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FINANCING SANTA FE CITY HALL

A city living beyond its means

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From front, Parks Division employees Larry Lovato, Lawrence Cordova and Jordan Milliano replace PVC water supply lines for sprinklers in Franklin E. Miles Park on Thursday. The park is one of several connected to an irrigation system controlled from the Parks Division headquarters. The city spent about $20 million on a parks improvement bond from 2008 that included installation of better sprinkler heads and controllers. A 2012 bond project also paid for improvements. Clyde Mueller/The New Mexican

In a meeting of the Santa Fe City Council’s Finance Committee last year, some councilors asked staff to come up with a plan to open the Southside Branch Library on Sundays.

They didn’t say how the city should pay for it.

“It is just as important as anything else, like the police department or anything else, and so staff is directed to do whatever it is they need to do,” said Councilor Carmichael Dominguez, who represents the area and championed the idea.

Dominguez’s just-get-it-done attitude toward instituting four hours of operation on Sundays at the Southside Branch Library, which the city built eight years ago with no money to pay for staffing, is indicative of the governing body’s actions — or inaction — over the last several years that have put the city on a path toward a financial reckoning.

A city living beyond its means

The Southside Branch Library, pictured on Friday, was built eight years ago with no money to pay for staffing. In a sign the city has been living beyond its means, city councilors last year pushed for the addition of Sunday hours at the library, despite the cost. Luis Sánchez Saturno/The New Mexican

At the same meeting in May 2014, another councilor, Joseph Maestas, even suggested revising certain revenue projections from $1.5 million to $2 million to help pay for new police officers. The former finance director balked but said he would do it if instructed by the City Council, which later voted on a budget that relied on cash reserves to make ends meet.

“We’ve hit the end,” Mayor Javier Gonzales told councilors last year when they adopted the budget.

Since the recession of 2008, the city of Santa Fe has been living beyond its means, spending millions more annually than it generates in revenue, and pushing tough decisions to the future in the hopes that gross receipts tax revenues lost in the downturn would rebound. To pay for day-to-day operations and cover salaries, the city used a series of bridging strategies that included taking cash from bond proceeds meant for improving parks and Water Division revenues meant for maintaining the water system. But the tax revenues never recovered, and now those bridging options are running out.

A common refrain at City Hall is that the city government has to stop “kicking the can down the road,” yet that’s exactly what continued to happen.

Gonzales has said the city faces an estimated budget deficit of $15 million next year. But in an interview last week with The New Mexican, Gonzales said the budget gap is “actually closer to $20 million” when the city considers the fact that half of the gross receipts tax revenue that should be used to pay for capital improvement projects is being used to fund ongoing operations, such as salaries.

“Here’s what we’re facing today: In real revenues, the city generates — between GRT and property tax — $62 million to $65 million a year. Our spending is about $80 million, so we have been funding that through cash,” Gonzales said.

“We have the ability to make some growth happen in our economy a little bit better than other cities. But there’s no doubt that we have way overspent beyond what our means are, and we have a strong need to be honest, not only with ourselves but the public, that sound policy says that you can only spend what you bring in,” he said.

Gonzales, who took office in March 2014, said the budget is structurally deficient and can no longer support past practices.

“We think that there is about three years left of cash that’s available before we start moving into these waters of having less available on hand to cover basic bills,” Gonzales said.

“It comes now where we have to begin to make a series of decisions on how we begin to reduce costs of government, find ways to create more efficiency and do so in what’s going to have to be a multiyear process,” he said.

With salaries and benefits accounting for the biggest share of the general fund, the number of workers employed by the city and the service levels they’re meeting is among the areas the Gonzales administration is eyeing.

Among six cities identified by Santa Fe as peer cities, an analysis by The New Mexican shows, Santa Fe spends more money per resident and has the largest workforce per capita — by a large margin. The city has a population of 83,000 and an annual budget of about $340 million. That works out to about $4,096 per resident. The average spending per resident for the other six cities was $2,643. The cities examined were Las Cruces; Rio Rancho; Loveland, Colo.; Midland, Texas; San Angelo, Texas; and Flagstaff, Ariz. Loveland, with a population of 71,334, was closest to Santa Fe at $3,852 spent per resident. Rio Rancho, population 87,521, was the lowest at $1,358.53.

