The city of Santa Fe is forecasting a staggering $100 million budget deficit in the upcoming fiscal year in what officials described as a brutal economic shock wave from the novel coronavirus.

“This is unprecedented,” Finance Director Mary McCoy said during a virtual news conference Monday. “Practically overnight, we’ve been confronted by a structural imbalance … where the city’s recurring expenditures are far higher than our recurring revenues.”

Exactly how the city government plans to make up the worst budget shortfall in its history remains to be seen, and officials declined to speculate how either residents or city employees might be affected, though it’s clear cuts will be necessary.

“I don’t want to get ahead of myself in predicting anything, nor do I want to unnecessarily alarm our employees or our residents,” Mayor Alan Webber said in response to a question from The New Mexican. “The city of Santa Fe will be fine. We’ll just have to be a lot smarter, more creative, more flexible and adaptive as we continue to deal with this unprecedented budget shortfall.”

The projected $100 million budget gap for the fiscal year that begins July 1 comes on the heels of an estimated $46 million shortfall in the current fiscal year that led to furloughs for a vast majority of city workers and a spending and hiring freeze.

The total deficit projected across all funds for the upcoming fiscal year includes an estimated $31 million shortfall in the general fund, which was about $102 million in the 2020 fiscal year. McCoy called the general fund the “meat and potatoes” of city government because it pays for day-to-day operations from police to parks and recreation.

McCoy said the overall $100 million shortfall constitutes a 30 percent decline in revenue into all funds.

“This will impact all departments and all divisions,” she said. “There is really not a single revenue point that is unaffected.”

McCoy said the city is projecting a 33 percent drop — or $37 million less than the current fiscal year — in gross receipts tax revenue, one of the city’s largest revenue sources. Lodger’s tax revenue is expected to be cut in half.

“As far as our revenue forecasting, this is very different territory for me,” she said. “I’ve done revenue forecasting for quite a while now, and not to be able to use historical data or trends to be able to guide us into the future has been very difficult, so we’ve been collaborating with economists at the state and other organizations to help understand how they are estimating revenues in this uncertain time and what to expect for our own Santa Fe economy.”

McCoy said gross receipts tax revenue fell by about 5 percent in March compared with last year.

“Businesses were starting to shut down, and we entered into the stay-at-home order” in the middle of March, McCoy said.

Gross receipts tax disbursements from the state lag by two months, which means the city won’t know how the pandemic affected revenues in April and May until later this year.



But officials are bracing for unpleasant news.

“What we expect from April is retail really to bottom out,” she said. “We expect the hospitality and food services to bottom out as well, so we expect that to be a much larger decrease than the 5 percent we saw in March.”

While the estimated revenue shortfall of $100 million is the most likely scenario the city will use for budget planning purposes, Webber said the financial situation could be even more dire.

“There is a worst-case estimate, which would be triggered by a second wave infection [of COVID-19] that shuts down the economy again,” he said. “That could mean a $150 million budget shortfall across all funds. [But] we’re going to use the $100 million figure as the likely number against which we’ll be doing our budgeting for fiscal year ’21.”

In previous years, the city Finance Department has presented a proposed spending plan to the council’s Finance Committee, which then holds a series of budget hearings to vet the proposal. The year will be different “given the severity of the shortfall,” McCoy said, adding the strategy now will be to take the proposed budget through each of the three major council committees.

In a Monday morning memo to council members, McCoy said the financial crisis is the worst the city has ever faced.

“Cancellations of small and large events, declines in tourism, travel and retail sales, far-reaching business closures and sky-rocketing unemployment all contribute to an estimated $100 million deficit across all funds,” she wrote, adding the deficit represents multimillion-dollar revenue shortfalls from taxes, parking fees and bus fares, among others.

McCoy also said the economic recovery would be long.

“We expect the financial impact of the coronavirus pandemic to last through FY21 and we also expect an extended recovery period for 5-6 years,” she wrote. “Additionally, we fully expect the state government aid the city was already awarded, such as capital outlay funding, will be rolled back. In addition, the cost of issuing debt for capital projects may rise.”

Webber said the city government has been “deeply affected” by the cancellation of “major income-producing events” this summer, such as the Santa Fe Indian Market, Traditional Spanish Market and the International Folk Art Market.

“Those large-scale events continue to be the kinds of things that, by all accounts because of the way in which COVID-19 is spread, will be the least likely to reopen any time soon,” he said.

The city hopes to obtain federal assistance under the new coronavirus relief bill the U.S. House of Representative passed Friday. Under the bill, now headed to the Senate, the city stands to receive $29 million in the current fiscal year and $14 million in the next, but it’s unclear whether President Donald Trump will sign it into law.

“If that were to become law … there would be some federal support, but far short of what we actually need,” Webber said.

Follow Daniel J. Chacón on

Twitter @danieljchacon.

