Tax error puts Santa Rosa in big hole

SANTA ROSA, NM (KRQE) - If you're expecting a paycheck, a bill is the last thing you want to see sitting in its place.

That's what happened to the city of Santa Rosa last month.

City administrator Ian Serrano says the city was expecting an approximately $160,000 deposit from the state for its monthly gross receipts tax revenue. Instead city hall got a letter from the Taxation and Revenue Department (TRD) informing them that Santa Rosa not only wasn't getting that money, it actually owed the state about $243,000 not including the $160,000 the state had already taken.

Serrano says that's because an unnamed business appealed its tax bill and won an approximately $400,000 refund. It's unclear how or why the business was overcharged.

In the letter, state tax officials ask that the city pay up before the end of the year in either a lump sum or with monthly installments.

Serrano says the total the city owes reflects about a quarter of its annual revenue stream and Santa Rosa is asking for two years to pay the money back.

The city also needs a loan of the money the state's already taken to cover its bills in the short term. It's working with TRD to come to an acceptable arrangement.

"We're going to be forced to look at steep cuts in our finances in order to make that payment," Serrano said.

Layoffs, furloughs and reduced hours at city buildings are possibilities, but Serrano says one area is off the table.

"As far as law enforcement, fire, ambulance... we don't want to touch that at this point," Serrano said.

The city is also not considering bankruptcy. Difficult decisions on where to make the cuts will come have to be made quickly within weeks.

Correction: In the broadcast version of this story, the copy reads that it's unclear how Santa Rosa overcharged the business. The correct version is in the print story and reads - "Serrano says that's because an unnamed business appealed its tax bill and won an approximately $400,000 refund. It's unclear how or why the business was overcharged." KRQE regrets the error.