New County Buildings and Specialty Taxes

Shocked. Stunned. Surprised. Alarmed. Those were my reactions to the news that Bernalillo County is even considering a plan to purchase a new building for the purpose of “efficiency” and “consolidation.”

As you may have heard, the county is just coming out of what can only be characterized as a financial crisis. A crisis precipitated by the treasurer’s risky investments that resulted in a realized loss of approximately $17 million, and exacerbated by ongoing costs of overpopulation at the Metropolitan Detention Center.

A crisis that we were fortunate to get through with our AAA bond rating intact.

As a result, county departments have been asked to cut their budgets, which is one step closer to cutting services, fund balances are being scoured for any unspent funding, maintenance is being deferred, and pressure is being applied to find new sources of “revenue.”

From franchise taxes to impact fees, from inspection fees to taxes for open space, the county is looking for new and creative ways to make you pay for the financial bind it’s in. All at a time when property taxes have risen, while property values have declined, and the economy is still struggling.

At the June 10th Bernalillo County Commission meeting, I opposed placing a new voter-imposed tax to fund open space on the November ballot. If open space is a priority – and I believe it should be – then we should continue to fund it from of the general fund as we have for the previous eight years.

I was told that the county no longer has the money to continue funding $1.2 million for open space out of the general fund and that a new specialty tax would be needed. Property taxes are already a huge and increasing burden for homeowners and a new specialty tax would only free up general fund tax dollars for less-popular uses.

Now, miraculously, just days later, the county announces it is looking to spend millions of dollars acquiring a new building and millions more to move.

If the county can find millions of your dollars to spend on itself, it can certainly find $1.2 million of your money to spend on you for open space.

As a County Commission, we should not forget that we work for you, the taxpayer, and we should be good stewards of your tax dollars. The financial conversations that you are having over your kitchen table are the same type of conversations that Bernalillo County officials should be having, and we should always be mindful of the financial burden we place on your family.

For the county, gone are the days of vast reserves that “needed” to be spent down. Gone are the days of having $20 million available to spend on a building in the name of “consolidation” or “efficiency.”

And gone should be the days of building a new monument to Bernalillo County government on the backs of taxpayers

—– Editor’s Note ——
Commissioner Johnson’s Op/Ed was published by the Albuquerque Journal Monday, June 23rd under the title:“Wrong time for new taxes, buying new county building” (Subscription)

Truth

Truth is undeniably the first casualty of any political engagement. It’s not that objective truth doesn’t exist – it’s just that the truth becomes inconvenient for those who are promoting poor policy.

Proponents of the misleadingly named “Taxpayer Protection Act” argue that it’s “unfair” that city residents have to pay a 3% franchise fee and that somehow unincorporated county residents are “subsidized” by city residents because city residents have to pay a 3% tax to the city that county residents are not forced to pay to the county.

Of course both arguments are utter nonsense.

While it may be politically expedient or even popular for a county commissioner who represents almost exclusively city residents to impose a new tax on county residents, it doesn’t mean that the city does anything other than collect its franchise fee and spend it on city operations. There is no transfer of money or benefit to the county paid for by the city’s franchise fee, so there is no subsidy.

As for fairness… not having the burden of higher property, gross receipts, and franchise taxes in the county may be attractive but it’s no more unfair than paying lower taxes in New Mexico than they do in California or New York.

Remember, in many cases the county right-of-way isn’t owned by the county at all. The property is owned by individual property owners who already pay taxes on it. The owners must grant a utility easement which allows the use of their property for the purpose of providing needed gas, water, sewer, and electric for themselves and the community around them.

How “fair” is it to charge a property owner for use of land that they already own and pay taxes on? The Taxpayer “Protection” Act would do just that.

Wouldn’t “fairness” dictate that if individuals are forced to provide land for the public good, the county – who purchased the rights-of-way it does own with public money – should provide land without charging the public for the use of lands they paid for in the first place?

The other fallacy being floated is that the county will be charging eeevil “for profit” corporations and that county residents won’t have to pay.

The demonstrable truth is that taxes and franchise fees are ALWAYS passed on to the consumer… you. Just take a gander at any city resident’s electric, water, or gas bill where you’ll find a whole host of taxes and fees that are collected by utility providers and passed on directly to the governments that imposed them.

Words can be used to enlighten and empower or they can be used to confuse and conceal. Focus group tested phrases like “subsidy” and “fair share” may sound good and certainly evoke specific emotional responses, but more often than not they’re used to hide what’s really going on.

We’re used to this kind of misdirection and obfuscation from our political leaders in Washington D.C., where the only truth is getting re-elected and you need to pass a bill before you find out what’s in it.

