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.
The legalization of recreational marijuana sales in Colorado Springs earlier this year is financially impacting Manitou Springs tax revenues. This should be no surprise and, in fact, Manitou Springs City Council and City Staff have been very concerned about this for at least the last five years. All of our day-long budget work sessions and budget meetings have factored in this potential loss, now a real loss.
We have used these years of strong income to undertake a number of capital infrastructure projects. We have tried to balance an aggressive attack on deferred maintenance while containing costs, which are not easy during a time of inflation.
We have built up a capital reserve of about $8 million, roughly six to seven months of expenses, to manage diminishing revenues. We have asked our department heads to be fiscally careful and keep costs down.
It remains essential that we both contain costs where possible but also increase revenues in other areas. Our reserves will buy us time but are not a long-term answer.
We need to do something now, and 2A is the first step as we rebalance our municipal finances.
How the city plans to address the estimated $4.3 million drop in MJ tax revenue
At a public meeting on July 29, we presented what we call a “Balanced Approach” for our anticipated revenue shortfall. It has two principal components. The first would be to set a new ceiling on our excise tax rate, increasing it from 5% to up to 14%. City Council would be authorized to adjust the rate — increasing or decreasing it but never exceeding 14%. This would allow Council to respond to changing conditions without needing to call a special election or wait under a general election.
The second piece would be to channel revenue from our parking enterprise fund more broadly into the City’s General Fund, using the money for roadwork and related maintenance projects. Our projections are that the excise tax increase could generate up to $2.4 million while the parking revenues would contribute roughly $1.5 million. Meanwhile, we have identified reductions that would save $600,000.
The expectation is that we would be able to continue to pursue a solid capital improvement program to catch up with a lot of outdated and increasingly unreliable infrastructure.
Certainly, cost reductions, or cost containment, measures are going to be important. In short, that means we will need to have a more spartan budget. Obviously, we have to safeguard our core services – police and fire protection, providing water and sewer utilities, and streets.
Frankly, given the recent hikes in capital project expenses and inflation, coupled with the uncertainty in the national economy, this will not be an easy job.
Potential impacts on infrastructure projects and business
The real impact will be with our capital improvement projects, essentially with catching up with deferred maintenance on our infrastructure. For example, we had a major sanitary sewer collapse at a critical intersection on Manitou Avenue a week before the July 4 holiday. Shortly after that, we had two water main breaks on lower Ruxton Avenue that interfered not only with residential traffic but impacted the Cog Railway and access to the Incline. These are disturbing reminders that we need to systematically tackle our old water and sewer lines and other infrastructure. The marijuana money did give us a real comfort level in completing a number of public works projects.
Sadly, when we have tightened our belt in the past, one of the first things to go has been any dedicated, long-term capital improvement plan. Not being able to follow a sustained maintenance and replacement plan is fool hardy, at least for anyone who wants to have reliable drinking water and flushable toilets.
Issue 2A may not be a singular solution, but it will buy us time to make adjustments while maintaining an acceptable level of services. It may take three to five years to manage this loss, ensure healthy reserves, and manage risks effectively.
I ask your support for 2A. I ask your support for Manitou Springs.
Manitou Springs Mayor's Thoughts 