The City of Santa Rosa, N.M., faces a financial “catastrophe” after the state suddenly withheld $160,000 in gross receipts taxes in June, with an extra $240,000 reportedly withheld in the coming weeks, reported the current print edition of the Guadalupe County Communicator in Santa Rosa.
The state abruptly withheld the money after an undisclosed business appealed the amount of taxes it paid over the years. Because of the sudden shutoff of funds, the city faces deep service cuts, a shutdown, or even bankruptcy.
The sudden fiscal crisis will hurt Santa Rosa’s chances in establishing a Route 66 museum in the historic Ilfeld Warehouse near downtown. Sixty miles east, Tucumcari also seeks to land a Route 66 museum. Santa Rosa’s plight — along with positive developments involving Tucumcari’s bid — almost certainly has placed Tucumcari in the lead for a Mother Road museum in New Mexico.
The Communicator described how quickly the crisis developed:
Like many municipalities, Santa Rosa counts on monthly gross receipts tax revenues to fund its day-to-day operations. In June, the city was expecting a monthly distribution of about $160,000. But when the city checked its bank account, the automatic deposit had not arrived.
Instead, the city was informed it had a “negative distribution” that wiped out that entire monthly amount, with the Taxation and Revenue Department saying that another $243,334.39 would have to be repaid either in full, or in six monthly payments of $40,555.73.
Either option was considered cataclysmic. As of this week, the city had around $200,000 total in its bank accounts, a payroll of $71,000 to meet by the end of this week, and other bills due totaling $45,000.
The city council voted 3-2 to seek an emergency loan from the state on Thursday to make up for the lost June money. Even with a loan, Santa Rosa still has to find about $200,000 a year in spending cuts. Whether the state approved the emergency loan was not known during the publication of this story.
If Santa Rosa declared bankruptcy, The Communicator reported that would mean a takeover of the municipal government by the state, with “bare-bones services at best.”
In an opinion piece, M.E. Sprengelmeyer, publisher and editor of The Communicator, took the state to task for not informing Santa Rosa in advance about the tax appeal and the possible future problems with it:
The city faces all sorts of financial or accounting issues, past or present, that certainly are worthy of debate. But this appears to be an entirely new crisis, separate and distinct.
The current crisis is about New Mexico law and policies that somehow allowed a big-money appeal to go forward without an advance heads-up to the cash-strapped local and county governments that might conceivably be forced to pay back some of the money they thought they were entitled to spend.
That ain’t right.
Just a few months ago, the state awarded a $325,000 grant to plan and rehabilitate the Ilfeld Warehouse so it can become a Route 66 museum. However, with the city suddenly becoming more cash-strapped, it’s doubtful it can pay for basic museum services, much less renovations.
Coincidentally, about the same time news of Santa Rosa’s crisis broke, a group in Tucumcari announced in an email that the New Mexico Route 66 Museum had been officially incorporated and its nonprofit status approved by the state. The group also announced:
A new Museum Board has been formed, and a Museum Operating Committee is in the works, with more announcements to come soon. The New Mexico Route 66 Museum is now accepting financial donations and interests in sponsorship, more information on exhibit donations will also be released soon. A primary site for the museum has been selected for approval, and that decision should be concluded within the next couple of months. Once that decision has concluded, work or the move in process will begin almost immediately.
As recently as a week ago, Santa Rosa was considered the front-runner for the first Route 66 museum in New Mexico. How quickly things can change.
UPDATE 7/3/2012: KRQE-TV in Albuquerque filed this follow-up story:
Serrano says the total the city owes reflects about a quarter of its annual revenue stream and Santa Rosa is asking for two years to pay the money back.
The city also needs a loan of the money the state’s already taken to cover its bills in the short term. It’s working with TRD to come to an acceptable arrangement.
“We’re going to be forced to look at steep cuts in our finances in order to make that payment,” Serrano said.
Layoffs, furloughs and reduced hours at city buildings are possibilities, but Serrano says one area is off the table.
“As far as law enforcement, fire, ambulance… we don’t want to touch that at this point,” Serrano said.
Serrano also said bankruptcy was not being considered.