Lower than expected gross receipts tax revenue in May led city officials to adjust the budget for fiscal year 2017


FARMINGTON — The city of Farmington is tightening its belt as gross receipts tax revenue continues to decline.

At the end of July, City Manager Rob Mayes cut about $3 million, or 5 percent, from the city's fiscal year 2017 budget. Each department was required to cut a certain amount of spending.

For example, about $700,000 was cut from the police department's budget, Mayes said in a recent Mayor's Table online video.

In a phone interview Thursday, Mayes said the city is also putting off replacing vehicles, such as police cars, and has cut employee training this year. The city has also decided not to fill 15 vacant positions and will not raise pay for any of its employees. It is also delaying capital projects, including the Complete Streets project that aimed to make the downtown more pedestrian and bicycle friendly.

The fiscal year 2017 budget already accounted for 10.6 percent less revenue from gross receipts tax than the previous year. Mayor Tommy Roberts said the city in July received gross receipts tax numbers for May and adjusted the budget as a result. In May, the city received about $4.43 million in tax revenue, a drop of more than $240,000 from the $4.67 million it received in May 2015.

That decrease, coupled with concerns that the downward trend in tax revenue will continue, prompted the city to take precautionary measures.

Mayes said that by making cuts early in the fiscal year, the city may avoid future cuts.

"The key to those being effective is that you really have to react early in the process," Mayes said.

A contingency plan the City Council approved while drafting the fiscal year 2017 budget earlier this year includes up to another 5 percent in cuts.

Roberts said as revenues continue to decline, the City Council will decide how to make up the difference.

He said this could mean eliminating services or programs. The council may also decide to raise taxes to increase the revenue. Another option the council may take is to draw from its cash reserves, Roberts said. He said he favors doing that, but the city can only draw a limited amount before it reaches the state required minimum balance.

Mayes said the cash reserves are in place for "a rainy day."

"Cash can be a bridge to see if the economy improves," Mayes said.

This is not the first time Farmington has experienced a rapid decline in tax revenue. In 2009, the city received $55.9 million in gross receipts taxes, the largest annual sum it has ever received, Mayes said. But then in fiscal year 2010, the city experienced a $9.7 million drop in gross receipts tax revenue, according to Daily Times archives.

Over the next few years, tax revenue "inched" back up until it was within 5 percent of the 2009 level during fiscal year 2015, Mayes said. City documents show gross receipts tax revenue increasing to $53 million in fiscal year 2015, up from $47.9 million in fiscal year 2011.

In fiscal year 2016, tax revenue again began to decline. Mayes said the city ended fiscal year 2016 with 11 percent less tax revenues than it received in 2009, and that was even after a tax increase that took effect in January.

The increase in revenue in 2015 was partially due to increased oil drilling, Mayes said.

"That kind of mini-boom wound down as quickly as it started," he said.

He said gross receipts tax revenues began to decline dramatically during the last half of fiscal year 2016, especially during the last quarter.

Hannah Grover covers Aztec and Bloomfield, as well as general news, for The Daily Times. She can be reached at 505-564-4652.

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