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County coffers don't suffer from pandemic, but County Manager remains cautious
Las Cruces Sun-News - 8/1/2020
LAS CRUCES - Despite the coronavirus pandemic, the Doña Ana County began the new fiscal year in a stronger financial position than it did last year -- $11 million stronger. That’s because there is $105 million in the county’s current cash reserves before any additional revenues have come in.
At a time when some other municipalities across the state have had to make cuts to their budgets because of anticipated revenue shortfalls, the county seems to have escaped for now any drastic cuts to its services.
That reserve balance will be crucial should county revenues fall this fiscal year.
Doña Ana County projected it would finish the fiscal year June 30 with $71 million in cash reserves. But instead, it finished higher than the $94 million balance at the beginning of the previous fiscal year.
But County Manager Fernando Macias is cautious, since he said the uncertainty resulting from on and off closures across the economy due to the pandemic keep the situation volatile. Some of the extra money came from “restrained spending,” he said, that was budgeted but went unspent due to the pandemic.
While the state saw gross receipts tax revenue fall 10.6 percent statewide, Macias said the county saw a small bump in expected GRT for the end of the fiscal year. GRT is a large source of county revenue.
“There was certainly great concern that, beginning in March, we would see a notable downturn in the collection of GRTs,” Macias said. “Because of the nature of activities occurring here in Doña Ana County, the county did not see a downturn in GRT collection.”
Macias said two clear things drove the county's balance: $5.5 million in additional gross receipts tax revenue that wasn’t anticipated and about $5 million saved because of growing economic uncertainty.
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The county also received capital money for infrastructure improvements from the January legislative session. Plus, Macias said the county has received partial reimbursement from the federal government for pandemic-related expenditures.
The $5.5 million in GRT growth came most notably from four areas: construction, manufacturing and wholesale trade, professional, scientific and technical services, and health care and social assistance, Macias said.
In February, the county began to put off nonessential purchases and be judicious in filling empty positions. Declining county detention center revenue was an early warning, he said. In March, the state projected a huge revenue shortfall attributable to the pandemic, leading the county to proactively save $5 million it planned to spend.
Internet tax revenue grows
Looking ahead, gross receipts tax revenue from sales over the internet show promise.
Over the current fiscal year, which began July 1, Macias said the amount of tax revenue the county receives from internet sales is expected to be more than double what was anticipated -- jumping from $765,000 to $1.7 million, he said. That money hasn’t come into the county yet.
The county began receiving GRT revenue from internet sales in September 2019, according to County Financial Services Director Asma Dawood. In total, Dawood said the county received $46.7 million in GRT revenue last fiscal year.
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In a state Consensus Revenue Estimating Group report prepared for the June special legislative session, the authors explain that while many other revenue sources decreased due to the public health crisis, “Receipts from internet sales is a bright spot for New Mexico’s finances, as revenues were outpacing original estimates before the spread of the virus and stay-at-home orders increased online shopping activity.”
But the report also points out the state’s online sales boost “fails to offset declines in out-of-state receipts.”
While Macias is assured that the $1.7 million will come into the county’s coffers, how other revenue sources will fare going forward could change depending on how the pandemic progresses.
Impacts from the COVID-19 pandemic on the county
Economic conditions related to the pandemic could cause one or several of the county's GRT sources to decrease, including internet sales. If reopening the economy continues to slow, that could affect future or anticipated revenue collection.
“That's why it's still prudent to be as conservative as possible," Macias said, "Because you may need some of these revenues to sustain yourself if there is a notable drop off in revenue collection as the year goes along."
Whether total revenue falls or surpasses the previous fiscal year is unknown. But Macias said the coronavirus didn’t result in cuts to the current county budget. On Tuesday, the county commission adopted its $194 million annual expense budget.
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Given some options, the county chose to adopt a largely flat budget for Fiscal Year 2020-21, meaning it carried over similar revenues and expenditures to the last fiscal year. The only additional spending came from $2.4 million added for a number of essential expenses, including body cameras for the sheriff’s office.
“We may be strong right now," Macias said. "Things materialized in a way that was very fortunate, because now we’ll be in a position to provide more services into the community. But we have to be extremely, extremely cautious.”
Later in the fall, Macias said the county government will revisit the budget to make adjustments as the pandemic develops, which could cause some of the county’s reserves to be put to use or could cause more cuts. Macias said it’s a “difficult time to predict” how the situation will shake out.
Michael McDevitt can be reached at 575-202-3205, email@example.com or @MikeMcDTweets on Twitter.
This article originally appeared on Las Cruces Sun-News: County coffers don't suffer from pandemic, but County Manager remains cautious
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