Bloomfield: State wrongly took $600,000 from city
City Council votes to re-enter earlier lawsuit
BLOOMFIELD — Bloomfield officials say the New Mexico Taxation and Revenue Department has wrongfully taken about $600,000 from the city, so they're going to court along with a coalition of other aggrieved cities to try to get some of that cash back.
The city of Bloomfield is the latest municipality to join in a lawsuit regarding the department’s practices of withdrawing money without explanation when a business modifies a tax form and shows that it has paid more than its share in gross receipts tax.
And, unlike in other lawsuits Bloomfield has pursued, this one poses a limited risk to the city budget due to a legal fee agreement the cities worked out with their law firm.
The City Council unanimously approved re-entering the lawsuit during a meeting Monday night. Bloomfield had withdrawn from the suit earlier this year over financial concerns.
Vanishing money, no warnings
According to city attorney Ryan Lane, the state has a certain time frame to withdraw the money from the municipality where that business is located. Lane said the city believes the taxation and revenue department has been withdrawing the money from the city after that allotted time has expired.
In addition, Lane said the taxation and revenue department did not warn cities or offer explanations when it withdrew the money.
“We look at our bank account, and there’s a deduction,” he said. “That’s it.”
Those deductions come in the form of a smaller distributions of gross receipts tax revenue. In Farmington, those deductions have ranged from $100,000 to $1 million, according to The Daily Times archives.
The cities say the deductions make it hard for them to budget from month to month.
The Artesia News reported in February that the city of Artesia was once expecting a $1.5 million distribution and instead received $500,000 — with no warning or explanation.
Bloomfield was one of the initial cities to file suit against the taxation and revenue department. The first suit gave the five initial cities — Bloomfield, Farmington, Jal, Eunice and Artesia — access to documents that Lane said confirmed their suspicions.
“The next step, then, is to pursue the money that we think they took wrongfully,” he said.
Albuquerque tipped the scales
However, when it was just the five cities, Bloomfield determined it could not pay the legal fees associated with the action, according to City Councilor Ken Hare. Bloomfield backed out of the lawsuit earlier this year.
“I think the case has merit,” Hare said. “The problem was we couldn’t afford it at that time.”
After Bloomfield left the lawsuit, the city of Albuquerque joined and negotiated a contingency agreement with the law firm Gallagher & Kennedy, which has been representing the cities. This contingency agreement means the firm will take a percentage of the money if the cities win. However, if the cities do not prevail in the lawsuit, the participating cities will only pay costs for filing fees, depositions and expert witnesses. Lane said he thinks the costs to the city will be less than $10,000.
“Even if we got half of that $600,000, it would make a difference for our budgeting,” Lane said.
The city of Bloomfield has been working on a tight budget in recent years and has failed to meet the state-required budget reserve.
In addition to trying to get some of the money the city believes was wrongfully withheld, Lane said the lawsuit is also about holding the state accountable.
Kevin Kelley, a spokesman for the Taxation and Revenue Department, said in an email that it is committed to responsible stewardship of taxpayer dollars and proper distribution of tax dollars. Kelly said the department has not yet received the lawsuit from the cities and cannot speculate about the potential litigation.
Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652 or via email at firstname.lastname@example.org.