Szigeti offers alternative to transferring $1.5 M a year from city’s electric utility: triple property taxes instead

by Kathleen Sloan | October 16, 2020
7 min read
electric department equipment
The problem: “The city is a utility that runs a municipality.” The solution may not be as easy as simply raising property taxes. Photograph copyright © 2020 by Ron Fenn

Truth or Consequences City Commissioners are looking into tripling the property tax rate after hearing a presentation from George Szigeti, past city commissioner and past public utility advisory board member.

Szigeti, sponsored by City Commissioner Randall Aragon, was allowed to give a presentation at the Oct. 14 commission meeting. Aragon said the same presentation had already been given to the T or C Chamber of Commerce.   

The subject was the city’s improper governmental practice of transferring about $1.5 million a year out of the city-owned electric utility’s revenues and into the general fund to pay for governmental activities.

All city budgets are divided into “governmental activities” and “business-like activities.” Governmental activities include police protection, fire protection and administration, among other departments, which—in other cities—are usually paid for out of property taxes, gross receipts taxes and state-distributed taxes and grants.

Business-like activities are the utilities, such as electric, water, wastewater and solid waste services. These “enterprise funds” are supposed to be “self-sufficient,” Szigeti said. Good government practice is to charge utility fees that support the operation, maintenance and capital improvements needed, according to state law 3-23-4 and 3-18-1, which govern the use of utility revenue and the setting of utility rates.

The city has not plowed the enterprise funds back into the utilities, but has neglected upkeep, replacement and repairs. City Manager Morris Madrid, during the city commission’s Aug. 26 retreat, said utility capital projects presently underway have increased from $4 million to $20 million in the 18 months of his tenure.   

Szigeti said this money transfer “has been an issue for many years; for as long as I’ve been here.”

He estimated the city spends about $6 million a year on governmental activities, or, as he put it, “to operate the city.” The city’s general fund is the city operating fund.

The $1.5 million transfer from the electric fund into the general fund pays for about 25 percent of the cost to run the city, Szigeti said.

To avoid this $1.5 million transfer, Szigeti said some people have suggested the city cut back on staff. Szigeti rejected this alternative as unfeasible. “I spoke with city staff, and they said they are already shorthanded.”

The second alternative Szigeti presented was to increase the revenue from gross receipts taxes by $1.5 million, which would require the sale of $75 million more in goods and services by city businesses. “That would be nice,” Szigeti said, and “something we should strive for.”

However, to generate such dramatic growth would probably require increasing the sales tax by 1 percent, he said, bringing it to 2.685 percent. The city’s total gross receipts tax would then reach 9.5 percent, “which is over the state-mandated limit. Therefore this is not an option,” Szigeti said.

The third alternative was to increase property taxes “to be more in line with Elephant Butte’s,” Szigeti said.

The city charges residential property owners $1.44 per $1,000 of taxable property value, according to Szigeti. At that rate, he said the city earns about $170,000 a year to pay for governmental activities.

Elephant Butte charges residential property owners $4.22 per $1,000 of taxable property value. At that rate it earns about $255,000 a year, Szigeti said.

Szigeti argued that the city’s property tax rate is very low. Tripling it to $4.32, he said, would bring in an additional $340,000 in revenues.

The revenue figure he cited is only double, not triple the current property-tax revenue of $170,000. Triple the property tax revenue would be $510,000 in additional revenues.

He went on to note $1.16 million would still need to come out of the electric fund. 

Szigeti said electric rates would not go up in his proposed plan. Instead he suggested that $500,000 of utility-fee revenues be labeled a “tax,” while keeping rates the same.

Szigeti did not say electric rates would go down by the corresponding $500,000 or so that would come from increased property tax revenues.

Therefore, Szigeti’s proposal would cost city residents about $500,000 more, with no relief on their electric bill.

City Commissioner Randall Aragon said, “This is a wake-up call. Just like the water and sewer black hole. We pay now or we pay later. We need to think about this.”