(23) comments

Stefanie Beninato

Correction I do not believe the city can raise its share of property taxes but it does have some authority to do so for GR

And as for Ted Farr, IMHO he has violated his oath to do no harm if he really is a medical doctor. Telling people not to wear masks and not to observe social distance is reckless endangerment of lives. Has Mr Farr been working without a mask and exposed to COVID patients so he can develop herd immunity?

Ted Farr

The one-size-fits-all government approach clearly is not working, and is not needed.

Vulnerable people should be protected, which mostly are the elderly in poor health and immune compromised, and also some health care workers. An 80 year old man has a 1,000 times greater chance of dying of COVID than a 30 year old woman. Why make both follow the same restrictions? Most of the population has a very, very low risk of getting seriously ill or dying from this. We need to help those few at risk, and let everyone else go about their business - which includes wearing a mask if they so choose.

Please read the brief article I posted below, which makes a very sound case for this. Here it is again: https://www.spiked-online.com/2020/05/15/we-could-open-up-again-and-forget-the-whole-thing/

Stefanie Beninato

Maybe some of you should understand that property taxes are not set by the city. The state has laws and the counties are the ones that impose the property tax. Just like with GR, the city gets a percentage and can, depending on state law, raise its percentage. However given the economic situation raising GR does not seem like a good idea.

Lodgers tax was an important source since the city went after airbnb. The city has failed however to go after other STR sites and the nearly 800 unpermitted rentals---those lodgers taxes go directly to the city.

What I wonder if the shortfall is not underestimated. If the city is short $46 million in one quarter why is it only going to be short $100 million in the next four quarters?

One partial solution is to get rid of Webber's heavily laden support staff who are never in their offices and all deputy department heads. Give them other jobs within the city if they have the qualifications. No dead weight.

Lee DiFiore

Have to agree with Ted Farr and others on this post that the current economic and tax conundrums were not the result of the virus and almost exclusively caused by the decisions of those in government and others in positions of authority, in particular the governor. And now those same individuals are whining and insisting the U.S. taxpayer must borrow money to make them whole and protect "we the people" from their decisions.

Tammy Tapia

Ok, first I have NO idea why Chacon is allowed to write for this paper any longer! He only takes the bad and writes about it, he picks and chooses untruth and prints them to get a rise out of all of us. He does not tell the entire story and he never has. Please hire a reporter that will actually report the entire story!!! Thank you

Andrew Lucero

HA!!!!!! That’s a good one! Oh Tammy, since when has the New Mexican ever had the reputation of being an objective, unbiased newspaper known for its journalistic integrity?

Heather Nordquist

Can you be specific about what you believe to be a lie in this story?

Khal Spencer

Gee, Tammy. I guess the Albuquerque Journal is selling us a bill of goods too.

https://www.abqjournal.com/1457239/santa-fe-faces-100m-deficit-in-fy21-ex-tourist-town-has-been-hit-especially-hard-by-coronavirus-outbreak.html

Its a tough message but your demand that we shoot the messenger is pretty lame.

Robert Bartlett

It will be enjoyable to watch the Mayor and Governor suck up to all those "selfish" people who want to reopen for business and those that just want to get back to work. Call that the blue state blues. Very soon the face diapers will disappear too.

Judith Senda

The answer is simple. Our politicians took away our incomes, and forced us do without. Now they have to give up their revenues and they have to do without.

Imposing new taxes or fees isn’t an option. That only harms us a second time.

Christopher Ramirez

Judith I don't fully disagree but you do realize that "their" revenues are also public safety that we rely on in time of need right? Police, fire, public works, etc. The city is asking for money from the city unions to help with the shortfall, this equates to loss of jobs, furloughs and salary cuts on people that have nothing to do with it all. Again I don't disagree fully with you, the city could have done better with finances including a property tax to pay for all those salaries like every other city has. If I'm not mistaken it's such a small number increase that people would hardly notice.

Judith Senda

Yes Christopher, thank you, I do realize that. I didn’t intend my comment to be a financial analysis of any depth, merely that we’re looking at the second of a one-two punch from our “leaders.” And it won’t be just the municipal, but the county and state that want a piece as well.

It’s seldom the case that the number is so small people will hardly notice. Moreover, any new “temporary” tax to make make up the deficit will become permanent— especially if no one *takes* notice.

“The power to tax involves the power to destroy,” and we’re already badly wrecked as it is.

George Welland

It's sad to only read flippant comments or irrelevant ones (by pseudo-medical ethicists) about a real fiscal crisis. Unfortunately fee charges and increased fines will be introduced while higher paid jobs are retained as low paid and rank and file workers suffer cuts. Possibly municipal bond issuances may take advantage of historically low interest rates, but otherwise the Round House is the city's only life line... because of lobbyists still wining and dining legislators, that is if the special session is called soon and held in person (the city needs as many visitors as possible!). Obviously, there are a lot of things legislators can do inside the Round House to help everyone in New Mexico also, and they may want to start by passing a law to make the state unemployment insurance office start paying benefits!

