Mayor Tim Keller is taking some heat from the public and the media, especially the Albuquerque Journal, for beginning to backtrack and breaking his campaign “promise” to have a public vote on any tax increase.

There is no doubt that the Mayor’s popularity will take a hit, but then again he was elected with a 62% majority vote and can probably afford to take the hit.

A promise not to raise taxes without a public vote by any candidate for Mayor is meaningless when said from the get go and is nonsense that should not be taken too seriously.

No candidate for Mayor really knows what is going on with city finances until they actually look at the books.

Keller making the promise as a candidate not to raise taxes was at best idealistic and at worse being foolish just to get elected Mayor.

The problem is, any candidate for office usually regrets making such promise to get elected, just ask former President George H.W. Bush (41) when he said “Read my lips, no new taxes!” and lost reelection to President Bill Clinton.

Candidate Keller also said he would draw from various agencies, departments and programs where large, misappropriated budgets existed to deal with any city deficit.

What candidate Keller said about “misappropriate budgets” sounded fantastic but not very realistic after the 8 years of budget cuts and downsizing of government by his predecessor.

The truth is, it is the City Council and only the City Council that can enact a tax increase, with or without a public vote, not the Mayor.

A Mayor can veto a tax increase, but the city council has the power to override such a veto.

It is called checks and balances.

CITY’S GENERAL FUND BUDGET AND DEFICITS

The City of Albuquerque has a total operating budget of $955.3 million dollars, of which $529.6 million is the general fund which goes to providing and delivery of essential services and includes personnel costs and social services.

The operating budget of $955.3 million, less the $529.6 general fund budget, is the budget used for city capital improvement projects and includes major construction projects, municipal development projects, building maintenance and repairs, street repairs, sidewalks, paving and construction, solid waste facilities, airport maintenance, parks and recreational facilites to mention a few.

The city has 19 separate departments and employs upwards of 5,000 city personnel, including police, fire, bus drivers, 911 and 311 call operators, clerks, secretaries, risk management personnel, maintenance workers, solid waste workers, animal control worker’s and code inspectors, zoning and planning inspectors, planners, health care personnel, social service workers, attorneys and paralegals, just to mention a few.

5,000 is the level of personnel needed to run a municipal government and deliver the essential services demanded by the public.

The city is facing a $6 million deficit for the current fiscal year in the general fund budget.

The city is also facing a $40 million-dollar deficit for the next fiscal year commencing July1, 2018 in the general fund.

For the last eight (8) years, the Albuquerque City Council strongly resisted raising the gross receipts tax despite the effect that budget cuts were having a severe impact on the delivery of essential services and a disastrous effect on public safety and the general fund.

For the last eight (8) years, there has been a severe downsizing of city hall personnel, the elimination of numerous positions, the reduction of sworn police officers by 250 and no or very little raises for city hall employees and even a time when city pay was cut to make up for deficits to avoid any kind of tax increase.

On April 1, 2018, Mayor Keller will be announcing his very first budget for the 2018-2019 fiscal year which may include increasing the gross receipts tax to fill the $40 million deficit.

It will be up to the City Council to adopt the budget, amend the budget or for that matter enact its own version.

Now comes the hard part: to tax or not to tax, and with or without a public vote.

BUDGET DEFICIT INITIATIVE REPORT

In order get a handle on the deficit, the Keller Administration prepared a report outlining suggested budget cuts and revenue generating options, including taxes increases, that can be considered by the city council.

You can read the full February, 2018 Budget Deficit Initiative Report prepared by the Keller administration here:

Click to access budget-deficit-initiative-report-3-2-18.pdf

According to the Budget Deficit Report, the challenges facing the city with respect to the deficit are:

A $25 million ‘structural deficit,’ meaning a fundamental long-term gap in recurring revenue as compared to recurring expenses resulting from slow economic growth, loss of “hold harmless” tax revenue and the trend toward online purchasing.” The hold harmless provision was enacted by the legislature to reimburse municipalities for the loss revenues from the repeal of gross receipts tax on food and medicine. The legislature decided to repeal it and allow municipalities to enact enact a 3/8ths Gross Receipts Tax (GRT) to replace the funding lost. This is what the city council has under consideration with the introduction of a resolution by Councillors Ken Sanchez and Trudy Jones.

A $15 million increase in recurring costs arising from external pressures on the cost of medical insurance, water rate increases and costs associated with compliance measures required under the Department of Justice settlement agreement.

An $88 million increase in additional costs over Fiscal Years 2018-2022, leveling off at a $32 million recurring cost, at a minimum, if the City wishes to improve public safety by adding 100 new police officers per year until staffing levels return to the desired number of 1200. This does not include the price of recruitment strategies or pay increases designed to recruit and retain officers. Currently, the police department employs 850 sworn police officers and therefore needs to hire 350 police officers to reach the 1,200 level.

A $21 million increase in one-time and short-term costs to address the equipment and technological needs of our first responders, including large backlogs in fingerprint and DNA testing at the crime lab, which ultimately delay, for several years, the criminal justice system in Albuquerque.

