Ruidoso officials consider hold harmless gross receipt tax
State could decided to pull the hold harmless supplement to the village at any time
- Coughlin urges residents to attend the public hearing Aug. 8
With state rumblings about cutting all of the “hold harmless” gross receipt tax supplements, Ruidoso councilors are considering positioning the village to be able to enact a tax that would make up the difference.
By approving a consent agenda item at their meeting last week, councilors set a public hearing on adoption of an ordinance authorizing a municipal hold harmless gross receipts tax of up to 3/8th of a cent at its meeting Aug. 8.
In 2004, the New Mexico Legislature and governor repealed the state’s tax on food first imposed in 1933 as a temporary and emergency measure to keep schools open during the Great Depression. State officials pledged to “hold harmless” municipal and county governments by providing the money the entities otherwise would have raised by taxing food. But in 2013, legislation passed to phase out the hold harmless payments over a 15-year period. The phase-out began in 2016. The state gave local governments the option of increasing their GRT on everything except groceries and medicine by 3/8th of one percent. In the future, if the state budget continues to sag, legislation could be introduced to re-impose the local portion of the food tax.
“What’s happening is the state has been threatening for awhile, but right now, communities under 10,000 (population) still get the hold harmless and we’re under 10,000,” Councilor Tim Coughlin said Tuesday. “Those above 10,000, they have been slowly taking away the money. They are giving the local municipalities the option of enacting their own tax to make up the difference and if it is equal to or exceeding what they would have gotten from the hold harmless, then the money from the state just ceases to come. But they are looking forward at pulling the hold harmless from everybody. If they do that, my understanding is that it will cost us a half million dollars a year to our general fund.”
The other problem is timing, Coughlin said. New GRT levies are enacted in January and July.
“We would have to have something to (state) Taxation and Revenue at least 90-days in advance of those dates to have them enacted in those times,” he said. “So right now, we’re talking about the potential for enacting this GRT, or at least having the ordinance passed, but not necessarily enacting, and waiting to see.”
But “wait and see” carries some hazards, he said. The state could remove the hold harmless supplement under an emergency clause at any time. If that happened in October, the action would not give the village the time to file the tax for the January deadline, and it would miss out on at least six months of hold harmless collections, Coughlin said.
“Personally, I am struggling with this,” the councilor said. “I’m not sure how I’m going to respond to it, because the state is saying, ‘We need the money and we’re going to take it away from the municipalities.’ What that does is just shift the burden back down to the taxpayers.
“I don’t know that I like it, but I don’t know that we have any choice.”
The village’s budget for Fiscal Year 2017-2018 was tight, he said. “We kept it just a couple of percent above last year,” Coughlin said. “If we remove a half million dollars, we’re going to have to cut back on some services this next year or make immediate cuts to services.”
A breakdown from Village Finance Director Judy Starkovich shows that 2/8th of a cent would generate the amount of revenue now received from the state for hold harmless. The last 1/8th increment would yield money for debt service that could be used for Federal Emergency Management Agency project matches and other general infrastructure needs.
The current GRT is 8.4375 percent covering the state, county and village levies. The proposed hold harmless addition would increase that figure to 8.8125 percent with the state receiving 5.1250 percent, the county receiving 0.2500 percent and the village, 3.4375 percent.
Coughlin said he plans to use social media at the beginning of August to urge residents to attend the council meeting for the public hearing. Council meetings begin at 1 p.m. in village hall on Cree Meadows Drive.
“Nobody shows up at our meetings and then they complain about it afterwards,” Coughlin said. “The tough thing is that nobody wants to increase the taxes, however, nobody wants to have their services cut. So, what do we do?”