Cheryl Everett: Permanent fund would strengthen future revenue

Cheryl Everett

In recent years, New Mexico law has undercut funding for local governments by reducing what is known as “indemnity”.
Indemnification payments have been made to compensate local governments for their lost revenue as the state sales tax on food is reduced in annual increments between 2015 and 2030.
The sales tax cuts should provide tax breaks for low-income families. Ironically, these cuts could lead to cuts in city programs and services for the same families and other city dwellers.
The New Mexico Municipal League and many of its member cities have voiced alarm at these “harmless” cuts.
But instead of accepting this dire fate – or raising taxes or cutting services – the city of Rio Rancho is proposing to set up a permanent fund to generate ongoing income for future city budgets.
The change requires a change in city law that requires the approval of city voters. A charter review is underway to keep the city’s founding document updated as times and needs change.
Thanks to efficient city operations and conservative budgeting in recent years, the city now has $ 10 million available to set up the permanent fund.
In its first year, the fund is expected to make $ 338,500. Through year 25, the city’s permanent fund interest income could increase by $ 752,557 annually.
Under the current proposal, 50 percent of that investment income will be reinvested in the fund to raise both capital and interest, and the other 50 percent will be distributed annually to the city’s general fund to help meet the city’s operating costs.
Guidelines on additional contributions, investments and responsibilities for the administration and administration of the permanent fund can be added by the city ordinance.
The advantages of a permanent fund are many:
• Continuity: Only investment income, not capital, is diverted from the fund to support city programs and services.
• No tax or fee increase: Interest income from the fund is generated from money already available.
• Flexibility: The permanent distribution of funds can be allocated as required in the annual city budget and can change from year to year.
Why Rio Rancho Needs This Additional Funding:
• Rio Rancho tops the top five most populated general fund spending per capita in New Mexico cities at $ 596 per year. The others (Albuquerque, Farmington, Las Cruces, and Santa Fe) cost between $ 1,079 and $ 1,782 a year – or three times that of Rio Rancho.
• Rio Rancho’s gross tax revenue per capita is very low compared to the other top five cities in New Mexico – from $ 317 per year in Rio Rancho to $ 1,276 in Farmington, for example.
• The permanent fund is a bold, breakthrough strategy to put the Rio Rancho municipal government on a solid financial footing as the city grows in population and economic impact among comparable cities in the southwestern United States. It deserves the support of our Charter Review Committee, and then the Rio Rancho voters.
(Cheryl Everett is a Rio Rancho-based former councilor.)

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