More GRT woes ahead

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County > ‘Hold Harmless’ phase out willl impact revenues

By Arin McKenna

When the New Mexico State legislature repealed gross receipts taxes on food and medicine in 2004, they decided to allocate “hold harmless” distributions to municipalities and counties to offset revenue losses.

Now new legislation will phase out those payments, carving a deep chunk out of Los Alamos County’s already shrinking revenue stream.

County lobbyist Scott Scanland called HB 641 — which began as a bill to increase film production tax credits —a “perfect storm.” The film credit bill passed the House and languished in the Senate until the night before the session ended, when Sen. John Arthur Smith, chair of the Senate Finance Committee, prepared to push it out of committee with the hold harmless repeal and a few other changes added.

The Municipal League and local government lobbyists caught wind of the move. Smith has been trying to repeal the hold harmless provision for several years, and opposing that effort was part of the county’s legislative agenda.

“We went to work on it pretty quickly and pretty efficiently. And by the time the senate adjourned on Saturday, about 2 a.m. we felt like we’d killed the bill pretty well,” Scanland said. But Smith returned at 10:30 a.m. the final morning with a “new and improved” version of the bill.

Gov. Susana Martinez–who had vetoed the film credit bill the year before–agreed to sign the bill if a reduction in corporate taxes were added. Senate progressives agreed to vote for it in exchange for combined reporting for big-box retail chains. The bill also gives local governments three new 1/8 increment-taxing capabilities and cleans up some tax legislation from 2012.

“It flew out of the Senate and hit the House floor at about 11:20, and it was voted on at approximately 12:01,” Scanland said. “The House concurred, and now it’s the law of the State of New Mexico.”
Local governments have two years to devise a plan for adjusting to the lost revenue before the repeal begins to take effect. The offsets are phased out over 15 years.

In FY2015, the county will lose $121,000 in GRT, or 6 percent of the current offset, and an additional 6- to 7-percent is pared away for 14 years after that. By the time the offset is completely repealed the county will be losing approximately $1,815,000 in revenues.

The Municipal League, along with Scanland and other lobbyists, will use the next two years to try to reduce the impact to local governments.

Scanland said one proposal being floated is to allow local governments to impose GRT on food and medicine. Scanland gives that little chance of getting through the legislature and even less chance of being enacted at the local level.

On the positive side, HB 73–which was on the county’s wish list–was signed into law. The bill allows all county and municipal governments to impose lodgers taxes in order to raise money for convention centers. Previous legislation restricted that option to larger municipalities. The current legislation was initially opposed by the New Mexico Lodging Association.

“The Municipal League had some nice negotiations with them, so they were able to amend it and fix it so that by the time it hit the House floor, everybody was singing “Kumbaya” and it zipped through the Senate pretty quickly,” Scanland said.

HB 158 was top on the hit list for the Los Alamos Public Schools, since the initial funding formula would have hit Los Alamos hard.

“The orders were pretty clear that we were to kill, kill, kill,” Scanland said. “Superintendant Gene Schmidt and two or three of his staff were up there on any given day, and we were really in full scale battle mode on this bill. To the point where the bill wasn’t even going to get out of its first committee in the House education committee.”

A compromise was reached that took out most of the detrimental funding formula, and supporting the bill became one of LAPS’s top priorities. It passed the House, but was one of several bills shoved aside by HB 641 negotiations in the Senate.

Scanland said there was still some pushback to the bill that he and others will work on this summer, with a goal of reintroducing it in January.

House Joint Memorial 5, which requests full federal funding for the cleanup of Area G, also passed.
Los Alamos was also awarded $25,000 in capital project funds to design phase one of the new radio system for Los Alamos County.