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Deciding it was not prudent to move forward with reductions in gross receipt tax rates (GRT), three ordinances each proposing to repeal a 1/8 percent GRT increment were tabled during the Los Alamos County Council meeting Tuesday night.
It was recommended that the reductions in GRT rates be included in financial planning discussions next year.
Councilor Robert Gibson presented the three ordinances, which addressed a general increment, a county correctional increment and a fire protection increment.
Each increment, if repealed, would have equaled a $2 million reduction in revenue to the county. The county will receive $51 million in GRT revenue for FY 2010.
Reading from a written statement, Gibson said, “Coincident with my putting these ordinances on council’s agenda, the county suddenly realized its GRT revenues for the last fiscal year fell significantly, in fact, by just about the amount that these tax rate changes would cut revenues. The timing of this revelation may or may not have been another coincidence, but I have too much faith in the integrity of Steve Lynne (chief financial officer) to believe he would cook the books themselves.
“Although some of last year’s revenue drop is apparently a timing issue of no long-term significance, it may also indicate the drop in LANL (Los Alamos National Laboratory) GRT payments we have long anticipated but not previously seen.”
Gibson continued, “Speaking of LANL, it would be the largest beneficiary of any reduction in GRT rate. That was an important, albeit, secondary, reason my earlier efforts to reduce taxes focused on property taxes. All the benefit would go to our citizens, not the lab.
“The GRT rate reductions here proposed could still be implemented, but under some scenarios, such as CMRR not being built, could require the county government to tighten its belt. That would not be a bad thing … As long as the county insists on spending at its current prodigious rate, I am not sure it would be prudent to move forward with these reductions at this time. Rather, they should be considered in the broader context of county financial planning next year.”
According to an agenda document, the GRT revenue was reported to be $5.75 million or 11.1 percent lower than projected. The drop is primarily attributed to the timing of spending at LANL, which is subject to GRT, and continued refinement by the lab of its GRT payment management.
In his statement, Gibson said a more optimistic picture was presented to councilors last April.
He said, “During last April’s budget hearings, the county’s LRFP (long range financial plan) projected a total fund balance a decade from now of approximately $250 million, even paying off the $75 million ordinance 529 bond issue and assuming continuation of our very high spending levels.”
Gibson said, “The county’s adopted financial policies require that if balances exceed reserve commitments, the county ‘should take specific actions to reduce the balance.’ In short, the county should not be banking funds for which it has no demonstrated need. Specific general fund balance requirements total roughly a third of the general fund budget, or about $23 million. Other funds, such as utilities, properly maintain some fund balances also, but they are smaller.”
The ordinances were prepared to comply with this policy, Gibson said.
An agenda document reported while there has been an upward trend in GRT revenue since 2007, there has also been volatility, which caused a significant variance between the updated projection and the previous one.
Based on an analysis of last year’s retail gross receipts, the Chamber of Commerce and Los Alamos Commerce Development Corporation calculated the savings would be $40 per year per household, if the ordinances were approved.
The organizations also pointed out having GRT rates competitive with other communities would be a plus. They noted, however, Los Alamos’ rates are lower than 23 other municipalities that are comparable to the county including Santa Fe and Española.
“In general, we like the idea of lower taxes and think that’s always good and to have taxes as low as possible and to be competitive,” said Kevin Holsapple, executive of the Los Alamos Commerce Development Corporation.
However, he noted it seems Los Alamos is already competitive and the dynamic nature of the GRT revenue is a concern.
He credited GRT revenue’s volatile nature to the lab. “The lab, like any good business, they are looking to lower the amount of taxes they pay,” Holsapple said.
As he understood, Holsapple said the lab was successful in its new contract in reducing the taxable liabilities they have.
Lynne added the volatile nature also has to do with the timing of LANL spending and how it affects the month-to-month GRT revenue.
Holsapple agreed with Gibson, saying discussing reducing GRT rates may be better discussed when planning for the budget.