Arnold Mayberg

bake sale? car wash?

Ted Farr

This crisis was not caused by COVID-19, but from extreme government over reaction, which has made things far, far worse than if nothing was done. Bio Statistician Knut Wittkowski echoes the thoughts of many top epidemiologists from around the world. Please consider his words. Ending the lockdown now, including masks, and social distancing will quickly build herd immunity and we will be done with this virus in a few weeks. It will save many lives, especially among our precious elders.

From an excellent interview with Knut Wittkkowski:

“When the whole thing started, there was one reason given for the lockdown and that was to prevent hospitals from becoming overloaded. There is no indication that hospitals could ever have become overloaded, irrespective of what we did. So we could open up again, and forget the whole thing. I hope the intervention did not have too much of an impact because it most likely made the situation worse. The intervention was to ‘flatten the curve’. That means that there would be the same number of cases but spread out over a longer period of time, because otherwise the hospitals would not have enough capacity.

Now, as we know, children and young adults do not end up in hospitals. It is only those who are both elderly and have comorbidities that do. Therefore you have to protect the elderly and the nursing homes. The ideal approach would be to simply shut the door of the nursing homes and keep the personnel and the elderly locked in for a certain amount of time, and pay the staff overtime to stay there for 24 hours per day.

How long can you do that for? For three weeks, that is possible. For 18 months, it is not. The flattening of the curve, the prolongation of the epidemic, makes it more difficult to protect the elderly, who are at risk. More of the elderly people become infected, and we have more deaths.”

https://www.spiked-online.com/2020/05/15/we-could-open-up-again-and-forget-the-whole-thing/

Christopher Ramirez

Santa Fe relys on gross tax receipts (sale of goods, shops must be open...) to pay for everything essential. If the city would adopt a property tax that would pay for police and fire budgets (like EVERY OTHER CITY) instead of rely on gross tax receipts (extremely irresponsible) then they could utilize that surplus of money (the money used to pay for pd and fires current budget) to help the rest of the city. But every year that it's suggested it's shot down. Santa Fe has some of the cheapest property taxes in the country and some of the richest residence.... Get it together Santa Fe, mayor.... They're afraid to implement a tax (which everyone else has) because they're afraid of not getting re-elected, I'm sorry but that's just irresponsible management. Public safety should not have to rely on gross tax receipts to have jobs

(yes police and fire positions in Santa Fe are being threatened, furloughed, and pay cuts, when many other departments are receiving raises or bonuses for working through covid 19 and being on the front lines, being exposed daily) the public should not be afraid of loosing police and fire coverage because the city CHOSE not to make proper financial decisions.

Gerald Joyce

Mr. Ramirez is right on the money. We are structurally unsound tax wise, have the courage to change it. And another thing, stop scaring the public. We don't need any more IMHE modeling or the like when you try to solve REAL problems.

Khal Spencer

One problem here. Its tough to write a check for property tax when you are out of work or your hotel is vacant. This might work fine for the wealthy class that seems to dominate policy and vote....Democratic councilors and mayors into office.

Lloyd Dobber

All of the jobs you're talking about would still be employed if that property tax was in place. New Mexico is one of the lowest in the nation and Santa Fe is one of the lowest in this state. We have multimillion homes that are people's "summer" home. Bringing the property tax to a normal level and basing public service on property tax makes a world of difference. The city has taken the easy way out rather than the sensible choice that EVERY OTHER CITY DOES! The simple truth is the absolutely must happen and coming up with more and more excuses not to is only getting the problem. It's going to be a long time before we see GRT return.

Gerald Joyce

Not everyone is out of work. Federal and state taxes have been postponed, those on unemployment are getting the benefit of the Care Act and an additional $600/ week along with their $1200 from the Treasury. In addition a good portion of all homes with mortgages pay taxes in escrow monthly . I agree that these times are unprecedented but the fact remains that Santa Fe's finances need to be realistically addressed. It's only been eight weeks and these are worst case projections. Unfortunately passing the correct tax structure takes courage and integrity . Attributes not usually applied to politicians. This crisis will not solve itself.

Lloyd Dobber

We are currently making cuts to the essential workers on the front lines that other cities in NM and other states are giving raises to.

It has been brought up for many years to the city council that public service needs to be based on property tax. The health and safety of the community should not be based on something as subjective as tourism. We have people in this city who own multimillion dollar second and third homes. New Mexico is currently in the bottom half of national property taxes at 0.97%. Santa Fe is at almost half of the state average at 0.53%.

That is HALF the rate of NM which is some of the lowest in the nation. The city council has been warned year after year about what needed to happen but has ignored those facts because it doesn't look good politically. Now, with cities 30 minutes away having their Fire and PD unaffected, some getting raises, our city is furloughing essential workers, cutting their benefits, and trying to defer blame on the workers affected by their lack of action.

kyle renfro

first, give all your staff big raises

Robert Bartlett

Good, no leftist boondoggles for you Santa Fe.

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