City Commissioner Frances Luna said, “The city is a utility company that runs a municipality.” She agreed: “We are undertaxed on property rates.”

At her first meeting as a newly appointed commissioner, Frances Luna (seen here at her swearing in on Sept. 29) directed the city attorney to research whether the commission had the power to raise property taxes without a vote of the people and instructed the city manager to report back on how increased revenues would be spent. Photograph courtesy of the City of Truth or Consequences Public Information Department

However, she warned that “any time we raise utility rates or taxes; you have to let the public know what it is getting.”

Luna directed City Attorney Jay Rubin to find out “what the city can raise [property taxes to] without a vote.”

Luna then directed Manager Madrid and staff to “come back with projections—what the money will be spent on.”

Luna asked that the information be presented at the next city commission meeting.

Mayor Sandra Whitehead agreed with Luna: “We need to look at a plan. I always suggest we need to have a plan.”  

Whitehead warned, however, “There is a lot of delinquency on property taxes,” and the city needed to be careful “we don’t run people out of their homes.”

Newly appointed Mayor Pro-tem Amanda Forrister said, “People move here because of low property taxes. We need to look at what this will do to our tax base.”

The Sun contacted Szigeti and each of the city commissioners, asking for comments on the absence of any budget cutbacks in Szigeti’s presentation to make up for the $1.5 million subsidy from the electric department.

Only Luna responded.

“It’s clear that the City of T or C is a bare-bones operation,” Luna said, in an email. “I don’t believe anyone could accurately describe the City of T or C as having extra positions or spending unwisely. It is clear that every city employee is crucial to the operations and that if anything, we are in need of additional staff. I do not see cutting staff positions as an option for the city.”

However, the city’s 2020-2021 budget document shows that the general-fund budget has increased about $1 million since Manager Madrid was hired in December 2018. From 2013 to 2018 the general-fund budget hovered around $5.3 million. This year and last year the general-fund budget totaled $6.3 million.

The city commission asked very few questions about the budget when it was passed in July, accepting it, just as they accepted Szigeti’s proposal. And it looks like there is nothing stopping the city commission from increasing property taxes with a similar ease. The Sun asked the state Department of Finance and Administration if the city would have to put a property-tax increase to a vote. The answer, provided by Henry Valdez, DFA public information officer was, “no”; the city commission could do it by passing a resolution.  

“Through a governing body, the City of T or C can approve a resolution to increase its imposed rate from 2.225 in any increment up to the 7.65  [statutory maximum],” Valdez elaborated. He further clarified: “The operational rates for counties, schools and municipalities do not require voter approval.”

Therefore, the city can increase property taxes up to $7.65 per $1,000 taxable value without voter approval.

Szigeti and Luna are correct in stating T or C has low tax rates. According to an annual DFA publication titled “Property Tax Facts,” T or C had the 13th lowest tax rate out of 106 cities in the 2018 edition (the most recent available).

However, the overall tax rate residents pay includes millage for Sierra County government, the school district and the Sierra Vista Hospital, in addition to the city’s portion.

The 2018 DFA publication states the overall tax rate for residential property in Sierra County was $22.66 per $1,000 taxable valuation. Sierra County ranked 14th lowest out of 35 counties. That puts T or C residents’ tax bill close to the middle of the pack.

The other matter to consider is property valuation. In Sierra County, in 2018, residential property owners paid 0.76 percent of their whole property’s value, ranking 16th lowest out of 35 counties, again in the middle of the pack.  

T or C residents are probably paying above their punching weight in property taxes, considering the city’s poverty rate of 30.7 percent, 2018 U.S. Census data. The city’s 2020-2021 budget document reports the collection rate for property taxes is 88 percent—a fairly high delinquency rate. Given the COVID-19 crisis, it seems likely that poverty and property tax delinquency have increased here.

It appears there are no easy solutions to bring the City of Truth or Consequences into compliance with good government practice regarding the expenditure of utility enterprise funds.

