This budget adjustment is requested to move funds from the Lodger's Tax fund balance into the Promotions & Marketing account. In January, the Finance Department notified the Tourism Office that approximately $565,000 would need to be expended by the end of this fiscal year, FY23, to remain compliant with Lodger's Tax spending regulations. The state mandates that Lodger's Tax funds need to be spent in a 60/40 ratio, with 60 percent spent on operations and 40 percent spent on marketing and promotions.
The Tourism Office expends funds under the 40 percent category on advertising, the Lodger's Tax grant program, and certain professional agreements which have a marketing or promotions focus. The Tourism Office employs a variety of advertising and promotional techniques, including, but certainly not limited to, print ads, digital placements, and billboards. The Lodger's Tax grant program funds the marketing plans for several community events, such as the annual rodeos, Balloon Rally, downtown events, and outdoor events.
Since Jan. 1, the Tourism Office has spent or encumbered approximately $300,000 from the Promotions & Marketing account and the Lodger's Tax grant program. To stay compliant with the mandates, the Tourism Office requests $265,000 from the fund balance to continue advertising and promoting the community. Tourism has plans to spend these additional funds, if approved, by working with several of our advertising partners, such as state Tourism, Sunny505 (marketing firm in Albuquerque), print publications, and online platforms. The Tourism Office also plans to replace as many of the dilapidated billboards as possible that we have along Interstate 40 and other areas. These plans will be able to be implemented once the funds are available.
In addition to the 60/40 spending mandate, Lodger's Tax funds are also required to be spent within two years of being collected. If this budget adjustment is approved, the Tourism Office will be able to continue promoting and marketing the community to remain compliant with the mandates.
On March 31, 2023, The City of Gallup completed a proposal to extend Preventing Alcohol-Related Death (PARD) Services. The Notification of the Award will not be completed in time to prevent a lapse in services. Indian Health Services has granted the City up to $250,000 to extend PARD services for May and June.
The Electric Department is requesting a budget adjustment of $3,240,000 to cover the power purchase cost to the end of this fiscal year. The Electric Department has had several different issues this fiscal year with Continental Divide/Tri-State, PNM and Gallup Solar.
For the issue related to CDEC/Tri-State they have been overscheduling the City and not considering the new WAPA Groundwater contract that was approved back in April of 2022. This overscheduling has caused us to purchase power at a much higher cost. This issue has been addressed and corrected as of February of 2023. Preliminary calculations indicate that a refund of $738,750 is owed to Gallup.
The issues we have had with PNM were overcharges due to errors in the Energy Imbalance calculation process. Our WAPA energy schedules were not being reflected in the accounting for generation resources that were supplying energy to serve Gallup Load. The “short” schedules produced an incorrect deficit of energy which PNM supplied from the California ISO Western Energy Imbalance Market (WEIM) and charged Gallup for that energy at a time when market prices were very high. The error has been corrected and we have already received a reimbursement payment from PNM in the amount of $1,088,852.37.
Lastly, unreliable forecasting data and solar performance has been a contributor to this account’s shortfall. Daily data for hourly metered load is required for producing the forecasts but has only been available since October 2022. The Summer forecasts were being done using only historical data which has caused very volatile energy imbalance charges on our NITS invoices due to the inaccurate data. After October we have been able to forecast Gallup’s load correctly and have seen much less extremes in the load imbalances. In addition to this Gallup and Enchantment Energy have worked closely with Standard Solar and have been given access to the hourly production data which also assists us with even more accurate forecasting. 90% of solar panels have also been corrected since a couple months ago after numerous talks between Gallup, Enchantment Energy and Standard Solar. With the new maintenance program in place, generation production has become more reliable and predictable.
We also want to recognize a revenue adjustment which was not budgeted for in this fiscal year in the amount of $1,887,215. This includes the reimbursed payment from PNM and the supplemented payment from Guzman Energy. Our electric revenue is also also higher than originally projected and I am requesting an increase of $2,000,000 to reflect current expectations. With this revenue adjustment we can recalculate our days cash on hand and stay above the required 180 days.