The disparities in staffing were even starker. Santa Fe has a workforce of 1,357 full-time-equivalent employees. On a per-capita basis, that amounts to 1,635 workers per 100,000 residents. That was 365 more workers per 100,000 residents than the next closest city, Las Cruces — which had 1,270 workers per 100,000 residents — and over 600 workers more than any of the other cities. Midland and Rio Rancho had only 860 and 800 workers per 100,000 residents, respectively.

Yet in some of the more critical functions, such as police and fire, the analysis found that employee headcounts were comparable on a per-capita basis. It was difficult to do a comparison for other city departments because department classifications varied by city.

Gonzales said his administration will conduct a workforce assessment before next spring and review all departments, including police.

“We can’t assume that just because the police is set up to protect us that there are not opportunities inside the police department to reduce costs on programs that were kind of built over the course of time,” he said. “That has to happen as part of this area to identify both waste and find efficiency before we get ready to go into the next budget cycle.”

Gonzales said the city must develop at least a three-year plan to reduce costs and ferret out inefficiencies before “we we can even start talking about tax increases.” The main reason, Gonzales acknowledges, is the trust deficit in City Hall.

“There is an issue of credibility at City Hall when it comes to the expenditure of financial resources,” which was highlighted by the shoddy accounting of a $30.3 million voter-approved bond issue for park and trail improvements, he said.

Gonzales’ administration also plans to make the city’s budget more transparent. The city, for example, has more than 600 funds, about 200 of which are no longer active. By comparison, Springfield, Ill., a city of more than 100,000 residents, has fewer than 40 active funds.

“Part of the bridging strategies, apart from using cash and apart from shifting your costs to the other funds and things like that, an important part of the bridging strategy was sort of obfuscation — maybe not intentional — but a complication of the city’s finances to where any reasonable person would look at them and not truly be able to see what the true situation was,” city Finance Director Oscar Rodriguez said.

“A big part of what we’re trying to change from that is to get out of that so the full picture is in view, in easy view, of the council and everybody else,” he said.

The city’s financial problems are tied not just to the decisions at City Hall but multiple other factors, including changes to the local economy and shifting demographics.

From the 1980s and into the early 2000s, Santa Fe’s economy was on fire.

“We saw real takeoff of the construction industry during that time,” Gonzales said.

As gross receipts tax revenues grew, the city expanded the services it provided. The city relies heavily on gross receipts taxes, which are volatile, to pay for day-to-day operations. As property values went up, city officials made a conscious effort to keep property tax rates low and to fund government operations through gross receipts tax revenue, Gonzales said.

When the Great Recession hit, the first thing that retracted was construction activity, he said.

“When those construction jobs got lost, the turn of the economy started going downward,” Gonzales said, adding that tourism also was “highly impacted.”

“As revenues that we counted on to fund government were going down, the council made a policy decision to keep levels of service and people employed,” he said. “The one place that they had to go to was a cash pool.”

In 2011, for example, then Mayor David Coss and several council members, including Dominguez, proposed a property tax hike to close looming budget gaps. But by the time the council approved the budget, the hikes were off the table and the city once again turned to cash reserves.

Surplus revenue from the city Water Division has been the “largest component” of the bridging strategies over the years, Gonzalez said.

In an interview Saturday, Councilor Dominguez acknowledged that the council has implemented bridging strategies in the past to balance the budget. He said the council made millions of dollars in cuts after the recession hit in 2008, and “a number of us” hoped that the economy would rebound enough to change things around.

“That hasn’t happened,” he said. “It is clear to me more now than ever.”

After the council made “pretty steep cuts,” he said, the thinking was that “things can’t get any worse.” While they didn’t get worse, he said, they didn’t get any better.

“When the economy first went bad,” Dominguez said, “we were just really holding on, and we didn’t have a strategy for how to deal with it long term.”

