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Revenues returning to pre-bust amounts

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In spite of the current oil and gas boom, most of the incorporated communities in Lea County are still just closing in on pre-bust gross receipts tax revenue.

Two exceptions, one at each end of both the county and the economy, are Tatum in the north and Jal in the south. Tatum received about 31% less in calendar 2019 than in 2015 and appears to be receiving the least effect of the oilfield boom. Jal, situated in the heart of the oilfield activity, picked up in 2019 almost triple its 2015 revenue.

New Mexico towns and cities generally depend on GRT revenue for basic operations. The GRT is tax paid by consumers for goods and services. The News-Sun analyzed five years of data from the state’s Taxation and Revenue Department, 2015-2019.

Generally called a sales tax, the GRT is collected at the point of sale and sent to the state, with the state sending each community its share in the second month following the sale. Business conducted in one month affects a city’s coffers two months later.

Although the most recent oilfield downturn began in late 2015, most communities actually began feeling it in 2016, continuing into 2017. Finally, the boom came in 2018.

From $78.8 million in 2015, Hobbs’ revenue dropped to $46.1 million the next year, a 41% decline. In 2019, the total revenue for Hobbs was $74 million, still 6% below income in pre-slump 2015.

Lovington’s 2015 GRT revenue of $10 million dropped to $6.8 million in 2016, a 32% loss. The county seat’s 2019 GRT revenue was back up to $8.2 million, but remains about 18% below the 2015 income.

In Eunice, a GRT revenue of $4.9 million in 2015 dropped 43% in 2016 to under $2.8 million, forcing the city to reduce salaries and lay off some employees. Actually 8% above the 2015 revenue, Eunice brought in $5.3 million in 2019.

Even Jal saw a drop in revenue the first year, but only by 8% from $3 million in 2015 to $2.75 million in 2016. By contrast, the county’s southernmost community brought in $8.6 million in 2019, a whopping 187% increase over the city’s pre-slump GRT revenue.

Meanwhile, Tatum’s revenue in 2019 was only $345,000, still 31% below the town’s 2015 draw of just under $500,000. The town’s first drop in 2016 was a hefty 38% to almost $312,000.

With all five communities added together, not counting the county government, the total revenue in 2015 was $97.1 million, dropping by 39.5% to $58.8 million in 2016. In 2019, the total was $96.5 million, still 0.7% under the 2015 pre-slump total.

In general, the data for 2017 shows only a slight increase from 2016, while 2018 shows a larger increase to boom levels maintained in 2019.

Although the Lea County government collects GRT revenue, those funds are earmarked and represent a small portion of the county’s overall revenue, most of which comes from property taxes.

However, if the county government’s 2015 GRT revenue were added to the communities’ revenues, the comparison between 2015 and 2019 flips for the county as a whole. In 2015, the Lea County government’s GRT revenue was $14.9 million, increasing to $23 million in 2019, a 54% bump for the county government and a 6.6% increase for the total that includes the communities. Those totals were $112 million in 2015 and $119.5 million in 2019.

The county government recently used its increased income to pay off a bond issue used to construct the Lea County Detention Center, resulting in Lea County becoming debt-free.

Quoting the Legislative Finance Committee, the Albuquerque Journal recently reported oil and gas revenue now makes up about 38% of direct state revenue collections and roughly 47% of all revenue sources.

The Journal concluded, “In addition, two counties in New Mexico’s oil patch — Eddy and Lea counties — accounted for 90% of the state’s overall gross receipts tax revenue growth during the 2019 budget year, the LFC figures.”

The 2019 budget year began July 1, 2018 and ended on June 30, 2019. The data reported in this article refers to calendar years.

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