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Jal tops record in tax revenue

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Curtis Wynne/News-Sun

The City of Jal set a revenue record last month with more than $2.1 million in gross receipts tax (GRT) income.

That’s four times as much as the city budgeted for last fiscal year.

“It is a record. It is the most I’ve ever seen,” Jal City Manager Matt White told the News-Sun. “I never got even close to that when I was in Eunice.”

White was mayor of Eunice from 2005-2018.

Triggered by a boom in Lea County oil production, including more than 50 currently active drilling rigs, GRT revenue trends upward recently in all of the county’s incorporated cities, with Jal’s increase the most impressive.

With a census count under 2,500 residents, Jal is the gateway from Texas-based oil and gas producers into the southeastern New Mexico portion of the Permian Basin, currently the most active oilfield in the nation.

“That’s on the census rolls, but then you count the other 2,500 people who live here in their trailers, RVs and out in the man camp, we actually think we probably have 4,500-5,000,” White said.

To provide services for all those residents, the Jal City Council last year budgeted $495,000 in revenue per month for fiscal year 2022 which ended June 30.

The average monthly revenue actually received turned out to be

SEE JAL, Page 6 $1,518,000, White said.

To operate community services, cities in New Mexico generally depend on gross receipts taxes paid by consumers on goods and services. Taxes from business activity in one month are paid by the business to the state the next month and then divvied back to local entities the following month.

So Jal’s $2.1 million received in June came from goods and services sold in April.

Much of Jal’s extra revenue is coming as a result of the New Mexico Legislature’s tax changes made in 2019, called HB 6, requiring GRTs be paid based on the destination of goods and services sold.

For comparison, according to the New Mexico Taxation and Revenue Dept. website, Eunice received just over $520,000 in June while Lovington received more than $720,000.

Hobbs, with somewhere around 20 times the population of Jal, received GRT revenue last month of more than $4.7 million, just over twice Jal’s revenue.

While the New Mexico Legislature cut the state’s share of GRT by an eighth of a percent on July 1, affecting consumers to the tune of around 25 cents for every $200 spent, the cut won’t affect local government revenue.

Only the state will see a reduction in revenue, but Rep. Larry Scott, R-Hobbs, noted on several occasions that New Mexico is “floating on an ocean of money,” referring to both pandemic-related federal funds and increases in oil and gas production and equipment taxes.

On the state’s GRT cut, White agreed a quarter on $200 is little benefit for the average consumer, but it might mean more for larger operations.

“Where it helps is if you’re building a $10-20 million project,” White said, then reflected, “although, if you’re building a $20 million project, $25,000 is probably not going to help a lot.”

Meanwhile, the City of Jal remains careful with its gold mine of revenue, White remembering legal problems he had with the state agency taking back a large sum of Eunice’s funds a few years ago.

“We’re dong a couple of things. We’re not saving 100 percent. We’re buying a lot of new equipment,” the city manager said. “We’ve bought six new police cars recently. We’ve bought six new maintenance vehicles.”

While replacing aged equipment, city officials also want the take care of some infrastructure issues with the extra funds.

“We’re not just sticking it all in the bank. We are trying to save some,” White said. “We’re building a new city hall. We’re cash flow on that — it’s coming out of our pocket. The council has given me $3.5 million to do that.”

After years of planning, construction of the new city hall facility inside the former Burke Junior High School building began last summer with a grand opening expected by this fall.

In addition, the city has been working on acquiring grants for some projects such as a major water line, road repair, and a new wastewater treatment plant, with most grants from federal or state sources requiring local matching funds.

“We’re getting a lot of grants. I just got a grant the other day for $5.4 million. That requires a 10 percent match, so that’s about $540,000,” White said, continuing his list of projects. “That’s for our new water line. That was the colonias fund.”

Jal recently earned designation as a colonia, increasing probability of receiving federal funds for infrastructure projects.

“We’re getting ready to drill six new test wells,” White said. “We got permission … to drill some test wells to see if we can find a good well or two to supplement some water rights we have.”

City officials in recent years have been concentrating on keeping as much fresh water as possible to serve residents and future generations.

But some of the funds are being set aside for the day when oil crashes again, like just two years ago.

“We’re being very very conservative,” White concluded. “We’ve put close to $10 million in savings. It will get us through a year or so, anyway.”

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