SEVERAL CITY WORKERS FEAR PAY CUTS AFTER IRS AUDIT SHOWED NEED FOR CHANGES.

Byline: PHAEDRA HAYWOOD

Julie Brette Adams showed up at Fort Marcy Complex at noon Tuesday to lead her Stretch-and-Tone exercise class as usual.

But before launching into her routine of squats, crunches and bicep curls, she told the approximately 75 students gathered in the gymnasium that contrary to what they might have been told by city officials last week, "everything is not resolved and fine" with her new contract.

"I don't agree with the terms of the contract, but it was my only option," said Adams, 45, who starting teaching at the city recreation complex as a substitute in 1992 and now leads 11 classes a week. "I'll give it a trial period. I'll be here teaching, but if it doesn't work out with the numbers, then I won't."

Adams did a short stint as a city employee in the early 1990s, but since 1995 has had a contract that pays her a set amount per year.

That changed this year, after an IRS audit determined the city of Santa Fe wasn't properly distinguishing between employees who must have taxes deducted from their earnings by the city and contractors who are responsible for paying self-employment taxes.

Under the terms of the contract she signed Tuesday, Adams said, she will be charged a fee to "rent" the space where she teaches and will receive a percentage of the proceeds collected from students who attend. Adams declined to give specifics on her compensation. But Recreation Division Director Tom Trujillo said Adams has a contract of "about $20,000 per year" to teach 11 classes per week, which means she earns about $35 per class, more than the $25-per-class rate most other city fitness instructors earn, but less than she might be able to earn at a private club. A Fort Marcy employee said Adams has been offered 80 percent of the class fees.

Adams said the new contract could potentially result in her being paid about the same amount she earns now, but could also result in her earning less. "The risk factors are much greater," Adams said. "When less people come, when there is a snowstorm, whatever factors influence attendance, I'm going to be affected."

Trujillo said about 150 city contracts will be re-examined this year as a result of the IRS audit. The city also had to pay the IRS about $338,000 for Social Security and Medicare withholdings never paid for improperly categorized workers.

Many of those whose status will be re-assessed, Trujillo said, are referees, umpires and fitness instructors. The IRS has guidelines to help governments determine how to categorize workers. But some are subjective, Millican said, thrusting the issue "deep into the gray."

Public Works Director Robert Romero said one of the factors used to determine if a worker is a contractor is whether that person assumes any of the business risks associated with self-employment.

Adams' new contract will result in her assuming more risk. "I don't feel good about going in this direction, because it puts the burden of subsidizing the classes in a way on my shoulders," she said.

Another criteria the IRS suggests using to determine a worker's employment status is who controls the financial aspects of the job. In Adams' case, she does not. The city of Santa Fe sets the rates for her classes -- $3.50 per class ($1.50 for seniors) -- considerably less than comparable classes elsewhere.

"As you know, the city of Santa Fe is looking at our budgets," Trujillo said when asked why the city doesn't simply offer Adams a job. "At this point there isn't any kind of vacancy to offer."

Fort Marcy Complex Director Peggy Sanchez said any change in the complex's fees would have to be approved by the City Council, but that is not being considered at this point.

On Tuesday, Adams suggested that students who are seniors consider paying full price to help ensure her salary.

"I'd pay $10 for this class because I'm capable," said Nancy Reynolds, 82, a retired journalist and lobbyist who has attended Adams' classes five days per week for about the past 17 years. "I'm totally uninvolved in politics now, but we would march on City Hall to keep Julie."

After Adams' announcement, state water planner Angela Bordegary, 43, entreated all attendees, regardless of age, to pay more. "Pay for what we are getting," Bordegary said. "A class like this anywhere else would be $14."

Staff at the complex said Tuesday that they are not set up to track any extra payments that might be voluntarily paid for Adams. "Can't we just tip her?" wondered one student aloud.