As your elected mayor and one of your representatives within local government, many of the decisions I help make are a balancing act revolving around the use of available resources to address current needs, and at the same time, planning for the long-term.
The city has historically struggled to generate revenue to fund public service needs in relation to other communities. This is the case because of Rio Rancho’s historic tax leakage, the state’s structure for local government revenue sourcing, which is predicated upon business activity and sales, and legacy land ownership issues.
Furthermore, based on continued growth in the community due to Rio Rancho’s desirability as a place to live and work, local government must develop new and additional funding to account for increased public service demands.
As a result of past careful decision-making, more local spending, strong construction-related activity and unexpected federal funding, the city has unprecedented reserve levels as we plan for the upcoming fiscal year, which begins July 1. City staff has recommended to the governing body (mayor and city council) the creation of a permanent fund as a use for some of the reserves that have materialized.
A permanent fund restricts the use of the earmarked resources (the principal) so that only the earnings (interest derived from the invested principal) can be used to support general government services and/or reinvested.
Rio Rancho would not be traveling into unknown waters with the creation of a permanent fund. The State of New Mexico and City of Albuquerque have utilized permanent funds for many years.
I fully endorse the concept, which would ultimately be established through a voter-approved city charter amendment question on the March 2022 ballot.
Because reserves are one-time money, once it is spent, it is gone.
The permanent fund makes sense for a portion of the reserves because an investment like this does two things without a tax increase: It grows the money over time and generates new revenue annually to fund public services. There are very few options available to government to increase revenues that don’t require imposing a tax or fee increase, and to make recurring money from one-time money.
Another advantage of a permanent fund is that if the city has financial challenges down the road, the fund would be available to tap if absolutely necessary, and the decision to do so would be made by voters. Also, by establishing this fund, in the future the city could deposit unanticipated revenues from other sources into the fund to grow the principal and thereby increase earnings/interest yields and available money.
The process for establishing a permanent fund begins soon with the city’s charter review committee. Via a positive recommendation from the committee, the governing body can consider and then approve placement of a March ballot question.
With voter approval, I believe the city would be positively impacted for decades and beyond, leaving a legacy fund for future generations.
(Mayor Gregg Hull was elected to his second term in 2018.)