Mayor John Suthers has presented a 2019 budget proposal to Colorado Springs City Council that aims to keep the red-hot local economy percolating.
“Our first and primary strategic plan goal remains promoting job creation,” Suthers wrote in his Oct. 1 budget message. “We’ve created 24,000 jobs since June of 2015, an average of 7,300 jobs per year. Wages have climbed significantly during that same time also, with the median salary for posted jobs in our region currently over $72,000, far above the median salary for the State of Colorado.”
The proposed budget includes continued funding for the Colorado Springs Chamber & EDC, Small Business Development Center and Visit Colorado Springs, organizations that have worked with the city’s Economic Development Office to create an environment conducive to economic growth, Suthers said.
It also funds arts and cultural organizations and special events with revenue from the city’s Lodgers and Automobile Rental Tax and adds $640,000 in funding from the Parking System Enterprise fund for additional downtown streetscape improvements and lighting.
“Ultimately, job creation is not something that the city does,” Suthers said in an interview. “It’s primarily the private sector responding to overall economic conditions. In some instances we can facilitate that.”
In the past few years, the city has eliminated the business personal property tax and smoothed the way for businesses to move through city planning and permitting processes. It has also focused on providing better services and attempted through infrastructure improvements to make Colorado Springs a better place to live and work.
“In this budget, there is a continuing emphasis on infrastructure, delivery of city services and quality of life,” Suthers said.
The budget proposes an increase of $1.8 million to improve technology infrastructure, applications and cybersecurity, and additional funding for an online permit, land use and licensing system to increase delivery of city services and business friendliness.
The budget also proposes a $950,000 increase in funding for park maintenance, recreational and cultural services and a new Forestry crew and $2.7 million for critical facility maintenance, including police and fire stations, parks and public works. It also allocates more funding than last year for cleanup of homeless encampments.
Public safety — “another thing businesses care about,” Suthers said — features prominently in the budget. It allocates $4.5 million for 61 new police officers and eight new firefighters, plus $9.9 million to raise salaries for police and firefighters to the market average.
General Fund dollars freed up by the passage of the stormwater fee “will allow us to hire 120 police officers and 32 firefighters by 2020,” Suthers said.
All of these improvements are aimed at citizens’ quality of life and the city’s ability to attract new businesses, Suthers said.
The same improvements and amenities help make Colorado Springs a desirable place for Millennials.
“When you fix infrastructure, you create an environment companies want to come to,” Suthers said. “Once you get the jobs, Millennials will come.”
A business-friendly strategy has earned the city high rankings in desirability, livability and job opportunities and has made Colorado Springs the fastest growing city in the nation for Millennials.
“I recently had a woman come up to me and say, ‘I hate to see all the growth,’” Suthers said. “Her third sentence was how pleased she was that her grandson got a great job. … Anybody who says they don’t want growth, if they want their kids to live here, they better understand we’re going to have to grow 5,000 jobs a year.”
The LART tax supports a wide range of festivals and athletic, tourism and cultural events, as well as economic development activity. City council administers the fund, with the guidance of the LART Citizens’ Advisory Committee.
The tax consists of a 2 percent levy on sales at lodging properties and 1 percent on auto rentals.
LART revenue grew 14 percent in 2017 and 5.6 percent in 2018, indicating growth in tourism that is expected to continue, although at a more modest rate.
The LART committee has drafted its 2019 funding recommendations, based on an estimated $7.8 million that will be available for appropriations from 2018 LART tax collections and leftover funds from 2017.
Among the events the committee has named for support are The Broadmoor’s Pikes Peak International Hill Climb, Labor Day Lift Off and Pikes Peak or Bust Rodeo. The LART tax also funds Visit Colorado Springs, the Cultural Office of the Pikes Peak Region, Colorado Springs Sports Corporation and the Colorado Springs Chamber & EDC, with which the city has contractual agreements.
City councilors will make the final decisions on funding LART expenditures and all other budget allocations.
“We did get increased funding through LART this year,” Chamber & EDC President and CEO Dirk Draper said.
The LART committee’s draft budget recommends a 2019 allocation of $300,000, an amount that represents about 15 percent of the chamber’s budget. (The other 85 percent comes from its business community members.)
“One of the major initiatives we are exploring right now is a deal-closing fund,” Draper said. “It would be under local control and would be used for companies expanding or relocating to Colorado Springs. One of the advantages would be to leverage incentive dollars the state provides that often require a local match.”
The proposed $302.1 million budget for the city’s General Fund, which covers operations and management, is $15.4 million more than the 2018 budget.
That increase is based on a predicted 4.5 percent increase in collections of the city’s 3.12 percent sales and use tax, indicating a continued strong economy in 2019.
Colorado Springs Chief Financial Officer Charae McDaniel said revenue is running ahead of this year’s budgeted amount.
“Our budget is coming in $2.1 million more than we had originally budgeted,” McDaniel said. “Based on what we predicted to collect, the year-end estimate is for more than 3 percent growth.”
McDaniel said she incorporates three models into sales tax revenue forecasts: historic trends; surveys of consumer sentiment; and actual revenue that is input each month into forecast models.
Although economists say an economic downturn is inevitable, McDaniel said she has been hearing from investment advisors and local economists that they don’t anticipate a slowdown in 2019.
Tatiana Bailey, director of the UCCS Economic Forum, said she thinks 4.5 percent growth in sales and use tax collections in 2019 is “probably pretty realistic. Sales and use taxes have been increasing over the past five years,” growing 8.2 percent in the past year and a sizable 35.04 percent between August 2013 and August of this year.
“It has been a steady increase, with seasonality,” Bailey said.
Bailey offered another perspective on those figures, however.
The 3 percent year-end growth estimate is a nominal value, as opposed to an inflation-adjusted increase, Bailey said.
“If you adjust for inflation, it’s about a 1.2 percent increase for 2018 and 1.1 percent for 2019,” Bailey said. “That gives you the picture in real dollars as to what the city has to work with. Basically, we are keeping up with the population increase and inflation, and a little more than that.
“If you go back to the nominal [value], what Charae stated is pretty accurate, because an 8.2 percent increase is pretty good,” Bailey said.
Other indicators also support the predictions upon which the budget is based.
“Over the past year, August to August, there has been a 25.2 percent increase for construction machines,” Bailey said. “Businesses are buying new equipment, and that’s very telling.”
Business services, especially business-to-business services such as consulting, grew by 17.5 percent over the same period.
“That also tells me that the economy is strong and companies are using each other,” Bailey said. “As long as we continue to do well in the local economy, those increases are going to continue.”
It is difficult to predict when the next economic slowdown will occur because there are so many variables, Bailey said.
A local unemployment rate that has been averaging 3.5 percent “indicates the economy is too hot,” she said. “As for tariffs, there’s no way they’re not going to have an impact.”
The new tariffs make it more difficult to predict when a downturn will occur and how severe it might be, she said.
Businesses reaping benefits from the Trump administration’s tax cuts “probably are what’s going to keep us afloat,” she said, adding that she would be “pleasantly surprised” if a slowdown doesn’t happen during 2019.
The proposed Colorado Springs budget increases the unallocated General Fund balance — the amount that is kept in reserve to cover urgent or unbudgeted needs. Bailey recommends a similar strategy for business owners.
“If I were a business owner, if I had the money and my business was doing well, I would take advantage of the huge incentives in the new tax law for purchasing capital equipment,” Bailey said.
“Having said that, I’m not going to overspend or take out a loan that will be onerous for the next 10 years,” she said. “I would probably put some reserves aside. You want to grow when it’s a good time to grow, but you always want to have some padding so you don’t have to lay off employees later.”