The City of Hobbs, along with 43 other state municipalities and counties took the New Mexico State Tax and Revenue Department to to the proverbial woodshed and Hobbs now expects to get nearly $2.7 million in return.
During its Sept. 7 meeting, the City of Hobbs Commission approved a resolution authorizing the approval of a mediation settlement agreement in a lawsuit the City, and 43 other petitioners, made against the New Mexico Taxation and Revenue Department.
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 …,” the resolution states.
“Some allegations were that New Mexico Tax and Rev engaged in unlawful, what we call, callbacks or takeback of gross receipts taxes,” Hobbs City Attorney Efren Cortez explained to the commission. “Another allegation is that they violated, what’s called the 20 percent rule. At a certain sum of callback the Tax of Rev, by statute, must give the municipality at issue, the opportunity to enter into a payment agreement to pay the necessary sum that is to be remitted to New Mexico Tax and Rev.”
Cortez told the commission it approved a resolution in 2018 to join the other 43 petitioners in the lawsuit. In the settlement NMTRD agreed to pay damages in the amount of $50 million to the petitioners, of which the City of Hobbs will receive $2,688,632.41 to be disbursed in the city’s October monthly GRT distribution.
The City of Hobbs will also pay the contingency fee (including GRT) of $291,548.58 to the attorneys representing the petitioners, Gallagher & Kenne dy, P.C., of Phoenix, Ariz., with an office in Santa Fe.
Cortez told the commission when the lawsuit was ready to go to trial in April the idea of a settlement was brought forth. Both sides entered into media tion with Mayor Sam Cobb, City Man ager Manny Gomez, Finance Director Toby Spears and Deputy City Attorney Valerie Chacon representing the City of Hobbs.
Cortez told the commission the par ties didn’t settle during mediation, but discussions through retired New Mexico Court of Appeals Judge Michael Bustamante, who served as the mediator during the process.
When preparing his presentation to the commission, Cortez said he took time to reflect on the entire process of the litigation.
“The one thing remained true and I am convinced of it having worked closely with this commission. I worked closely with the mayor, the city manager and our staff,” Cortez said, “and it’s this, our commission has guts.
“I can tell you there were times in conference calls where the other petitioners were not happy with the City of Hobbs. The mayor did an excellent job of continuing to advocate for the City of Hobbs to ensure that the taxbase of the City of Hobbs was protected at all times and represented.”
Cortez also recognized former City Commissioners Patricia Taylor and Marshall Newman during the litigation process.
“I’ve been confident in this commission that it is resolved to protecting the taxbase in Hobbs,” Cortez said. “Not only did it come out in my conversations with you (the commission) but it also came out in my conversations with the 43 other petitioners. And my hats off to you for that.”
Cortez said not only was Hobbs’ position not thought of in a likeable sense with the other petitioners, but (Hobbs officials) were often told by the other (petitioners) what they thought of Hobbs’ position.
“But the mayor stayed resolute. The city manager stayed stead fast and I believe we achieved a result in this litigation that’s worthy of presentation to the public this evening,” Cortez said.
Commissioners Larron Fields, Chris Mills and Dwayne Penick each gave kudos to Cortez and his staff members for their work during the litigation.
In the end, the resolve of the City of Hobbs to stand it’s ground also won the respect of the other petitioners.
“For those of us who were at the Municipal League Conference, in the general session, which sits every municipality in the state in the room, (Albuquerque) Mayor Tim Keller applauded the CIty of Hobbs for the way that they had stood with them and had worked together in opposition of some of the original settlement agreements and those sorts of things,” Cobb said. “He stated we would not have 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.”
