AURORA — The city’s heavy reliance on sales-tax revenue is detrimental during economic downtimes, and Aurora will have to change that in order to continue to provide needed services, officials said.
Currently, about two-thirds of Aurora’s general fund comes from sales and use taxes.
The City Council is expected to approve the $246 million general-fund budget for 2009 later this month, after cutting programs and shifting money to make up for a projected $10 million shortfall.
But with the economy expected to continue its decline, and with home construction down, sales-tax revenue cannot be counted on to buoy the budget in the future.
“It’s difficult when you rely on one revenue source for so much of your budget,” City Councilman Steve Hogan said. “We need to think about a diversification so that we’ve got some of our interests converted more by property tax.”
Hogan says Aurora needs to be more focused on bringing new businesses to the city. That would not only increase sales and property taxes, but also increase the head tax. Businesses and employees who work in Aurora each pay $2 per employee per month in head taxes.
Next year’s sales taxes are expected to increase by 2.5 percent, about a half percent less than original projections, said Aurora budget official Greg Hays.
The city is taking a big hit in construction-related use taxes, which are projected to drop from $13 million this year to $6.3 million next year, Hays said.
Aurora is about average in its dependency on state and use taxes compared with other cities, said Sam Mamet, executive director of the Colorado Municipal League. Statewide, that figure is 71 percent, or $1.8 billion.
Even so, some cities have begun to look at other ways to raise money, such as increasing property taxes and increasing fees. Other ways to save money include privatizing services and contracting out services such as law enforcement and public works to other government entities.
“I’ve seen in the last couple of election cycles an increasing number of municipalities go to the ballot with property-tax questions,” Mamet said. “Sales tax is volatile with the vagaries of the economy. Property tax is a more stable revenue source.”
At some point, Aurora expects to increase its revenue through commercial and residential development around the new Anschutz Medical Campus on the former Fitzsimons Army base.
But the city isn’t getting much money from the campus now because the hospitals and other facilities there don’t pay property or head taxes.
Next month, the city will discuss several possible tax increases to fund capital projects and for services such as police and fire. That might be a tough sell to voters given the financial times.
Aurora City Councilman Ryan Frazier agrees the city needs to find other ways to make money, but he doesn’t support tax increases. He said the city can do its fair share to save money.
He is proposing to eliminate 59 vacant, nonessential positions in the city, on top of the 50 that were done away with to balance next year’s budget. That could save Aurora an additional $3.7 million, he said.
“In good times, no one has trouble with the sales tax. It’s bringing in tons of money to the city,” he said. “In tough times you see how vulnerable that reliance is.”
Carlos Illescas: 303-954-1175 or cillescas@denverpost.com