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Kathleen Sloan is the Sun’s founder and chief reporter. She can be reached at kathleen.sloan@gmail.com or 575-297-4146.
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Understanding New Mexico's proposed new social studies standards for K-12 students

“The primary purpose of social studies is to help young people develop the ability to make informed and reasoned decisions for the public good as citizens of a culturally diverse, democratic society in an interdependent world.”
—National Council for the Social Studies 

Reader Michael L. Hayes of Las Cruces commented: What impresses me is that both the proposed standards and some of the criticisms of them are equally grotesque. I make this bold statement on the basis of my experience as a peripatetic high school and college English teacher for 45 years in many states with many students differing in race, religion, gender and socioeconomic background, and as a civic activist (PTA) in public education (My career, however, was as an independent consultant mainly in defense, energy and the environment.)

The proposed social studies standards are conceptually and instructionally flawed. For starters, a “performance standard” is not a standard at all; it is a task. Asking someone to explain something is not unlike asking someone to water the lawn. Nothing measures the performance, but without a measure, there is no standard. The teacher’s subjective judgment will be all that matters, and almost anything will count as satisfying a “performance standard,” even just trying. Students will be left to wonder “what is on the teacher’s mind?” or “have I sucked up enough.”

Four other quick criticisms of the performance standards. One, they are nearly unintelligible because they are written in jargon. PED’s use of jargon in a document intended for the public is worrisome. Bureaucrats often use jargon to confuse or conceal something uninformed, wrong or unworthy. As a result, most parents, some school board members and more than a few teachers do not understand them.

Two, the performance standards are so vague that they fail to define the education which teachers are supposed to teach, students are supposed to learn, and parents are supposed to understand. PED does not define words like “explain” or “describe” so that teachers can apply “standards” consistently and fairly. The standards do not indicate what teachers are supposed to know in order to teach or specify what students are supposed to learn. Supervisors cannot know whether teachers are teaching social studies well or poorly. The standards are so vague that the public, especially parents or guardians, cannot know the content of public education.

Three, many performance standards are simply unrealistic, especially at grade level. Under “Ethnic, Cultural and Identity Performance Standards”; then under “Diversity and Identity”; then under “Kindergarten,” one such standard is: “Identify how their family does things both the same as and different from how other people do things.” Do six-year-olds know how other people do things? Do they know whether these things are relevant to diversity and identity? Or another standard: “Describe their family history, culture, and past to current contributions of people in their main identity groups.” (A proficient writer would have hyphenated the compound adjective to avoid confusing the reader.) Do six-year-olds know so much about these things in relation to their “identity group”? Since teachers obviously do not teach them about these other people and have not taught them about these groups, why are these and similar items in the curriculum; or do teachers assign them to go home and collect this information?

Point four follows from “three”; some information relevant to some performance measures requires a disclosure of personal or family matters. The younger the students, the easier it is for teachers to invade their privacy and not only their privacy, but also the privacy of their parents or guardians, or neighbors, who may never be aware of these disclosures or not become aware of them until afterward. PED has no right to design a curriculum which requires teachers to ask students for information about themselves, parents or guardians, or neighbors, or puts teachers on the spot if the disclosures reveal criminal conduct. (Bill says Jeff’s father plays games in bed with his daughter. Lila says Angelo’s mother gives herself shots in the arm.) Since teacher-student communications have no legal protection to ensure privacy, those disclosures may become public accidentally or deliberately. The effect of these proposal standards is to turn New Mexico schools and teachers into investigative agents of the state and students into little informants or spies.

This PED proposal for social studies standards is a travesty of education despite its appeals to purportedly enlightened principles. It constitutes a clear and present danger to individual liberty and civil liberties. It should be repudiated; its development, investigated; its PED perpetrators, dismissed. No state curriculum should encourage or require the disclosure of private personal information.

I am equally outraged by the comments of some of T or C’s school board members: Christine LaFont and Julianne Stroup, two white Christian women, who belong to one of the larger minorities in America and assume white and Christian privileges. In different terms but for essentially the same reason, both oppose an education which includes lessons about historical events and trends, and social movements and developments, of other minorities. They object to the proposal for the new social studies standards because of its emphasis on individual and group identities not white or Christian. I am not going to reply with specific objections; they are too numerous and too pointed.