Commissioner Stebbins in her January 6th letter to the Albuquerque Journal (read it here) picked up the mantle of D.C. rhetoric claiming the absence of a tax is a “subsidy” which is “unfair.” To believe her argument you have to believe that absence is subsidy, two wrongs make a right, and “if you like your health care plan, you can keep it.”

The simple undeniable truth is that if the “Taxpayer Protection Act” passes on Tuesday January 28th, the county will receive millions of dollars of new “revenue” and county residents will pay more for their basic needs utilities. Period.

We can and should have an honest argument about whether or not the county needs to impose additional taxes. But to justify a poor policy through the use of catch phrases and buzz words and more importantly, deny the truth of increased cost to county residents is a disservice to the citizens of Bernalillo County and a prime example of what’s wrong with political discourse in this country.

Mocking The “Taxpayer Protection Act”

Last week I had a little fun with my colleagues on the County Commission. You see Commissioners Stebbins, O’Malley, and De La Cruz are hell bent on raising the cost of utilities for every county resident and have decided to name their tax grab the “Taxpayer Protection Act.”

[Side Bar]
No kidding! An ordinance that would take more money out of your pockets is somehow supposed to “protect” you. At least when the mob extorts protection money from you they provide protection you from them. 

Somewhere George Orwell and Ayn Rand are laughing their posteriors off watching their predictions come true.
[End Sidebar] 

Commissioner Stebbins noted that I had named a resolution the “Ratepayer Protection Act” last year – which is true. The difference is that the “Ratepayer Protection Act” actually protected ratepayers by prohibiting the county from reaching into their pockets – something the “Taxpayer Protection Act” most certainly does not.

Having a background in journalism, I decided to come up with a name that would be more accurate. And since the “Taxpayer Protection Act” does nothing of the sort, it seemed appropriate to come up with at least ten possible names and here they are:


Top Ten More Accurate Names for the “Taxpayer ‘Protection’ Act.”
10. The… Protection Money Act
9. The… We Need More Money Act
8. The… Bernalillo County Utility Tax Collection Act
7. The…  Illegal Revenue Enhancement Act
6. The… It’s not legal but we hope the Legislature will make it legal someday so we always put it on our legislative agenda Act.
5. The… Commission Can’t Live Within Its $250 MILLION a Year Means Act
4. The… It’s Not Our Land But We’ll Tax You Again for it Anyway Act
3. The… Ratepayer Screw Job
2. The… Soak the Poor Act
1. The… We Know You Can’t Live Without Water, Power, and Electric So We Know You’ll Pay Act

You can read more about the evening’s discussion in the Albuquerque Journal (read it here – subscription).

Consequences and “Fees”

You’ve heard it before – elections have consequences and it turns out that the election of 2012 will cost unincorporated Bernalillo County taxpayers an additional 3% for utilities.

In October of 2012 the Bernalillo County Commission passed the Rate Payer Protection Act – a resolution that prohibited the county from taxing basic needs utilities for the use of county right of ways. The resolution also required the county to recover reasonable actual fees associated with accessing the publicly owned space and for those fees to be approved annually by the County Commission.

Fast forward to May of 2013 and a new Commission with an old “tax it if it moves” philosophy. The first step was to repeal the Rate Payer Protection Act and publish an ordinance that – if passed – would impose a 3% tax on all utilities that use county right of ways.

That’s 3% more on every water bill, electric bill, gas bill, waste water bill, and phone bill at a time when families are struggling just to survive.

The bill’s sponsor, Commissioner O’Malley, and County Public Works will tell you that they need the additional $6 million a year for roads. They’ll tell you that it’s a fee, not a tax, and not to worry, the utilities will pay.

While it’s true the county should be putting more money into roads, a tax is a tax even when you call it a “fee”, and utilities can, do, and will pass the proposed 3% “fee” on to you no matter what it’s called.

You see, the price charged for any good or service is equal to the cost plus a profit. Contrary to the opinions of some, a company must make a profit or it ceases to exist. Regulated utilities must justify their rates to the PRC – rates that include a profit. Costs are any kind of expenditure whether they are labor, construction, capital, regulatory, legal, taxes, and yes… “fees.”

To say that the county will be taxing “utilities” not the public is rhetorical, delusional, and false. In fact, state law requires that franchise fees “shall be stated as a separate line entry on a bill sent by a public utility.”

YOU will pay and you’ll pay on those basic services that you need most, all to use land that you already own, for a commodity that you can’t do without.

Yes roads are important, but all of the expenses associated with accessing your right of ways are already paid for by the utilities which include road cuts and repair to county standards. They even pay for “de-confliction” in those cases where other existing utilities must be moved in order to accommodate new pipes, wires, fiber, etc. And yes… you pay for all of those costs as well.

