Albuquerque Gross Receipts Tax Recovery Tempered by Lingering Uncertainties

The City of Albuquerque recorded 1.7 percent growth in gross receipts tax revenue for fiscal year 2021, a result that exceeded the -3.4 percent decline initially projected because of pandemic effects.

That revenue stream accounts for 66.4 percent of the General Fund and 35 percent of the full operating budget, so any deviation from expectations forces immediate reviews of spending plans. The Finance and Administrative Services department updates forecasts each year and then compares actual collections against those targets on a monthly basis, allowing adjustments when receipts fall short.

Gross Receipts Tax Pressures

Revenue arrives from the state two months after the underlying business activity, which means July collections reflect May sales and create a built-in lag that complicates rapid responses to downturns. The city relies on the state-shared 1.225 percent increment as its most stable measure, yet even that portion showed sharp swings during the pandemic period. July 2021 receipts rose 21.3 percent over the same month in 2020 and 4.6 percent over July 2019, reflecting both rebounding consumer spending and federal aid inflows, but officials kept forecasts conservative because similar surges could reverse quickly.

House Bill 479 changes that took effect in 2019 gave the city more flexibility by raising the unrestricted local option rate, yet budget documents still allocate portions to transportation infrastructure and BioPark capital needs outside the General Fund. The 3 percent administrative fee charged by the Taxation and Revenue Department further reduces the net amount the city retains. These structural features limit how much of any growth can be directed to new programs without additional council action.

Employment and Broader Indicators

The seasonally adjusted unemployment rate for the Albuquerque metropolitan statistical area fell from 6.9 percent in July to 5.9 percent in August, according to Bureau of Labor Statistics figures used by city staff. The local rate remained above the national 5.2 percent mark for July, signaling slower labor-market healing in several sectors that feed into gross receipts collections. Quarterly forecasts prepared by the University of New Mexico Bureau of Business and Economic Research incorporate national outlooks and feed directly into the city revenue models.

Because employment, construction activity and home sales drive much of the taxable activity inside Albuquerque, sustained gaps in any of those areas would require the city economist to revise the five-year revenue outlook downward. Monthly tracking of individual business sectors therefore serves as an early-warning system before the two-month lag in tax distributions fully registers the change.

Budget staff will continue comparing incoming distributions against the fiscal year 2022 growth assumptions built into the current plan, with the option to scale back expenditures if receipts soften again.

This article is general information only and is not personal financial or investment advice. Consider your own circumstances and seek licensed professional advice before making financial decisions.