Mayor John Suthers has called for the city to spend $400.6 million in tax money next year, the city’s largest general fund budget in its history and more than 16 percent more than the 2021 budget.
But the numbers are deceptive, because the budget contains a projected $17.1 million above the city’s revenue cap imposed by the Taxpayer’s Bill of Rights (TABOR), which must be set aside for a refund unless voters allow the city to keep it, and another $26 million that’s being rebudgeted from unspent 2021 funds.
Those unspent funds resulted from $15.7 million in money received from the Coronavirus Aid, Relief, and Economic Security Act in 2020, which were spent, in part, on police and fire salaries, enabling the city to save its own tax money to carry over to 2021. Now, even more will be carried over to 2022.
The budget forecasts a rise in sales and use tax revenue of 5.2 percent over the October 2020 budget revision, an indicator that Suthers is bullish on the local economy.
“The city is doing very well,” he says in an interview, “but you have to pay attention. TABOR is a complicating factor. This particular budget benefits from the fact we got federal money that we could spend and have savings to carry over. This budget benefits from the fact we may be able to keep some of the excess for 2021 and, thereby, raise the limit next year.
“The struggle we always have is, you can use TABOR excess for one-offs, but you can’t use it for sustained maintenance of parks or other expenses. You have to make sure your ongoing expenses are well within projected growth and be conservative about that.”
Conveyed to City Council on Oct. 4, the budget includes money to add more police officers, add teams that respond to incidents involving people under the influence of drugs or with mental illness, and $9.1 million in pay raises for city personnel, who Suthers says are becoming more difficult to retain as they’re lured away by higher pay.
This year, the tax-supported general fund budget, which provides core city services such as public safety, public works and parks, stood at $344.6 million, or 4 percent higher than the 2020 budget.
(The proposed budget for 2022 for all city funds, except Colorado Springs Utilities, totals $779 million, but much of that figure folds in various self-sustaining enterprises, such as Colorado Springs Airport, stormwater, parking and the like.)
The general fund is supported with both property and sales taxes and some fees. Rather than lower the city’s property tax mill levy permanently to avoid collecting too much money in violation of TABOR, city finance director Charae McDaniel said Suthers’ plan calls for a temporary tax credit on property tax bills. TABOR and other laws do not limit the number of years such credits can be used. If in some future year revenue slips so badly the additional money is needed, the credit can be taken away.
A one-time revenue source this year of $76 million, which must be spent by Dec. 31, 2026, came from the American Rescue Plan Act, but that money will be allocated for one-time projects for which other revenue sources don’t exist, such as $6.6 million for new irrigation systems for the two city-owned golf courses, Patty Jewett and Valley Hi, that don’t have money to fund large investments.
The city will ask voters on Nov. 2 for permission to keep $20 million in TABOR funds from 2021 to create a wildland fire mitigation fund, while refunding on utility bills another $10 million in excess revenue. If that measure is approved, it would reset the city’s revenue cap, thereby allowing the city to retain the $17.1 million in excess TABOR revenue projected for 2022, Suthers says.
On the spending side, Suthers proposes adding:
• $700,000 to hire 17 police officers, the final addition in a four-year plan to add 120 officers;
• funding for two two-person Alternative Response Teams, previously called Critical Response Teams, in the Fire Department, a recommendation from the City Council-appointed Law Enforcement Transparency and Accountability Commission (LETAC);
• $2.15 million for the city’s Americans with Disabilities Act program;
• $1.7 million for fleet and fleet maintenance citywide;
• $934,000 for Mountain Metro Transit for fixed-route service, which will cover an increase in contract charges;
• $500,000 for continued support for shelter beds;
• $1.5 million for IT, including maintenance and increased cost of contracts;
• $700,000 for animal control, provided through a contract with the Humane Society of the Pikes Peak Region;
• $2.2 million for critical facility maintenance needs;
• $500,000 for capital improvements; and
• $9.1 million for pay raises. This includes market adjustments, step increases for police officers and firefighters (whose pay is tied to job classifications), pay progressions for civilian personnel and pay for performance ranging from 0 to 4 percent for civilian workers.
“Despite all the impacts of COVID — loss of jobs — we’re feeling wage pressure at the city,” Suthers says. “We’re losing IT people right and left, engineers right and left. We gave them 3 percent [raises] at mid-year this year, and we need to give another 3 percent.”
The city aims to pay employees at the 50th percentile of similar jobs, based on salary surveys.
The rebounding economy, as projected by Suthers, will have a significant impact on money raised for 2C, the city’s road and bridge tax.
After voters approved the tax in 2015 for five years, the .62 of a percent was to generate $50 million a year.
The tax was renewed for another five years, 2021 through 2025, but the rate was dropped to .57 of a percent. Next year, it’s projected to generate $65.6 million, which Suthers says “bodes well” for a future ballot issue to extend the tax again but at a further reduced rate.
In his letter to Council, Suthers notes the budget reflects “our shared strategic goals” of creating jobs, investing in infrastructure, building community and collaborative relationships and excelling in city services.
He also notes that while the Government Finance Officers Association recommends a reserve target of 16.7 percent of budget, his budget would allow the city to build its reserves to 20 percent by the end of 2022.
Council will conduct hearings before adopting a budget later this year.