Hold Harmless means Silver City faces money shortfall

Danny Udero , Silver City Sun-News Sports Editor

SILVER CITY — With the Hold Harmless Tax slowly phasing out, the Town of Silver City could be impacted tremendously if its sped up because of the budget problems the state is facing. According to Town Manager Alex Brown, Silver City could see a huge shortfall.

Every year, six percent is phased out and in 2016, Silver City lost around $109,000. This next year, the town will see a $330,000 decrease in hold harmless.

“According to Senator Howie Morales, the state may be looking at speeding this process up or phasing it out,” Brown said. “Silver City has the highest percentage of the total gross receipts tax. Hold Harmless is 18 percent. It’s the largest source of revenue for the town and it’s going to have a huge impact. Percentage-wise we are going to see the largest loss of anyone in the state.”

Senator Morales said he was concerned about the “broken promise” of holding local governments harmless pulled back a couple of years ago and even though he voted against the legislation when it came out in 2013, he sees it impacting Silver City pretty hard.

“It could have a devastating impact on the Town of Silver City,” Morales said. “This was all done to give a corporate tax cut. Lowering corporate taxes when the food tax was eliminated. They wanted to give some cushion to phase it out and not be reliant on those funds. Now where we sit with the budget shortfall, there is a large amount of money in the Hold Harmless phaseout. There has been some discussion that the state and governor could choose to repeal this. That in my opinion, is another broken promise and it would instantly have a huge impact on cities across the state.”

When that happened years ago, the state gave the cities hold harmless increments that they could impose. But, Brown said those increments only generate a little under $900,000. With the loss being about $1.6 million there is going to be cuts are property tax increases.

Previous:Hold harmless gross receipts tax discussed at council meeting

“We have about 4 mills of property tax we can impose,” Brown said. “That would generate another $800,000. This means huge tax increases in the community. We are also going to have to prioritize and see what services we cut. Non-essential services will have to scale back as much as possible or even be eliminated. The museum budget is close to $400,000 and the library is $500,000. If we eliminated those two departments and raise taxes, we are OK right there.

Senator Morales added that basic town services such as streets, law enforcement, maintenance, and sanitation will be impacted if this happens.

“Museums and libraries around the state will be threatened,” Morales said, “should this repeal take place.”

Representative Rebecca Dow said she didn’t think there was a senator or representative that would support getting rid of hold harmless without giving them a way to make up the loss.

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“I don’t think it’s a done deal yet,” Dow said. “It’s going to be a significant topic of discussion at the special session. In the context of the state situation and knowing what the governor is willing to sign and not sign, I’m not opposed to repealing some portion of the food tax.”

Representative Dow added that some people want to repeal the exemption on non-essential food items and it won’t generate as much money and the drawback is that it will have an impact on low-income seniors who are on a fixed income.

“The fact of the matter is we have to do something, everyone of us,” Dow said. “She will not sign individual bills, rather a tax reform package. She will consider taxing vacation rentals, online sales tax and some form of tax at the pump based on the price of oil. We need to close the loopholes and repeals of an exemption. It’s getting hard for the senate and the house to agree and even Democrats and Republicans to agree. But, we are going to have to do that.”

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Senator Morales said he thinks the legislature presented more than a fair budget that garnered full support from Democrats and Republicans and that there were some tax increases that had to be there in order to do this.

“We can’t cut our way out of this recession,” Morales said. “Since 2010, it’s been driving the state further and further into the cellar. By putting responsible measures that would alleviate us from this spiral, we will all come together with another solid budget. The governor has to use common sense and quit campaigning from her office and focus on the responsibility of governing to meet the needs of our citizens.”

“I am asking everyone to call the governor about this,” Brown said. “We don’t want to see huge tax increases in our community or services cut.”