City of Pueblo considering new taxes in light of hefty budget deficit & threat of no funds by 2028

PUEBLO, Colo. (KRDO) - The City of Pueblo says it's running out of time to solve its budget deficit, which has plagued them for the last several years. The City Council and the Mayors office are now considering new ways to generate revenue before their reserve funds run out, which could fall on taxpayers at the grocery store, and beyond.

Mayor Heather Graham tells KRDO13 that the City of Pueblo is facing a $8.5 million dollar deficit in the 2025 budget, which she says resulted in her administration cutting most of their funding to non-profits, in order to shave costs where they can.

"If we don't start looking at revenue sources, come 2026, the city is going to be in significant trouble." Graham told KRDO13 on Tuesday.

In a work session meeting on Monday at Pueblo City Hall, Graham and the city council discussed different situations for bringing in more revenue, beyond just the sole 3.0% City Tax Rate which she says accounts for 70% of their revenue.

Seen below, is a chart from the work sessions, showing the local tax rates of home-rule cities, compared to one another in Colorado.

Mayor Graham points out that Pueblo ranks among the lowest rates, including the fact that 77% have a higher total tax rate than Pueblo. She wagers that as a reason for why the percentage should be raised for the first time in decades.

Another slide, shows the scale for what an increase to that 3.0% rate would look like.

An increase of 0.15% to 0.50% would generate could range from adding 30 cents, up to 1 dollar more, per 200$ spent by a consumer. The latter figure, would amount to upwards of $12 million dollars, according to the city's projections based on 2023 spending.

Another idea included putting a small tax on grocery items, or a Food Consumption Tax, which Graham says exists in many of Colorado's cities. That tax would add anywhere from $1 dollar to $7.40 to an average $200 grocery bill, according to a city presentation.

Similarly, the higher end of that tax could raise over $13.8 million dollars.

Important to note from the below slide, is the red text indicating that residents who use SNAP, WIC or any other government assistance, would be exempt from a Food Consumption tax.

As far as budget woes, City Councilwoman Regina Maestri tells KRDO13 that the city has had a deficit every year, for as long as she has been on council. She says the deficit has been, on average, over $10 million for their budgets, and the only reason those deficits haven't rolled over to the next year, is because they've taken from the city's reserve funds to cancel it out.

It's that same formula, that Graham says, will lead to the city's reserves drying up in 2.5 years or so.

However, Graham, says this isn't the first time the city has faced a crisis such as this one, in fact a total exhaustion of funds came a lot closer than it presently is. At the end of 2019, Graham says the city had just $500,000 left in its reserves.

But, months later, the COVID-19 pandemic would break out, and ultimately revive the city's finances through the injection of millions of federal dollars into local governments like theirs, and residents' pockets in the form of stimulus checks, which helped keep people spending money locally through their sales tax.

So how all of a sudden has this crisis, sprung upon the Pueblo City government?

Graham explained that there's a multitude of factors that have led to the current situation. She believes that generations of people have grown up in Pueblo, but have found jobs elsewhere and ultimately leave the city, diminishing the population over time. The Mayor also states, there is certainly a generational struggle with poverty, which inherently limits spending within the city.

Conversely, Graham believes that there are also portions of people who live in Pueblo, who do have money to spend, however they may be taking their money on the weekends to spend elsewhere, due to more shopping opportunities.

As for budgeting, the Mayor explains that most of their costs come from paying their 800-plus employees, including 231 police officers.

"That is budgeted every single year. And in order to maintain essential services and having people apply for jobs, having police officers come to the city and work here, you have to keep up with the wages." stated Graham.

She adds that residents in the city most likely are not aware, that the city is only required to pay their employees 85% of what other communities pay for the same job. She says that is due to union negotiations over Pueblo's lower cost of living. But the Mayor also says, it's why they have budgeted raises for city employees year after year, to be fair and keep up with inflation.

It's those factors, combined with the actions of previous administrations, which Graham could not speak on behalf of, that the deficits take too much of a toll on their finances, in just a few years time.

Graham says that if voters don't approve whichever ballot measures they likely put forth by August of 2025, they will first have to cut part-time employees with the city, as per union contracts, who are largely responsible for maintaining and managing the city streets, parks, pools, and other amenities.

"Nobody can do a budget on 3% of every dollar that's spent in the city. It's not feasible no matter how many cuts that you make. And if we start making cuts, we're really going to start affecting the services of this of the community." explained Graham.

After that, Graham says the city would be allowed to cut from the full-time employees would then fall victim, a place that Graham and Maestri hopes never has to come.