Not to mention the fact that you are already paying for road maintenance and construction through your property “fees” – more commonly known as property taxes.

There’s also the very real legal question of whether or not a county has the authority to impose a “franchise fee” that exceeds the county’s actual expenses.

NMSA 1978 § 62-1-3 states that a board of commissioners is authorized to impose charges for “reasonable actual expenses incurred in the granting of any franchise.” Unfortunately, the county is unable to provide anyone – including the county’s internal auditor – with the actual expense of granting a franchise.

So instead, they’re trying to sell you on the idea that the need for road maintenance and repair is a “reasonable actual” cost.

But it’s hard to believe that $30 million dollars over the next five years is either “reasonable” or “actual” – particularly when the county’s bond dedication for roads over the same period is less than $20 million. In reality, this is just another scheme to separate you from your money and hide the fact that the county is doing a poor job of funding one of its core functions.

If the franchise fee weren’t enough, County Public Works is doubling down on construction costs as well by tripling the design review fee and adding an “application fee.” And you guessed it… You’ll get to pay for these increased fees as well.

In short, you will be paying for roads that you already pay for, on land that you already own, for services that you can’t live without, all because the current Commission cannot or will not use the money you already provide for its intended purpose. And the whole scheme is probably illegal to begin with.

—————————————

The above column was published in the Albuquerque Journal June 21st, 2013 under the title “Call it a ‘fee,’ call it a ‘tax,’ but whatever you call it, it’s unfair.” (Subscription)

 

Jobs Package Trumps Bad Policy

by Bernalillo County Commissioners Lonnie Talbert & Wayne Johnson

Many of us have been arguing for years that New Mexico must become more competitive by cutting our businesses taxes if we are going to compete for the jobs of tomorrow. During the recently concluded legislative session, Governor Martinez and the Democratic-controlled legislature did something many thought impossible – they came together in a bipartisan manner to pass real tax reform that will help businesses grow and create new jobs.

In the tax reform package, the business tax rate is lowered from 7.6% to 5.9%, the tax code no longer punishes manufacturers like Intel and Johnson and Johnson for exporting products, and unfair loopholes are closed to ensure New Mexico businesses are competing on a level playing field.

Any tax package will contain elements to criticize and this package is no different. As county commissioners, we understand the importance of hold harmless funds – state funding provided to local governments to help offset losses from the elimination of certain taxes in 2004. It was just another example of short-sighted policy enacted during the Richardson administration.

This new tax reform eliminates hold harmless funding over 17 years and that has caused some complaints by local officials. In our view, creating more jobs for New Mexicans and growing our economy is more important than protecting a bad policy, even when that bad policy benefits local governments. The truth is the elimination of these funds was inevitable. Hold harmless funding has cost the state 3 times as much as originally anticipated and it was just a matter of time before the legislature pulled the plug.

Given that reality, we believe this compromise strikes a fair balance. It gives cities and counties 2 years to plan for and 15 years to gradually grow into the loss of funding. Local governments are given the option of imposing their own tax, but we are confident that we can find better alternatives, such as implementing cost-savings, or simply responsibly controlling the rate of growth of county government over the next 17 years so that we grow into the reduction of state funds. In addition, cities and counties will directly benefit from business and job growth as a result of New Mexico’s more competitive tax environment – further offsetting the loss of hold harmless funding.

In these tough economic times, creating an environment where businesses can create more high-paying jobs must be our primary focus. We applaud the Governor and legislature for passing this critical tax reform package and we are more than willing to do our part in the process by working with them to ensure the loss of hold harmless funding does not lead to tax increases, or the loss of local services. Real reform is never easy, but working together, we can accomplish this goal, as well.

Editor’s Note:
The preceding was published in the Albuquerque Journal on Monday, March 25th.