Gonzales said the city must get off what he called the “little fixes,” such as a hiring freeze proposed by Councilor Maestas — “It doesn’t even pump the brakes on this ship,” he said — and prioritize what services it will deliver. He said he plans to keep the issue “front and center” before the council.

“They cannot, long term, continue to use cash to fund these operations that they just don’t want to make the hard choice on,” he said. “That’s where we’re going to go now.”

Maestas said the council needs a long-term financial forecast of up to five years and what he called “credible, timely information” as a sound basis for its decisions.

He said the administration’s budget for the current fiscal year was a status quo “kick the can down the road” budget that introduced an “all our eggs in one basket” strategy.

“I don’t intend to be painted into a corner again as I felt in adopting the fiscal year 2016 budget,” he said.

“Even with cost savings realized from government efficiencies, strategically raising certain fees and particular excise taxes that impact the general fund, I don’t believe we can completely fill this funding gap without considering raising taxes — as a last resort,” Maestas added. “Now is the time for leaders to step forward and make difficult decisions without delay.”

Contact Daniel J. Chacón at 986-3089 or dchacon@sfnewmexican.com. Follow him on Twitter @danieljchacon.

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(38) comments

Michael Grimler

Three words sum this problem up:

1) Corruption
2) Entitlement
3) Nepotism

That is all.

Carolyn DM

Don't forget ignorance and inexperience.

John Onstad

Michael:

Sure--but you're stating the obvious.

Santa Fe voters continue to return these politicians year-in-and-year-out. If the voters would elect honest, community-minded councilors and mayor, we could cut the budget in half, reduce your taxes and have a surplus in 6 months. Please recall that Rio Rancho's municipal budget is 1/3rd of Santa Fe's per capita. 1/3rd!!

When I came to Santa Fe in 1980 the NMGR tax rate was about 4%; it's now 8.3125%--AND THE CITY'S OUT OF MONEY and wants to raise the gasoline tax.

We can all b!tch and b!tch and b!tch, but the ONLY thing that's going to fix this is a voter rebellion to oust gravy-train politicians that salivate at the sight of your wallet.

John

Bridget Wolf

Students were sitting outside the Southside Library, in the cold, on Sundays so they could access the internet in order to do homework. People needed to access the computers to look for jobs. Children needed to read books. The hours for Sunday were taken from the other six days. Budget Neutral. This attack on the most vulnerable residents in Santa Fe is alarming to say the least.

C.J. Payne

Misuse of taxpayer dollars has been rampant all across the U.S.; unfortunately, it has taken an extended recession for this to become more visible. Those in power, who should be fiscally responsible pad their budgets (and sometimes their pockets) and then spend everything (whether they need it or not), just so they can ask for equal / greater funds later on. State / county / city governments, school districts, etc. are all doing the same thing. This says nothing of corrupt / illegal activities that are occasionally "discovered" and sometimes prosecuted. Given the state of the U.S. economy, raising taxes is NOT the answer. Try using process improvement methods to find ways to eliminate wasteful practices and to add true value for the taxpayers. If nothing else, it could help to streamline daily tasks / operations in dozens of areas.

Gail Larson

Apologies for stating the obvious, but a perfect example of the ineptitude of the business that is the "City of Santa Fe" is on Palace Avenue right in front of the Palace Restaurant. There is a drainage issue there. The city's response was to first "red bag" the parking meters on both sides of the block for the last two weeks, despite the fact that very little actual work has been done to solve the problem. Substantial loss of parking revenue for the city, and no consideration for the businesses there. I work in an office on that block and can honestly say that I have seen city employees actually working on the problem only a few times in the last two weeks. But even then, there were only one or two of those folks actually working......the rest....at least five or six others were just standing around doing nothing but looking at their cell phones or simply shooting the sh## with each other. Today...a full two weeks later, no activity on said problem, but.......the entire block was still blocked off. Only now there is the infamous "Special Event Ahead" signs, even more city workers with their green vests standing around doing NOTHING. The "Special Event" is a movie being filmed on the Plaza. A sign said "Businesses open....watch NM Filmmakers at work." No work on the drainage issue, still no parking.

