Note: No public money or other resources were used in the preparation of these remarks. These are totally the responsibility of John Graham, as a private citizen.
What is 2A and what will happen if it passes?
The Excise Tax, also known as an Amusement or Admission Tax, is a tax paid for admission to an attraction. Examples in Manitou Springs are Cog Railway tickets or admission to the Cliff Dwellings. It is paid mainly by visitors. The Excise Tax was established in 1972 and has never been raised from its original 5%.
What is 2A and what will happen if it passes?
2A is a ballot question for Manitou Springs voters. It asks for approval for City Council to adjust the existing Excise Tax to up to 14%. This would allow Council to increase or decrease the tax according to economic conditions and the City’s needs. Note: It sets a ceiling of 14%; it does not mandate the actual rate.
If 2A passes, the City could maintain a healthy level of services and continue pursuing capital projects. Our intent would be to maintain a strong reserve while fixing our failing infrastructure. We could undertake a systematic approach to undergrounding our overhead utilities as part of that. Staff recommends maintaining a $5 million reserve to facilitate grant opportunities and be prepared to deal with unexpected infrastructure problems.
What will happen if 2A fails? What is Plan B?
No matter what happens, it will take a number of years for the city to recalibrate and adjust to changes in our municipal revenue. We are re-evaluating our priorities. Should 2A fail, the city will need to reduce its budget substantially — and rapidly — and use reserves to make up for the loss. Capital projects, which take loads of money and staff support, would be postponed indefinitely. Our intent is to maintain core services – water, sewer, streets, police and fire protection – but things like snow removal, street sweeping, and park maintenance would likely be reduced.
Conceivably, the City could find itself asking voters for a property tax hike in a few years if the expected trends continue and 2A does not pass.
Is the city already cutting back on staffing and other expenses too?
Yes. Our Department heads were directed at the beginning of the year to work with “flat” budgets – no frills, nothing that is not essential. Staff is working to be efficient, and our City Administrator has been combining positions when possible. Departments have been making cuts, cross training personnel to wear more than one hat, and adjusting work plans to make the most with less.
City staffing has been reduced by one in six. Full staffing would mean filling 88.5 positions. Currently we have 74 and do not plan to add anyone.
Have we considered other funding options?
Yes, Council presented several scenarios at a public meeting on July 29. The city staff and City Council considered a number of funding options.
Here is the math problem: The City is down $3.3 million in sales tax this year. Next year — a full year of legalized MJ in Colorado Springs — we expect the shortfall to be $4.3 million, the expected difference between 2024 and 2026 sales tax collections. We will channel $1.5 million from parking, and we’ve identified reductions amounting to $580,000. That still leaves a $2.22 million shortfall.
Suppose we try to make that up by raising property taxes?
City Council is NOT proposing a property tax increase. In 2026, the City expects property tax collections to be about $1.2 million. To make up the deficit of $2.22 million – in other words – to collect $3.42 million, we would need to nearly triple our existing rate. That is a truly worrisome situation for people who pay property tax or renters whose landlords do. For every $100 you pay in City property taxes now, you would have to pay close to $300. The hammer would really come down on commercial property owners because commercial property is charged at a rate four times the residential rate. Consequently, Council felt this would be too great a hardship on citizens and businesses, so we are not proposing a property tax increase.
Suppose we try to make that up by raising sales taxes?
City Council is NOT proposing a sales tax increase. Similarly, raising the sales taxes would make our shops and restaurants non-competitive. Imagine paying triple or quadruple the taxes on a sandwich, artwork, t-shirt, jewelry, etc. It will not fly.
That left Council with the excise tax.
Council thought about raising each tax a bit, but piecing together several is complicated and confusing.
Why is the city launching so many projects right now? Shouldn’t we be delaying these projects because money is so tight?
The active projects in Manitou Springs now are mainly grant-funded projects with deadlines the city needs to meet. These include the roof replacement at the swimming pool, the expansion of the Creek Walk Trail, and reworking the Hiawatha Gardens Mobility Hub. These have all been in the works for several years.
What capital projects has the City undertaken?
Please go to the page titled “What the City has gotten done…”
Does the City of Manitou Springs have any funds in its reserve account?
We have built up about $8 million in reserves. This is not by luck or accident. For years, City Council has worried about lost marijuana revenue, and we have systematically saved money against a rainy day while addressing big projects. Unfortunately, we are beginning to dip into it.
The reality is that we have stored up a lot of nuts, but winter is coming. We know we will have to use some of that reserve, and we need to be very careful about doing so. You do not have to be any smarter than a squirrel to realize you have to protect your nuts.
Why can’t we just go back to the budget we had before we had marijuana money?
There will be cuts that will take us back to the days of a smaller budget, but there are additional consequences to consider:
- Our reserves in the past were lower than is now required by our auditors.
- In the past, we missed federal and state grants because we were too broke to make the required matches.
- The City scrapped by, but we were not doing great. In 2016, it was not unusual for City reserves to be about $50,000. To go back now would mean deferring maintenance even more. It would set our utilities’ needs back for years, which is already crippling.
- City facilities now need increased ADA compliance and sometimes increased security.
- Unfunded mandates have forced expenses on us just to stay compliant with state and Federal laws.
- Expenses are increasing in areas that are very difficult to contain. In 2026, we will see increases in the following areas:
- Property and Casualty Insurance increases, from $484,205 to $763,494, a 58% hike since 2024.
- PERA costs: About a 1% increase
- Medical Insurance: Anticipating a 7% increase.
- Electric utilities: 6% increase expected.
Many say that they feel the need to pick the city’s ballot measure or the school’s bond measure and cannot vote yes for both.
Everyone must decide for themselves how to vote. It is important to understand the difference between excise and property taxes. The city is asking for an increase in our excise tax (a tax on tickets and amusement) while School District 14 is asking for an increase in property taxes.
Property owners pay property taxes – residents, landlords, and businesses – while visitors chiefly pay excise taxes. These are unique taxes with different impacts on our community.
What is the average excise tax for other communities? Are we going to be particularly high?
This is a tricky question because cities often use different terms to describe their taxes and sometimes bundle them using different language and different fees. If you do a general excise tax search, Manitou Springs might come in high. However, when you look deeper, we are not high. It is not unusual for municipalities to look to their ticketing businesses for funding to support city budgets. `
What recent trends in the economy factor into the City’s thinking about funding?
- In 2025, we are using $400,000 from the parking enterprise for streets and $1,618,821 from reserves to balance the budget. We are down $3.3 million in tax collections this year.
- In 2026, we will use $1,500,000 from the parking enterprise fund for streets and $1,750,000 from reserves for the General Fund. This also reflects reductions of $580,000.
- If we do not secure additional revenue by the end of 2026, we will have only a little more than four months of operating reserves. This situation will prevent us from undertaking capital projects and will limit our capacity for grant matches.
Is the Excise Tax permanent, or will it expire?
The Excise Tax was established in 1972 and its original rate of 5% has never been raised. This is permanent, as are most of our taxes.
The City of Colorado Springs is tackling a $30 million deficit without going to the voters or raising taxes, why can’t we do the same thing?
$30 million represents about 2% of the City of Colorado Springs’s budget, while $4.3 million represents 30% of our budget. These are vastly different situations. Additionally, Colorado Springs has a much more diversified economic base. Manitou Springs’s economy is tourist-based. About three-quarters of our revenue has come from sales tax collections, including marijuana. Adding to the imbalance, we are largely a bedroom community, with residents working and shopping – and thus leaving their sales tax payments — in Colorado Springs. Further, we are an aging community, frequently with limited revenue.
Manitou Springs Mayor's Thoughts 