Home Local News Hobbs approves FY21-22 budget

Hobbs approves FY21-22 budget

11 min read

Fiscal spending keeps cash reserves around 48 percent

Predicting a volatile local economy, as well state legislation that has potential to cause a decrease in the city’s annual funding, the Hobbs City Commission unanimously approved the final budget for the 2021-22 fiscal year.

The general fund of the 2021-22 budget begins with a restricted/unrestricted amount of $79.6 million and ends with a cash reserve of $42.8 million, which is around 48 percent of the city’s total general fund.

The budget calls for a total revenue in the unrestricted/ restricted fund of $142.4 million and a prediction in total revenue during the 21-22 fiscal year of around $114.6 million. On the spending side, $172.6 million is budgeted in total expenditures leaving a budgeted cash reserve of $84.4 million.

U n re s t r i c t e d / re s t r i c t – ed funds is all the money the city has in its accounts. The difference between restricted and unrestricted funds is what has already been approved to be spent and what has not.

Restricted funds are funds the commission has approved to be used for upcoming projects but has not yet been spent. So while the city hasn’t written a check for a certain project and still has that assigned money in its account, that money is locked for certain usage approved through the commission and cannot be touched.

Unrestricted funds are funds budgeted for a certain project but no bidding process or contract has been signed locking that money into a particular project. As unrestricted funding, that money has the fluidity to be repurposed for other usage.

Following his presentation and before the vote was taken, Hobbs Finance Director Toby Spears received a comment of clarification from Commissioner Finn Smith regarding the budgeted expenditures costing more than the predicted additional revenue.

“At first glance this looks a little scary when you see budgeted revenues of $114 (million) and the expenditures of $172 (million),” Smith said. “I want to reiterate is that $48 million of that $172 million are expenditures that have been approved in prior years. What we are looking at, in my view, is current year expenditures not relating to stuff that’s carried forward of about $124 million versus a budgeted revenue of $114 and a half (million).”

“That is correct,” Spears responded to Smith.

Spears said the $79.6 million general fund is where any gross receipts tax funding the city receives is applied.

“The main fund that we watch, gross receipts taxes, and what impacts all of our police and fire services, code enforcement, that’s all affecting the general fund,” Spears said.

Spears said of the $114.6 million in predicted total revenue in FY21-22, about $10.2 million consists of state and federal grant funding the city has not yet received.

With a 48 percent budgeted reserve, the city continues to have a figure remaining higher than its own city law of 30 percent and well above what the 8.33 percent the State of New Mexico requires municipalities to keep.

“It’s very conservative in how we manage the oil and gas in this corner (of the state),” Spears told the commission. “We always have and we are monitoring gross receipts (tax funding) as it relates to destination sourcing that started July 1. So we kept our gross receipts flat to see how the HB6 legislation is going to be going forward.”

House Bill 6 was approved during the 2019 New Mexico Legislature and signed by Gov. Michelle Lujan Grisham in April of that year. It states any business headquartered in a certain community will be required to charge gross receipts tax where the service is provided — not in the community where the business is located.

This comes into play with the oil and gas industry, much of which is done outside of Hobbs’ city limits, but yet many businesses are headquartered in Hobbs. The GRT funding developed by the industry, and which in the past has contributed greatly to the city’s economic standing, no longer goes to Hobbs, but to where that job took place, which is either Lea County or the State of New Mexico.

During his comments at the end of the meeting Mayor Sam Cobb said the City of Hobbs is joining the fight in changing the state law.

“We’re not taking it lying down. I’ve already had a number of conference calls and Zoom meetings with mayors from around the region,” Cobb said. “I have volunteered to serve on the public policy committee with the New Mexico Municipal League.

Cobb said he, the city’s legal office and Carlsbad officials, are working together to draft a resolution that can be taken to the NMML. Cobb said the municipal league is the lobbying organization for all of New Mexico’s municipalities and one of the most powerful in the state.

“We need to make sure that all of the communities in our state understand any business transaction outside their municipal boundaries, (that tax funding) will not come back to them. They will go to wherever those services are performed. Although it is a huge impact on us because many of our local businesses do all of their work outside of the city limits, very little oil service work is done inside the city limits.

“It’s a huge negative impact for us and Carlsbad, Artesia, Lovington, Eunice and Jal and we are all together on that. I want to be sure that the mayors and commissioners in Rio Rancho, Albuquerque, Belen, Los Lunas and Las Cruces understand that this is bad legislation. It’s not good for the municipalities anywhere in the state.”

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