New Mexico has offered to pay $50 million to 44 cities and countries statewide to settle a 2018 lawsuit. The City of Hobbs is one of the 44 parties to the lawsuit, and the state has offered to pay the city just under $2.7 million as the municipality’s share of the settlement offer.
The lawsuit alleges that the New Mexico Taxing and Revenue Department (NMTRD) did not accurately share tax revenue with the suit’s petitioners. What this means is that the state allegedly kept in its coffers funds that rightfully should have been distributed to the 26 cities and 18 counties that are parties to the lawsuit.
Although the NMTRD denies the allegations that were made in the court filings, after lengthy negotiation, the state offered to settle the suit out of court instead of going to trial.
“The Taxation and Revenue Department has reached an agreement to settle a longstanding lawsuit brought by 44 counties and municipalities around New Mexico over Gross Receipts Tax distributions that date back more than a decade,” states the tax department’s press release of August 31.
The catch to the whole deal is that all of the 44 plaintiffs must agree to accept the settlement for it to fly. Until then, the agreement will not become final.
After all 44 municipalities agree to the settlement amount each has been offered, the state will make a one-time payment of $50 million. The unknown is whether all plaintiffs will agree, and if not, what will happen next.
The funds that the petitioners will receive through the settlement pay for public essentials like law enforcement and fire protection.
During its September 7 meeting, the Hobbs City Commission approved a resolution that authorizes the acceptance by the City of Hobbs of the $2.7 million settlement offer. “The settlement approves all claims made against the state, claiming the NMTRD violated the Tax Administration Act by engaging in unlawful reductions of Gross Receipts Tax of the various municipalities and counties — including the City of Hobbs,” states the resolution.
According to Hobbs City Attorney Efren Cortez, in 2018 the Hobbs City Commission approved joining the lawsuit with the other 43 petitioners. Finally, in April of this year, the city agreed to enter into the proposed mediation instead of going to trial. Mayor Sam Cobb, City Manager Manny Gomez, Finance Director Toby Spears and Deputy City Attorney Valerie Chacon made up the team that represented Hobbs in the mediation process.
Cortez said at the September 7 city commission meeting that Hobbs representatives, especially Mayor Cobb and City Manager Gomez, were “resolute” during the mediation process. “I believe we achieved a result in this litigation that’s worthy of presentation to the public,” she said.
Mayor Cobb commented that Mayor Tim Keller of Albuquerque “applauded the City of Hobbs for remaining strong and working together in opposition of some of the original settlement agreements…. [Keller] stated we would not have got what we got without the City of Hobbs and what this commission has done to give support to a fair resolution to this complex issue.”
According to New Mexico Taxation and Revenue Secretary Stephanie Schardin Clarke, some $1.9 billion is distributed to local governments annually in Gross Receipts Tax and related revenue. She said, “local governments deserve to have confidence in how their tax revenues are handled, and we’ve been able to demonstrate to them that the system is working. Throughout this process, this administration has been as transparent as possible, and we will continue to be, as we ensure local governments receive what they should under the distribution formula.”