A $5.2 million recurring increase in costs if the City wishes to improve public safety through advances in technology and initiatives that address the systemic pressures on first responders.”

Other major contributing factors that will no doubt impact the upcoming budget include:

$4 million for the increased costs of training of police and policy changes associated with the Department of Justice (DOJ) settlement agreement.

$3 million of increased costs associated with the self-insurance fund and more premiums needed for workers compensation and tort claims.

$6.2 million for the increases in health insurance premiums.

$2.1 million for an increase in water rates by the Bernalillo County and Albuquerque Water Authority.

Increased overtime to sworn police officers. APD consistently exceeds its overtime budget because of the personnel shortage and the union contract requires time and a half be paid. This past fiscal year, APD exceeded its $9 million overtime budget by $4 million expending a total of $13 million.

$69 million for the ART Bus project that must be found if the federal grant is not forthcoming, thank you Mayor Berry for not delivering on your promise. An option is that the City Council could enact Revenue Bonds to make up the shortfall which would be an encumbrance on future gross receipts tax revenues.

$40 million needed for an upgrade of the emergency operations center and communications center, which has not been upgraded since 1995. It is possible to include such upgrade in the Capital Improvements Program (CIP) which would be voted upon by the public and not result in a drain on the general fund.

Funding for replacement of the roughly 20% of police units and fire department units that is the average rate of replacement of older vehicles. This could also be included in the CIP program.

There is a need to generate revenues for city department vacancies and increases in salaries to city employees who have been given significantly less in salary increases, or no increases at all, for the last eight years.

OPTIONS TO REDUCE SPENDING THROUGH CUTS TO SERVICES

Budget cuts that are wide ranging, sweeping, with some downright draconian, are considered on the table.

Some of the proposed cuts will affect existing city employees and mean layoffs.

Following are 14 spending cuts in the Budget Deficit Initiative Report being proposed for consideration:

1. Reduce Social Service contracts by 10% for an annual savings of $1.8 million. Social services would include help to the homeless, after school programs, and senior citizen home assistance and food programs. Social services are always some of the first budgets to be cut to reduce deficits.

2. Close one or more city golf courses for an annual savings of $1 million resulting in layoffs of city employees and lost revenues from golf fees. Golfers are one of the most focal constituencies in Albuquerque.

3. Permanently cut 200 unfilled positions for an annual savings of $13.3 million with the service impacts being far reaching and with the majority of vacancies in high turnover and needed positions in Animal Welfare, Transit, Parks and Recreation and Cultural services.

4. Cut the current subsidy to the Explora Children’s Museum by $1.4 million a year which will have a huge impact on the museum requiring the museum to seek funding from the private sector which is difficult and highly unlikely.

5. Cut community events by $3.3 million, including events such as Summerfest, Old Town events, events at the Kimo theater, Veterans Memorial and events at the South Broadway cultural center and Fourth of July events.

6. Impose 12 furlough days (no pay) on all the estimated 5,000 city employees to save $15 million.

7. Shift medical benefits costs to all city employees to save $15 million. The city currently pays 80% and that would be reduced to 75%.

8. Impose a 2.5% across the board pay cut to all of the 5,000 full time city employees that would save $7.8 million. For the last 8 years, city employees have received 1% to 2% pay raises and at one time actually had their pay cut.

9. Reduce transit services by 10% to save $2.7 million. This comes as no surprise seeing that bus ridership has steadily declined for the last 10 years and it is not likely that it will improve with the ART Bus project.

10. Cut the welfare animal budget by 25% to save $2.7 million. Such a budget cut will no doubt result in more euthanasia of animals to avoid animal care costs.

11. Totally eliminate the 311-call center which will result in a $3.6 million saving annually. The 311-call center’s annual budget of $3.6 million, it employs upwards of 60 people, all who would lose their jobs, with the call center handling upwards of 650,000 calls per year. The 311call center is being characterized as a non-essential service and has been fully operational for 12 years.

12. Cut wireless service fees by 20% to save $336,000 requiring to pull phones and “mifi’s” from employees and vehicles resulting in the inability to track buses and city vehicles.

13. Shift the City School Crossing Guard Program to the Albuquerque Public Schools (APS) making them APS employees saving $1.2 million.

14. Phase out and cancel post retirement life insurance policy for all new employees with an annual cost savings of $385,000.

INCREASING TAXES AND FEES ON THE TABLE

What is needed are recurring revenue sources to deal not only with the projected $40 million deficit for the upcoming fiscal year, but also continuing revenues to deal with future budgets.

One shot revenue generating ideas such as selling city assets like golf courses and open space owned by the city or cutting service contracts are short term, short sighted fixes and do not generate any permanent revenue streams.

Permanent revenue streams are what are required to deal with recurring costs and expenses.

Following are 18 options in the Budget Deficit Initiative Report for increasing revenues streams to deal with the deficit:

1.Enact a 3/8ths Gross Receipts Tax (GRT) to offset the reduction of lost funding from the State and the hold harmless provision.

