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While the city of Roswell could benefit from a proposed settlement of a lawsuit with the state concerning gross receipts taxes, a Chaves County administrator said that the county is seeking more information about the situation.
The city was one of 44 counties and municipalities to join in a lawsuit against the New Mexico Taxation and Revenue Department alleging that the department had shorted local governments in gross receipts taxes due from about 2010 to 2015.
The city of Roswell joined the suit in late 2019, after the original group of about 19 municipalities and counties had filed suit in November 2018.
The Taxation and Revenue Department and Taxation and Revenue Secretary Stephanie Schardin-Clarke announced Tuesday a potential settlement that would distribute $50 million among the government entities, if all parties agree to the terms.
On the same day, the department had filed a motion in the New Mexico 2nd District Court to abate the lawsuit pending the settlement.
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Charlie Moore, communications director for Taxation and Revenue, said that the department could not estimate when or if distribution will occur.
“It must be approved by each of the plaintiffs, so that will drive the timeline,” he said.
The Roswell City Council had met in executive session on Feb. 25 to discuss a possible settlement between the city and state. By the nature of that closed session of the city’s elected officials and administrators, the discussions are not released publicly.
City Attorney Parker Patterson said that the exact dollar amounts and settlement terms are being worked out, but he did note that the settlement would likely represent much less than what the city believes it is owed.
“The city is currently awaiting final documents with regard to the ultimate figures and terms of the proposed settlement for Roswell,” he said. “In addition, certain details relating to TRD’s methodologies and other facts of this case are subject to legal confidentialities, which limit the city’s ability to provide a full statement of its position.
“The city, and the other city and county plaintiffs in this litigation, allege that the Taxation and Revenue Department unlawfully withheld significant amounts of GRT revenue from Roswell, and other local government entities statewide, as a result of TRD’s failure to follow legally mandated procedures. If approved, this agreement will reflect the settlement of a disputed claim between the city and the state, representing a substantial reduction below the amounts of which (the) city believes TRD unlawfully deprived it. Despite that, the decision to consider this proposal signifies a desire on the part of the city to resolve the dispute with the state and bring to an end this contentious and difficult litigation.”
According to the complaint filed with the 2nd District Court, the specific allegations by cities and states are that the state deducted from local GRT distribution sometimes large amounts of money subject to refund claims by businesses without first verifying the legitimacy of the refund request, without notice, without allowing local governments adequate time and information to evaluate the refund claim, and without adhering properly to state law regarding spreading out the local governments’ reductions as a result of the refunds over a period of time.
Chaves County had chosen not to join the lawsuit. In 2019, Stanton Riggs, then county manager, explained, “(O)ur loss of funds was minimal and we were concerned that the costs of the case would outweigh our damages.”
On Wednesday Chaves County Public Services Director Mac Rogers confirmed that the county had never joined the lawsuit, but he said that the county does have questions.
“We have submitted an IPRA (Inspection of Public Records Act) request to the TRD about the GRT settlement and we are waiting for a response on that.”
He said he could not comment further on the situation.
The lawsuit did not specify how much each party had alleged that they had lost in GRT taxes, and, in fact, attorneys were asking the state to provide detailed information about past distributions.
In its announcement about the proposed settlement, the Taxation and Revenue Department, which distributes about $1.9 billion in gross receipts taxes each year, said it worked to be transparent with cities and counties and to ensure that local governments received the proper amounts of GRT.
The announcement also pointed to several improvements made by the department in recent years regarding communication with local governments, providing detailed financial statements, conducting audits and making thorough reviews of the monthly disbursements before they are issued.
Gross receipts taxes are a major source of revenues for most local governments. According to online city documents, GRT represents 80% of the revenues projected for the city for the 2021-22 fiscal year, or about $35.76 million.
“When cities and counties are deprived of GRT revenue, they cannot pay for important infrastructure and essential services upon which local businesses and citizens rely,” the lawsuit stated. “In some cases, the cities and counties had to curtail such services and, correspondingly, their workforces as well.”
Lisa Dunlap can be reached at 575-622-7710, ext. 351, or at reporter02@rdrnews.com.
Local impact of pending tax settlement unknown - Roswell Daily Record
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