned commissioners it could have only $4,000 more than the required reserve at the end of fiscal year 2019.
Mayor Victor Snover then proposed considering increasing gross receipts taxes.
Aztec City Commission approved publishing a notice of intent to adopt a gross receipts tax increase during its Tuesday evening meeting. The commission will vote on the increase at a future meeting.
Aztec meetings can be viewed on the city’s YouTube channel.
City Commissioners Austin Randall and Sherri Sipe mentioned that Aztec could be hurt by the perception that will come with raising gross receipts tax and having the highest rates in the county.
"That perception has hurt us in certain areas through the years," Sipe said.
Aztec projects raising the rate by 1/8th of one percent would generate $128,000 a year, and raising it a quarter of one percent would result in more than $250,000 of revenue.
Farmington would spend for public safety, streets and economic efforts
Unlike Aztec, Farmington would not place all of the revenue into its general fund.
Instead, an eighth of one percent would be set aside specifically for public safety, such as the police and fire departments. Another eighth of one percent would fund the Public Works Department, including street maintenance and repairs.
Another eighth of one percent would be used to make up for money the city is losing during the state phase-out of hold harmless payments. The city receives the payments in lieu of revenue it previously received from tax on food and medicine.
The remaining quarter of one percent would be placed in a special fund to be used for economic development and community transformation efforts.
Farmington could choose to vote for all 5/8ths of one percent, portions of the 5/8ths of one percent or no increase during its 9 a.m. Tuesday meeting.
City Manager Rob Mayes said each 1/8th of one percent could generate $2.2 million.
He said the city needs to pass at least 3/8ths of one percent or cut between $6 million and $7 million from its budget and reassign priorities.
The City Council will listen to public comments about the increase during its meeting and heard public comments during this week’s evening meeting. Farmington meetings can be viewed at fmtn.org.
Supporters offer ideas for projects in Farmington
Most people who attended the Farmington City Council meeting on Tuesday asked councilors to increase gross receipts taxes by 5/8ths of one percent.
Several supporters offered their ideas for projects the city could build or work on using the quarter of one percent economic development and community transformation gross receipts tax.
These ideas ranged from trail development and creation of an all-abilities park to improvements of softball fields, which could allow local leagues to attract a national tournament.
During his presentation, Mayes said Farmington is not “putting the cart in front of the horse.”
“We have a great cart with a lot of ideas in it, but we don’t have a horse,” he said.
San Juan Generating Station closure looms over conversation
City officials say Farmington needs to invest now in economic development projects because the San Juan Generating Station will likely close in 2022.
“I don’t think it’s a matter of ‘if,’” said Allen Elmore, who serves as chairman of the San Juan County Libertarian Party and is a member of Cliffhangers Four Wheel Drive Club. Elmore is the publisher of “4 Corners American Classifieds.”
While Elmore supported the increased gross receipts tax rate, he suggested the city consider having at least a portion of the gross receipts tax go away in 2022 when San Juan Generating Station closes.
Farmington resident Nate Banks decried the gross receipts tax system as unfair because it is levied on every transaction rather than just the final sale of a product. Banks said this creates a pyramiding tax with hidden levels.
Kevin Walker, a La Plata resident and Farmington business owner, said he does not support raising taxes.
"I think you're under the gun here and don't have a whole lot of choice," he said.
Like Elmore, Walker said the tax increase should have a time limit if the council chooses to increase the gross receipts tax rate.
Councilor Sean Sharer said if the council approves the full 5/8ths of one percent tax and Farmington does not see positive measurable results the increase should be repealed.
“I have no idea how I’m going to vote,” Sharer said.
Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652 or via email at firstname.lastname@example.org.