NOTE: Albuquerque City Councilors Ken Sanchez and Trudy Jones have already introduced a resolution on a 3/8th of a cent gross receipts tax (GRT) increase that would require only a simple majority of five votes on the city council to enact.

The 3/8th % tax is being pitched as a “public safety tax” to recruit and retain officers for the Albuquerque Police Department, but it is likely the lion’s share of the revenues generated will go to paying the projected deficit. Money generated from the tax increase would go into the general fund, which could be used for virtually any city expense.

The 3/8th of one-cent GRT increase would close the entire budget hole by raising roughly $43.7 million in 2018, and $52 million by 2019.

What has not been widely reported is that the City Council must enact the tax and it must be on the books by April 1, 2018 for it to commence to be collected by the State on July 1, 2018, which explains the council’s urgency to enact the tax as soon as possible.

2. Increase the property tax levy by 1 mill which can be enacted by a simple majority vote of the city council. The property tax would generate $11 million a year, be permanent and would be paid for by all property owners. Gross receipts tax is paid by all who make purchases in Albuquerque and is highly regressive on the poor. Albuquerque’s property taxes are some of the lowest in the country and are strenuously opposed by the voting public.

3. Increase the electric franchise fee charged Public Service Company of New Mexico (PNM) from 2% to 3% cents to generate $4.1 million. This not at all realistic because it would require a rewrite of the franchise ordinance and renegotiations with PNM.

4. Increase the natural gas franchise fee charged by the Gas Company of New Mexico from 3% to 4% to generate $1.1 million. This is not at all realistic because it would require a rewriting the franchise ordinance and renegotiations with the gas company.

5. Increase telecommunications fee from 3% to 4% to generate $550,000 This is not at all realistic because it would require a rewriting the franchise ordinance and renegotiations with Century Link.

6. Impose a city gas tax of 2 cents per gallon that would generate $4.6 million. The revenue generated by the gas tax would be restricted to streets and transportation needs, the gas tax would require a referendum and there are revenue offset costs of at least $180,000 to administer tax collection.

7. Increase Planning and Permitting fees to raise $4.4 million in revenues. The fees will likely be paid and passed along to residents purchasing homes or commercial properties.

8. Increase bus fares by 25% system to generate $1 million in revenues. Bus fares have not been increased since 2002, but bus ridership has declined steadily and dramatically for the last 10 years and any fee increase may result in further decline in bus usage.

9. Charge a $10 weekly transportation fee for kids transported from APS schools to City Community Centers to generate $909,000 in revenues.

The following nine (9) revenue generating proposals will raise a total of $861,000 and will have such a small impact on a $40 million deficit that it is difficult to understand why they are even being considered:

10. Increase annual “alarm fees” from $25 to $30 by amending the alarm ordinance to generate $180,000 in revenues.

11. Raising “Latchkey and Children Service” fees by 10% to generate an additional revenue of $160,000.

12. Raise city golf fees at all city golf courses by $1 across the board to generate $171,000.

13. Increase the “Community Centers Adult fee” of $25 dollars a year to generate $80,000 in revenue.

14. Increase city aquatics fees for city pool us by public to increase revenues by $90,000.

15. Increase “engineering fees” by 10% to generate an additional $70,000 in revenue.

16. Increase annual membership fees at all Senior Citizens Centers from $15 to $20 to generate $50,000 in additional revenue.

17. Increase museum rental fees to generate $40,000 in additional revenues.

18. Increase “Family & Community Service Center Health Social Services Center” leases to generate $20,000 in additional revenue.

CITY COUNCIL NEEDS SHOW MORE DUE DILIGENCE

If the city needs a tax increase, the city council should do it, but it needs to do more due diligence on how the tax revenues should be dedicated and only after extensive public hearings on each city department budget.

The City Council must enact the proposed 3/8ths Gross Receipts Tax (GRT) for it to be on the books by April 1, 2018 for it to commence to be collected by the State on July 1, 2018, which explains the council’s urgency.

If the proposed 3/8ths Gross Receipts Tax (GRT) is enacted after April 1, 2018 by the City Council, the city will have to wait until January 1, 2019 for the revenues to be collected by the State.

The City Council should wait until after Mayor Keller submits his proposed budget on April 1, 2018 to dedicate the tax revenue under the budget they adopt.

The City Council is required to have public hearings on the proposed budget and allow for public input.

The public’s input is vital in order to reach a consensus on the need for any tax increase and how it should be dedicated.

CONCLUSION

Mayor Tim Keller should seriously consider submitting two separate and alternative budgets to the City Council on April 1, 2018 for public hearings for the City Council to decide which budget they should enact.

The first original budget would be one that virtually implements all the spending and budget cuts necessary to wipe out the $40 million-dollar deficit without tax increase.

The second budget would be a “bill substitute” budget that would make a combination of cuts, revenue raising measures and any proposed tax increases if needed, not only for public safety, but for all essential services.

The City Council should invite and allow Mayor Keller to actively participate in all schedule budget hearings, which would be a first, with the understanding he could not vote.

Let the city council do its job with budget hearings and decide on any proposed tax increase, how it should be dedicated, whether it be their own or any one proposed by the Mayor.