Jorge Negrete

Another example of us paying for more nonsense: District 1 city councilor wants to use our tax payer money to provide tourists with bikes to ride all over downtown, free of charge, bike sharing. That is something which is in the works now. They can't afford to rent bikes when they come visit? Where does it end?

Carolyn DM

They should bring their own bikes. We have a tourist's mayor, not a people's mayor.

Judy Klinger

I'll play devil's advocate here.
Comparing Santa Fe to those other cities listed is akin to comparing apples to oranges. Other than Flagstaff perhaps, Santa Fe has a huge number of part-time residents, many with 2nd homes here, plus we have all the visitors who come here spending money all the while. Even those transient residents still need infrastructure, streets, police, utilities etc... So perhaps the "real" population of SF is then much larger than the census indicates so that the # of city employees is not actually inflated.

That said, there are certainly city departments that could be streamlined and that could cut down on excessive upper and/or middle management. But I think that each department needs to be looked at and that the City as a whole shouldn't be condemned for perceived over staffing.

Also, I think that the paper made a poor choice by using the Southside Library as an example of bloated budgets. Providing the public with more library hours is exactly the sort of service that a city government should provide. (yes, I admit I'm biased since I am a retired librarian from SF Public Library.)

Rod Lievano

I think the point is that the library was built with no funds budgeted for staffing, so it's providing no service; just deteriorating.

John Onstad

The picture of 3 city employees installing 2" PVC irrigation pipe is a perfect example of the problem.

I've been a contractor for 35+ years and this job could be easily done with 2 men. I've laid lots of PVC pipe over the years.

Extrapolate this across-the-board to all city functions and it's pretty obvious the labor payroll is easily 50% more than required. This is called "featherbedding".

Rio Rancho's payroll is about 1/3rd of Santa Fe's per capita. 1/3rd!!!!

Can't wait to hear the denial from mayor, council and staff.

john ramirez

time to look at privatizing inefficient, bloated and corrupt operations like the Parking Division!
other operations for consideration would be solid waste and the convention center.

Ray Krueger

Teriffic story Daniel. Well done. Now, listen up councilors.

Scott Smart

and we wonder why the general public has completely lost faith in our elected leaders....

Chris Mechels

Even in the city of illusion, bills come due. Sadly, they are sent to the wrong addresses.

Carolyn DM

Mr. Mayor needs to see these comments. He needs to listen to the citizen's reasoning.

oscar michael

Surplus funds from the city's water division? Is this why the city had "smart" meters installed several years ago? meters that can only be read using their equipment. Is this why water usage in some households can double unexpectedly month to month? For years we have been paying a backdoor tax to fund city government excess. This sounds criminal.

Pierce Knolls

[thumbup]

Steve Salazar

They are read just fine, the surcharge is whee the slush fund comes from.

Leesa Vigil

Sounds like a pretty big mess. 600 funds? Obfuscation. Clean it up, reduce the number of accounts and confusion. City counselors dictating the revenues is madness. Complete madness. I've been reading that the Finance Director mentioned an 'all of the above' strategy to get the city's budget in order: Cut services, increase taxes, layoff employees. Tough time to be an elected city counselor, but that's part of the job, along with getting the city in the fine mess it's in right now. It's time to now earn the status associated with the job.

Jorge Negrete

I smell another property tax increase, along with another voter approved bond approval.......

John Haynes

As long as unionized public employees are the most decisive force in city elections it is unlikely that much will change.

Julian R. Grace

Clearly at the end of the article the proposed solution or "hard decision" is forecast to be tax increases. When they propose such tax increases the citizens will be faced with a choice, the status quo or reduction in expenses instead of tax increases. Will we rise to the challenge and vote no? How about voting out the elected officials that choose to increase taxes without allowing us the opportunity to vote against the tax increases? Food for thought.

Marcia Wolf

The chart in Mr. Chacon's article is alarming but on the other side of the coin I would not want to live in the comparison cities. That said, we have dug a deep hole. I appreciate the New Mexican editors and reporters for staying on top of this serious issue and hope these informative columns will light a fire under more Santa Feans who have positive ideas. One such article could be a list of all the services the City provides for us under a budget of $340,000,000 and how many employees are currently providing those services in each department so we can get to the guts of the matter. Understanding where the City's revenue comes from is easy but the expenditures seem to be a rat's nest. The taxpayers need more information. Thank you.

