Some government leaders in southeastern New Mexico are considering a renewed effort to create a new tax for hotel and motel visits, a response to the long-term stays of oil and gas industry employees, especially in Permian Basin counties and cities.
Because the current state occupancy tax law, or lodgers’ tax law, allows the tax to be collected only for the first 30 days of stays, Lea and Eddy counties and their cities are experiencing a couple of consequences.
One is a lack of available or affordable hotel and motel rooms for tourists and business visitors. But the other is lower occupancy tax collections than usual because primarily oilfield-related companies and employees are booking rooms for months at a time.
In 2019, a bill was introduced into the New Mexico Legislature that would allow “Class B” counties and the municipalities within them a “local option” of a new tax, called a tenancy tax, to take effect after the 30-day lodgers’ tax period expires. According to a Legislative Fiscal Impact Report, Class B counties would be Lea and Eddy counties only.
The report also noted that, given the broad definition of “rental residences,” it could affect apartment renters as well.
Senate Bill 375 (SB 375) passed the Senate and received “Do pass” recommendations from two House committees after several amendments to exempt low-income people, but was never voted on by the full legislative body. A related bill, SB 7 introduced by Sen. Peter Wirth (D-Santa Fe) that would have applied occupancy taxes to single-family apartments and homes used as rentals, did not pass out of the Senate.
“Nobody likes taxes,” said Sen. George Munoz (D-Gallup), who agreed to introduce SB 375 on behalf of Eddy County officials in 2019. “But when something gets devastated, to build or support your utilities systems, then you have to figure out how to do it.”
A certain portion of lodgers’ taxes must be used for tourism-related facilities, programs and projects, with the exact amount dependent on the property tax base of a governmental entity. But the other portion can be used for roads, utilities or other services.
“You have to think of something you can do to offset (the situation) and maintain some stability in your lodgers’ tax,” Munoz said.
Lodgers’ tax revenue information posted on the city of Carlsbad site indicates that the taxes increased consistently from 2003 until June 2019, but that collections and projections for lodgers’ taxes for fiscal year 2019-20 are down about 50%. A city of Hobbs online financial page indicates that lodgers’ tax collections totaled $2.56 million for the entire 12 months of fiscal year 2019, and has reached $537,471 for the first three months of fiscal year 2020.
Munoz said he has not been contacted about any proposed 2020 legislative effort, but one Eddy County official confirmed that discussions are occurring about introducing a new bill for the upcoming legislative session.
“It will be somewhat similar to last year’s SB 375, but with a significant number of changes that are still in development,” said Kyle Marksteiner, public information officer for the city of Carlsbad.
He stressed that discussions are still preliminary and that he could not provide detailed information at this time.
Juanita Jennings, city of Roswell public affairs director, said the topic of long-term stays at hotels and motels in the area was discussed at a New Mexico Tourism Department workshop Aug. 29 held in Artesia and focusing on several concerns unique to southeastern New Mexico.
She said city employees have had some initial discussions with city councilors about the $1,000 decline in occupancy tax revenues experienced in September 2019, the first drop recorded in three years. Roswell’s occupancy tax revenues for fiscal year 2019, which ended in June, was $1.34 million.
She said the city is still determining whether the September decline is the start of a trend caused by workers booking hotel and motel rooms for lengthy stays or the result of other factors.
“I do know that we have had some initial conversations to monitor it a little closer specific to long-term stays,” she said.
She added that any future decision to join in a legislative action would have to be made by elected officials.
“We benefit in that oil and gas is not as prominent right now in Roswell,” she said. “At the same time, we want to be sure that we don’t find ourselves in the same scenario if it does become more prominent here in Roswell.”
Senior Writer Lisa Dunlap can be reached at 575-622-7710, ext. 311, or at email@example.com.