A Taxing Issue
County holds sway over liquor excise tax; some in city want more control

By Zsombor Peter
Staff Writer

A customer at a local supermarket walks out to his car with a 24-pack of Bud Light in hand on Friday evening in Gallup. Five percent of the tax on alcohol sales benefit alcohol education and prevention programs across the county. Gallup generates the majority of the money that the tax brings in and city officials want more of a say on how the tax is spent. [Photo by Matt Hinshaw/Independent]

GALLUP — Ever since McKinley County began imposing a 5 percent excise tax on all liquor sales, most of the proceeds have been coming from inside Gallup city limits. And ever since, the county has had the final say on how that money gets spent.

"The (Gallup) City Council has really not had a say," said City Manager Eric Honeyfield.

Honeyfield guessed that past councils had few qualms about the arrangement. That's changing.

He announced plans this week for the city and county to begin negotiating new rules on how the proceeds from the liquor excise tax get spent. According to Assistant City Manager Larry Binkley, the New Mexico Legislature approved the tax in 1989 for mid-size counties to spend on alcohol education, prevention and treatment programs.

Honeyfield isn't complaining that the city isn't getting a fair cut of the roughly $1 million the tax has been generating in recent years.

For one thing, no one knows for sure how big that cut should be since, according to County Manager Tom Trujillo, no one keeps track of where in the county the proceeds come from. Honeyfield didn't know either, but guessed that roughly 70 percent comes from Gallup.

And how much of the proceeds get spent in Gallup? Neither the city nor the county had precise figures on that either, but Trujillo was sure it added up to at least $600,000 last year, probably more.

Then there's the fact that Gallup counts for little more than a quarter of the county's 75,000 residents.

What bothers some city officials is that Gallup gets so little say in which programs get to benefit from the money.

According to City Attorney George Kozeliski, state statutes demands that the city and county agree on how to spend that money. But those statutes, said Honeyfield, seem to leave a fair bit of room for interpretation when it comes to deciding exactly what it means to agree.

In it's last joint powers agreement with the county, which expired more than three and a half years ago, the city appears to give the county full control over distributing the proceeds. While a five-member advisory board two county representatives, two city representatives, and a fifth representative chosen by the first four is charged with recommending worthy recipients, the County Commission has the final say.

Honeyfield hasn't been completely satisfied with the commission's choices of late. He said it's sometimes overruled the board's recommendations to fund programs that have demonstrated very limited results instead. Besides keeping the funds flowing to the most worthy programs, he hopes that more city control over the proceeds will help defray the costs of some initiatives protective custody pickups, for example that currently depend solely on Gallup's general fund.

In defense of the county's decisions, Trujillo said that some programs deserved a few years to prove themselves and that others sometimes received low marks for simple bureaucratic reasons, for filing their reports a little too late for example.

"Even though they may not have got a good rating," he said, "(those programs) are providing an important service to the county."

Even so, Trujillo said the county would try do develop a more elaborate evaluation system to vet potential recipients of the proceeds even more carefully.

"We're trying and working to do everything to make the county accountable for the money it's spending," he said.

Trujillo said he was open to the idea of having the City Council approve all spending along with the County Commission.

Kozeliski and his county counterpart should be meeting in the coming weeks to work out the details of a new joint powers agreement between the two parties. Trujillo said the county was also preparing presentations about the excise tax to make to both the commission and council in March.