Additional revenue designed to compensate for state rollback of 'hold harmless' payments
FARMINGTON — The City Council raised taxes for the first time in almost two decades Tuesday evening.
The two tax increments will go into effect in January 2016, but that revenue won't reach city coffers until March.
No residents showed up to speak about the measure during Tuesday's meeting, and Councilor Mary Fischer cast the only vote against it.
In a public meeting on the proposal in late July, most of the residents who spoke supported the tax increase, which is designed to offset millions of dollars in lost tax revenue resulting from the state's plan to cut the so-called "hold-harmless" payments it has made to local governments since 2004.
Mayor Tommy Roberts thanked the residents who attended the meetings at which councilors discussed the tax increase.
"Your involvement has made a difference to the council," he said.
The city has not raised taxes since 1998, but city officials say they have to do so now or cut services.
In 2004, the state repealed gross receipts taxes on food and medicine. The resulting loss in revenue to local governments prompted state lawmakers to approve a statewide tax hike to fund the annual "hold harmless" payments.
But in 2013, legislators passed House Bill 641, and Gov. Susana Martinez it. The measure called for phasing out those payments to the state's larger cities and counties over 15 years.
By 2030, when "hold harmless" payments have been phased out completely, Farmington is projected to lose more than $5.8 million annually, according to city documents.
To compensate for the loss of revenue, HB 641 authorizes local governments to implement up to three, one-eighth of 1 percent gross receipts tax increases. Two of those taxes are what councilors here approved Tuesday night.
Those two tax increments will net nearly $4.9 million each year, but they will cover the revenue losses only until 2020, according to city projections.
City officials say the amount of Farmington's gross receipts taxes that would come from food and medicine, if they were taxed, has grown rapidly. If that trend continues, City Manager Rob Mayes projects the city would have been able to receive $6.6 million from taxing food and medicine by 2020. By 2030, he said, the city's gross receipts taxes from food and medicine, if they could be collected, would be $8.5 million.
The third tax increment, which the council has not implemented, would net about $7.3 million, according to city documents.
Also on Tuesday, councilors unanimously approved the appointment of Linda Rodgers, chief financial officer for Process Equipment and Service Co., or PESCO, to complete the term of District 1 Councilor Dan Darnell, who resigned to move to Rio Rancho to pursue an academic degree.
Rodgers said she is going to run for the position again in the March 1 election.
After taking Darnell's former seat on the council, Rodgers said, "It's an honor to be here tonight."