John Onstad

Marcia:

$340,000,000 is over a 1/3rd of a BILLION dollars to run Santa Fe City government.

Yet, for that amount of money, the average number cops on patrol in Santa Fe is about 8/shift.

There's obviously enormous graft and waste at city hall.

Rio Rancho spends $1,358/capita and Santa Fe spends $4,096/capita. As such Santa Fe spends 3X as much as Rio Rancho does for city government. 3X!!!

Santa Fe could use a 25-50% "haircut" in city expenses.

bob chilton

it's time to slash city of santa fe employment and start selling city owned real estate. this situation is no different than any business faces when times get tough.

that said, no new taxes!!!

Dr. Michael Johnson

Duh??? So who is surprised here, given the kind of people who are running (and not managing) this city???

Andrew Lucero

The vast majority of our Unionized City Employees don’t do a damn thing. Frankly, we could reduce our city workforce by 50% and no one would notice a significant reduction in city services.

Pierce Knolls

"The vast majority of our Unionized City Employees don’t do a damn thing."

They do one thing pretty well, and that is turn out and vote on election days. The local politicos know that, so that's why they'd rather play shell games with taxpayer cash than lay off any unionized municipal workers.

John Onstad

It cost $4,100 per resident to run the city. At 2.2 people per household that's about $9,000 per household. That doesn't include taxes for schools; that doesn't include the county taxes; that doesn't include state taxes; that doesn't include federal taxes.

The average Joe doesn't realize that all the taxes he pays add up to nearly 50% of his earnings.

And now a city councilor wants to raise the gas tax!

Government has an insatiable appetite for your money. Wake up folks!

Don Duke

Prediction. Voters will be asked for huge tax increase. City government will threaten deep cuts in police, fire, and streets unless proposed taxes are approved.
Voters will approve the new taxes. Nothing will change.

mike baker

There is at least a two-fold problem I have seen in Santa Fe over 40 years of interacting at various levels with city (and county) employees in various departments: too many incompetent people have jobs because of to whom they are related instead of how well they do their job, and, there is a cult here of living off the public coffers perpetrated by politicians, like ex- mayor Coss, who buy city employee votes with tax payer money and the rampant Northern New Mexico tradition of many politicians and bureaucrats not having any life experience which opens avenues towards honest work and so they revert to theft and corruption, about which you ready seemingly daily as a New Mexico way of life.

Carolyn DM

Mr. Mayor, how about starting with accountability. Get rid of some of your personally selected employees like your social media person/friend. Then become aware of how many of your employees are just sitting on their a$$es waiting for retirement like the three employees behind the desk at Salvador Perez who are clueless as to what goes on around them because they're too damn busy looking down at their cell phones.

john coventry

When I think about City Hall the first employee that comes to mind is the City Clerk.
The City Clerk is one of the 'double-dippers' who's wage and benefit package is worth about a quarter of a million dollars a year. That is just one employee.

The greed and a cult like environment pervade City Hall and an idiot like attitude of the voters allows our local government to continue to rip-off the tax payer. Why the F are
Santa Fe citizens so weak and controlled?

Alfred Padilla

When the voice of the tourist industry is louder than the voice of the people a monopoly is born. Let them fund this mess, not controlled just do not give a F !

Leesa Vigil

I don't care so much about double-dipping as long as the person is working for their salary. Otherwise it just sounds like jealousy. The City Clerk is elected, yes?

john ramirez

No she is not elected!
she retired from that position then came back at a higher salary while collecting an extremely high pension for life! this is why the city gets away with wasting the taxpayers money on themselves rather than providing essential services!

Donald Sure

Not a single mention by our city leaders that we are way over staffed. This is because much of the excess is at the administrative level.

Nothing will change. Hold onto your wallets,folks. Tax increases are coming and you can't even vote on them.

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