On September 6, it was reported that Mayor Tim Keller was seeking and secured city council approval of $56 million in funding for transportation projects by issuance and sale of municipal bonds. The issuance sale of municipal bonds is the standard approach to funding such projects. No increases in taxes will result from the funding. According to City Officials, getting the money immediately from a bond sale securing low interest debt will allow certain road projects to move forward faster than if the city waited for dollars to accumulate.
Mayor Keller had this to say:
“We’ve got decades-old traffic and infrastructure problems, and they won’t pay to fix themselves. … But help is on the way, and we’re getting it done without raising taxes.”
The list of projects could change. The city council will approve the specific projects before the end of the year.
According to Municipal Affairs Spokesperson Johnny Chandler, the $56 million in funding for the transportation projects will come from the issue and sale of bonds secured by the ¼ cent Transportation Tax revenue, which voters approved for the third time at the ballot box last fall. The ordinance if passed by the City Council will allow the Department of Municipal Development (DMD) to bond $56 million for roadway specific infrastructure projects. Later in the year, the City Council will vote to approve the specific list of projects the Keller Administration is proposing for use of the funds.
According to the city news release:
“The initial list of proposed roadway infrastructure projects includes increasing road safety on East and West Central, Marquette, Rio Grande, San Pedro, Alameda, Wyoming and other major roads; adding lanes to Paseo Del Norte west of Calle Norteña; adding streetlights to major arterials; and upgrading ADA access throughout the City. This investment will also help jump start our COVID economy by bringing construction jobs and additional gross receipts tax revenue.”
City voters first passed the ¼ cent transportation tax in 1999 and renewed it in 2009. Unlike previous versions of the tax, voters in 2019 approved the tax without a 10-year expiration date which created a new opportunity to borrow against future revenues by issuing 15-year bonds. According to Albuquerque Chief Operating Officer Lawrence Rael, the tax is part of the gross receipts tax that brings in about $38 million to $40 million annually, but only about $19 million is dedicated to road improvements. The rest goes to public transit, trails and bikeways. Under the current bond proposal, the city will use about $4.5 million of the annual tax revenue to pay the debt for 15 years.
PROJECTS TO BE FUNDED
The city intends to fund $56 million in construction projects under the newly conceived financing proposal meant to accelerate key roadwork and stimulate the pandemic-battered economy. Those projects include:
1. Begin widening the western end of Paseo del Norte and to improve sidewalks and other infrastructure in the Wells Park neighborhood.
2. The Wells Park area would get $4 million for “complete streets” work, such as lighting, sidewalks and bicycle lanes.
3. A new grade-level railroad crossing on Marquette, helping link Albuquerque Convention Center users and others in the city center to developments east of the tracks.
4. Construction of an interior roadway at Los Altos Park, upgrading San Pedro near Alameda, and adding streetlights on the West Mesa and elsewhere in the city.
5. A $12 million dollar expansion of Paseo del Norte on the West Side to widen the road from two to four lanes between Kimmick and Rainbow. The city has already accumulated $5 million for the project with help from the New Mexico legislators. The $12 million of new money means the two-phase project is about 75% funded. The city has already hired a consultant and begun the design process.
TAPPING GENERAL FUND $4 MILLION TO PAY FOR SHORTFALL IN LODGER’S TAX REVENUES USED FOR “SPORTS FACILITIES”
Last year on September 6, 2019, Mayor Tim Keller submitted a $29 million infrastructure bond tax package to the Albuquerque City Council to be financed by the City’s Lodger’s Tax. The Keller Administration labeled the lodger tax bond package as a “Sports – Tourism Lodger Tax ” because it was to be used for a number of projects around the city labeled as “sports tourism opportunities.” The tax is paid by those staying at hotels and vacation rentals in the city.
Originally, the Keller Administration said all the projects would be funded through savings achieved by refinancing existing lodgers’ tax bonds. The Keller Administration then backtracked and said the city would issue $29 million in new bonds and use the lodger’s tax. The final lodger tax bond funding enacted by the Albuquerque City Council was increased from $29 million to $31 and includes $4.8 million in surplus funding for the projects. The additional funds come from the sale of vehicles and other city property.
On October 7, 2019 the City Council approved a $30.5 million “Sports -Tourism” lodger tax package on a unanimous vote to upgrade and build sports facilities throughout the city. Revenue generated by the lodgers tax will be used to pay off the $30.5 million bond debt.
Following are the projects that were listed to be funded by the lodger tax revenues:
• $10 million to improve Los Altos Park, including new softball fields, a BMX pump track and concession improvements. Los Altos Park is the busiest park in the city and the Keller Administration argues that improvements will help attract tournaments.
• $3.5 million for a soccer complex at an unidentified site with locker rooms that could host tournaments. According to the Keller Administration, the multi-use soccer facility would be available for use by Albuquerque Public Schools, the New Mexico Activities Association championships and other tournaments, and would serve as a practice field for New Mexico United.
• $3.5 million for the Jennifer Riordan Spark Kindness Complex (a West Side baseball venue formerly known as the Albuquerque Regional Sports Complex).
• $4.5 million to upgrade the Albuquerque Convention Center, including adding outdoor message boards, and potentially having the Kiva Auditorium host a larger range of events. The city council increased the amount by $1.5 million. There have been recent reports that the convention center roof is leaking, but no money is being set aside for roof repair.
• $2.5 million to buy property for balloon landing sites.