Ms. LaFont urges: “It’s better to address what’s similar with all Americans. It’s not good to differentiate.” Ms. Stroup adds: “Our country is not a racist country. We have to teach to respect each other. We have civil rights laws that protect everyone from discrimination. We need to teach civics, love and respect. We need to teach how to be color blind.”

Their desires for unity and homogeneity, and for mutual respect, are a contradiction and an impossibility. Aside from a shared citizenship, which implies acceptance of the Constitution, the rule of law and equality under the law, little else defines Americans. We are additionally defined by our race, religion, national origin, etc. So mutual respect requires individuals to respect others different from themselves. Disrespect desires blacks, Jews or Palestinians to assimilate or to suppress or conceal racial, religious or national origin aspects of their identity. The only people who want erasure of nonwhite, non-Christian, non-American origin aspects of identity are bigots. Ms. LaFont and Ms. Stroud want standards which, by stressing similarities and eliding differences, desire the erasure of such aspects. What they want will result in a social studies curriculum that enables white, Christian, native-born children to grow up to be bigots and all others to be their victims. This would be the academic equivalent of ethnic cleansing.

H.E.L.P.

This postmortem of a case involving a 75-year-old women who went missing from her home in Hillsboro last September sheds light on the bounds of law enforcement’s capacity to respond, especially in large rural jurisdictions such as Sierra County, and underscores the critical role the public, as well as concerned family and friends, can play in assisting a missing person’s search.

Reader Jane Debrott of Hillsboro commented: Thank you for your article on the tragic loss of Betsey. I am a resident of Hillsboro, a friend of Rick and Betsey, and a member of H.E.L.P. The thing that most distresses me now, is the emphasis on Rick’s mis-naming of the color of their car. I fear that this fact will cause Rick to feel that if he had only gotten the facts right, Betsey may have been rescued before it was too late. The incident was a series of unavoidable events, out of everyone’s control, and we will never know what place the correct color of her car may have had in the outcome. It breaks my heart to think that Rick has had one more thing added to his “what ifs” concerning this incident.

Diana Tittle responded: Dear Jane, the Sun undertook this investigation at the request of a Hillsboro resident concerned about the town’s inability to mount a prompt, coordinated response to the disappearance of a neighbor. From the beginning, I shared your concern about how our findings might affect Betsy’s family and friends. After I completed my research and began writing, I weighed each detail I eventually chose to include against my desire to cause no pain and the public’s right to know about the strengths and limitations of law enforcement’s response and the public’s need to know about how to be of meaningful assistance.

There was information I withheld about the state police investigation and the recovery. But I decided to include the issue of the car’s color because the individuals who spotted Betsy’s car emphasized how its color had been key to their identification of it as the vehicle described in Betsy’s Silver Alert. Because the misinformation was corrected within a couple of hours, I also included in this story the following editorial comment meant to put the error in perspective: “The fact that law enforcement throughout the state was on the lookout in the crucial early hours after Betsy’s disappearance for an elderly woman driving a “light blue” instead of a “silver” Accord would, in retrospect, likely not have changed the outcome of the search” [emphasis added].

I would also point to the story’s overarching conclusion about the inadvisability of assigning blame for what happened: “In this case, a perfect storm of unfortunate circumstances, many of them beyond human control, hindered the search that it would fall to Hamilton’s department to lead.”

It is my hope that any pain caused by my reporting will eventually be outweighed by its contribution to a better community understanding of what it will take in the future to mount a successful missing person’s search in rural Sierra County.

1 thought on “Szigeti offers alternative to transferring $1.5 M a year from city’s electric utility: triple property taxes instead”

  1. Rick Dumiak

    Triple our property taxes???? What about our seniors that are on a limited income, how does Mr. Szigeti expect those residents to deal with that increase? Here’s one way to save some money: break the contract for those fancy self-reading electrical meters that we don’t want or need.

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