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Hobbs officials outline $45M FY2027 shortfall, weigh capital cuts and tax options
Summary
City staff told commissioners a preliminary FY2027 budget shows about a $45 million gap driven by declines in gross receipts tax after HB 6; staff proposed cutting $25 million in capital projects, a hiring freeze outside public safety, targeted reintroductions (eight positions) and a 3% COLA while commissioners debated using cannabis excise funds and a local-option tax.
At a Hobbs City Commission work session, city staff presented a preliminary FY2027 budget that staff said shows a roughly $45 million imbalance between department requests and projected revenues, and outlined cuts, limited re‑staffing and possible revenue options to close the gap.
The city manager framed the discussion around three principles—prioritize core services, reduce and restructure spending, and build reserves—saying, “We must tighten our belt today to ensure long term financial stability tomorrow,” and described immediate corrective steps that included eliminating about $25 million in proposed capital spending and a temporary hiring freeze outside public safety.
Why it matters: The shortfall follows a sharp drop in gross receipts tax (GRT) receipts tied to changes from House Bill 6, city staff said. That revenue decline has squeezed funding for police, fire, utilities and other services at a time of growing service demand and population. Commissioners discussed whether to reallocate existing earmarked funds, seek new local revenue, or scale back city subsidies to outside entities.
Staff numbers and proposals: Acting Finance Director Deb Corral told the commission total expenditures for all funds in the preliminary budget are $156,000,000, broken into operating ($75,162,667), salary ($66,954,881) and capital (~$13,000,000). City Manager Manny Gomez said the initial pre‑budget requests across all funds totaled about $188,000,000 against projected FY2027 revenues of $142,000,000, producing the roughly $45,000,000 gap.
As immediate adjustments, staff removed 19 new position requests (about $1.4 million) and cut about $25 million in proposed capital projects from the preliminary request; later the proposal reintroduced a smaller set of investments intended to preserve core services and retention, including eight new positions estimated at $600,000 (six positions proposed for the fire department, one IT position, and one utilities SCADA specialist) and a proposed 3% cost‑of‑living adjustment for all employees.
On available cash: Corral described a “flowback” estimate—funds budgeted but not likely to be spent—of roughly $15–$19 million that could be reallocated to partially restore cut capital projects. She also reported a general fund beginning cash near $43.6 million, budgeted general‑fund revenue of about $79.95 million and an ending general‑fund cash balance budgeted at about $31.0 million (roughly 35% reserves in the preliminary figures).
Cannabis excise fund and other earmarks: Commissioners pressed staff about a multimillion‑dollar cash balance in the city’s cannabis excise fund. Corral said that the fund’s budgeted revenue is about $1,128,000 and that $191,573 had been transferred to the general fund to seed a new Hobbs Community Safety Division (to sit initially in the police department); staff said a director is being recruited and operating and capital needs are being developed. Commissioners debated whether to reallocate portions of the cannabis fund or other earmarked balances toward immediate needs in the general fund.
Revenue options discussed: Staff outlined possible revenue measures including use of flowback reallocation, reexamining subsidies to entities such as Rockwind and the airport, and a local‑option gross receipts tax up to 2.05 percent as one scenario that staff estimated could generate additional annual revenue (staff presented multiple share/flow assumptions and impacts across city and state shares). Commissioners also discussed targeting other, narrower taxes so the burden would not fall solely on existing general‑purpose GRT payers.
No final decisions: The meeting was a work session and produced no formal motions or votes. Staff reminded the commission that the preliminary budget will return to the commission for final adoption at the next meeting and that the Department of Finance and Administration budget submittal deadline is June 1. Mayor Cena closed by thanking staff for their work and noting the commission’s next steps.
What’s next: Staff will refine allocations based on commissioner guidance, evaluate flowback and capital reintroductions, finalize the preliminary packet for formal action at the commission’s adoption meeting, and present options for any proposed local tax or reallocation of special funds.