• $2.5 million to replace the city’s 16-year-old indoor track currently used by the University of New Mexico and for track and field competitions.
• $2 million for a “multiuse trail” linking East Downtown to Downtown.
• $1 million for the forthcoming Route 66 Visitors Center at Central and 136th Street. The visitors center will be for both tourists and locals and plans include a museum, taproom and large event space for social and event gatherings.
• $1 million for Isotopes Park upgrades, such as netting and field improvements. The Isotopes Park upgrades include nets to protect young children and families during games and field improvements to provide for an easier transition from baseball to other uses including concerts. The professional soccer team United New Mexico currently uses Isotopes Park for their professional games.
• $500,000 for a “Northwest Mesa gateway.”
Keller’s “Sports – Tourism Lodger Tax ” drew severe backlash from Albuquerque’s Hotel Industry and it questioned the tourism value of several of the included projects. The industry representative said the projects were unlikely to boost visitation and, therefore, offer a return on the investment of lodger’s tax dollars.
At the time, Charlie Gray, the executive director of the Greater Albuquerque Hotel & Lodging Association (GAHLA), said the 120-member hotel association were only told of the $30 million lodger tax proposal when Mayor Tim Keller issued a news release about it to the public.
Members of the city’s Lodgers Tax Advisory Board (LTBA) said they knew absolutely nothing about the lodger’s tax plan until Mayor Tim Keller announced it on Sept. 7 in a press release. Board members complained they learned about it through media reports and were not requested to provide input. The proposal went to the City Council’s Finance and Government Operations Committee two days after the Keller announcement and the final City Council vote occurred on Oct. 7.
A link to a related blog article is here:
LODGERS TAX CAN ONLY BE USED FOR ADVERTISING, PUBLICIZING AND PROMOTING” TOURISM
A year ago, when Mayor Tim Keller announced the series of planned “sports tourism” projects around the city, the Keller Administration said they were relying on the sustained success of the local hospitality industry to pay for them.
When you examine all the projects that were to be finance by the “Sports Tourism Lodger” tax bonds, it is no doubt the projects are for the building of facilities and infrastructure. The glaring problem is the plain language of the lodger tax ordinance. It provides that at least one half of revenue generated from the lodger’s tax must be used “for the purpose of advertising, publicizing and promoting tourist-related attractions, facilities and events.”
The operable words in the city ordinance are “advertising, publicizing and promoting”. The debt of $31.5 million generated by the bonds will be paid by tax revenues that should be first applied to advertising, publicizing and promoting tourist-related attractions, facilities and events. Only after that is done can the funding be used to build, upgrade or make improvements to infrastructure and acquire or build facilities related to tourism.
It is a really big stretch to say that most of the projects are “tourist” and “tourism promotion” when they are obviously for general public use and not for tourism or promotion of tourism. To be perfectly blunt, 7 of the 10 projects are not tourism related and are used overwhelming by the general public and not the tourist industry nor by the hotel or lodger tax industry. It is a real stretch of the imagination to say the projects will attract tourism.
LODGER’S TAX REVENUE SHORTFALL
The city’s general fund, which is used for basic essential services such as police protection, fire and rescue and street maintenance is supported primarily by gross receipts tax revenues. The pandemic has had a major impact on the city’s hospitality industry to the point that the Lodger’s Tax revenues have plummeted.
The city finished the 2020 fiscal year on June 30 with $13.4 million in lodgers tax and hospitality fee revenue which is nearly $4 million less than it received in 2019. The Keller administration is budgeting for an even steeper decline this year, forecasting total revenue of $8.5 million. Because of a significant shortfall in the lodger tax revenues, the Keller administration is now turning to the general fund to pay the almost $8 million in debt service owed this year on the bonds.
Keller’s Chief Financial Officer Sanjay Bhakta called the lodgers tax debt payment one of the “unavoidable” general fund costs the city will incur this year given the pandemic’s impact on the economy. Bhakta had this to say:
“If that sector comes up and the revenues are higher than expected, we may not need the $3.5 million, but that’s what we’re budgeting right now.”
Bhakta added that the unforeseen events of this year do not necessarily change the value of last year’s bond sale and said:
“At that time, it made sense that we had that money, and I believe eventually it will work out. … Once the industry comes back, they will be able to reap the reward of that investment”.
In addition to buying new bonds, the city refinanced older bonds at lower interest rates to help cut the debt service costs. The city owes upwards of $7.8 million in lodgers tax debt service for fiscal year 2020-2021 which began July 1. Last year, the debt service was $7.7 million last year.
The Keller Administration reported that year to year increases gave way to year to year declines. Because of the pandemic, revenue crashed in March, coming in 61% less than March of 2019, a trend that continued through the spring and likely continue through the end of 2020.
COMMENTARY AND ANALYSIS
Both city and state revenues are plummeting. Both the city and state are facing deficits mainly because of the impact of the corona virus is having on the economy. The $56 million dollars sought for city road project can only be considered a small “life line” to the city’s overall economy and in particular the construction industry. Nonetheless, the road projects are definitely needed.
However, Keller’s labeling the $31.5 million lodgers’ tax as a “sports tourism” tax was downright sneaky. Without any financial analysis or actual proof to back him up, Mayor Keller and his administration simply argue that the projects will attract conventions or other sports-related tourism and events to Albuquerque. Now the taxpayer is stuck with at least a $4.5 million debt service that must come out of the general fund.