UNMH Accountability

$90 million – the amount Bernalillo County taxpayers send to the University of New Mexico Hospital each year. $146 million – the cash on hand UNMH plans use to build the first phase of a 5.2 million square foot mega-hospital. Zero – the amount of accountability the hospital has for the use of 6.4 mils ($90 million) of Bernalillo County taxing authority.
Last June, the University of New Mexico Hospital made public its plans to build the first phase of its master plan – a 96 bed elective care hospital. The justification for the expansion was and is to reduce emergency room wait times by moving elective or scheduled care to the new facility thereby freeing up beds in the old hospital for patients coming from the ER – which would in turn free up exam rooms currently occupied by ER patients waiting for a bed “upstairs.” 
Let’s assume for a moment that there are not questions about the hospital’s occupancy rates and that it is currently operating at 91% to 95% of capacity not the 63% to 71% provided by the Hospital Association and the Department of Health. Let’s also assume that the UNMH has done everything within its power to schedule elective care during non-peak hours and has implemented policies that use current resources in the most efficient manner. If we accept those assumptions, then UNMH may have made its case that they need to build a new 96 bed facility.
However, there would still remain serious questions about how UNMH managed to squirrel away $146 million in order to build a new 185,000 sq. ft. facility out of cash on hand. Remember, UNMH is a public hospital and receives substantial public funding particularly from Bernalillo County.  Those county tax dollars are treated as “direct revenue to offset uncompensated care.” In other words, dumped in to a single pot where they are co-mingled with the hospital’s other revenue sources without any requirement to account for the specific uses of those tax dollars.
So how did we get here? Back in 1978, Bernalillo County entered into an agreement with the University to take over operation of the Bernalillo County Medical Center – later to become UNMH. In 1992, the Commission placed on the ballot a 4.3 mill per year levy for the “continued operation and maintenance of the Hospital.” The voters approved the levy that year but the Commission retained some authority over how those dollars were used – that is until 1999.
In 1999, the County entered into an agreement with the University that transferred “exclusive responsibility” to “control and manage the Hospital” and made the UNM Regents the “ultimate governing body.” The County agreed to continue to provide “Mill Levy support,” and to “use its best efforts to obtain approval” for continued support from the voters.
At that time, the agreement provided roughly 2/3rds of the current $90 million. In 2004, UNMH needed the County to extend the lease to a 50 year term in order to secure financing for the Bill and Barbara Richardson pavilion. 
Four years later in 2008, claiming inadequate indigent care funding, UNMH asked the Commission to place on the ballot a 50% increase in Mill Levy support that was approved by the voters and added roughly $30 million to existing funding. At about the same time according to UNMH CEO, Steve McKernan, the Hospital had already begun putting away “savings” in order to fund the new $146 million facility. How can UNMH claim poverty while at the same time run a surplus sufficient to put away over $146 million?
It’s clear that the taxpayers of Bernalillo County have contributed a significant amount of their tax dollars to this project without their knowledge. It’s also clear that the hospital’s 2008 claims of poverty were somewhat exaggerated. 
As County Commissioners, we have a fiduciary responsibility to the people of Bernalillo County. But the fact is, through a series of ill-advised leases the Commission no longer has the ability to live up to that responsibility. 
In the end, UNMH may build its new facility – and it may even be justified. But that doesn’t change the fact that taxpayers are providing $90 million a year to UNMH with little oversight and no accountability. It’s a situation that needs to change in order to provide the public with the representation, stewardship and health services that they deserve.
—— Note —–
This article was published by the Albuquerque Journal under the title “Increase Oversight on UNMH Tax Money” on Monday January 14th, 2013. Read it here (subscription required).

Rates Could Go Down – Rate Payer Protection

Utility rates in the unincorporated area of Bernalillo County could see a modest decrease if a measure passes Tuesday night. The resolution entitled the Rate Payer Protection Resolution is designed to prohibit the county from charging a usage tax to providers of basic necessity utilities.

The concept is that the county should not be charging providers of power, gas, water, sewer, and public safety related telecommunications fees for use of the public right-of-way. Those fees are added to your bill making the whole thing just a back door tax from the county. It’s just one of the many hidden taxes that people pay every day.

The argument against removing the tax is that state law requires the county to charge for the use of the public right-of-way. But state statute also prohibits counties from charging more than reasonable and actual fees. County staff is also concerned that the resolution presents some sort of anti-donation issue.

The simple fact is that the county does not own the public right-of-way, the public does. Bernalillo County is simply the manager of that property. As the owners of the property (and those who will have to pay any rent, lease, or franchise fee imposed), the public should not have to foot the bill for a water line, gas line, or power line, that is simply sitting in the right-of-way that they own providing them with the very necessities of life. It’s hardly a violation of the State’s Anti-Donation Clause to allow people not to pay rent on property they already paid for.

The Rate Payer Protection Resolution also requires that the county recover reasonable and actual costs for installing the infrastructure. If a utility cuts a road to put in a line, it must pay for the project and pay for all of the costs incurred by the county to approve and inspect the project.

The two largest franchisees are Comcast and the Albuquerque Bernalillo County Water Authority. Together their right-of-way rental agreements add about $1 million to Bernalillo County coffers. Rate Payer Protection would only affect basic necessities utilities meaning that the impact to the County would be about $500,000. Comcast would continue to pay their franchise as cable TV is not a basic necessity. (After all, no one ever died due to a lack of cable.)

County management has continually tried to find a way to impose a franchise fee for use of county right-of-ways. Hopefully, Commissioners will see that providing use of county right-of-ways for basic necessity utilities is in the best interest of the health and welfare of county residents.

P.S. – You can view Tuesday night’s full agenda including the Rate Payer Resolution here.