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, to avoid relying on the 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 anywhere from 0.15%, to 0.50%, could add $0.30 cents, up to $1 dollar more, per 200$ spent by a consumer. The latter figure, would amount to upwards of $12 million dollars for the city, according to their projections based on 2023 spending by residents.

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

An important note from the slide below, is the text in read which explains that Pueblo residents who use SNAP, WIC or any other government assistance, would be exempt from a Food Consumption tax.

As far as the city's budget woes, City Councilwoman Regina Maestri tells KRDO13 that there has been 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, near the end of 2019, Graham says the city was much closer to exhausting all of its funds as just $500,000 was left in their reserves.

But, instead, the COVID-19 pandemic would break out months later, 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 allowed people to spend money locally, with the 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 later found jobs elsewhere and move out of the city, which has diminished 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 made an effort to emphasize that city residents are most likely not aware that Pueblo is only required to pay their employees 85% of what other communities would pay for the same job.

She says that is due to union negotiations that reflect 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. For 2025, salaries account for 16 million of the city's budget.

It's those factors, combined with the actions of previous administrations, which Graham could not speak on behalf of, that she says has led to repeated budget deficits, becoming almost too much to overcome.

Now, Graham says that if voters don't approve the ballot measures they will likely put forth by August of this year, city leaders will then have to cut their part-time employees first, as is ordered through union contracts. Those employees 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.

Then, Graham says the city would be allowed to cut from their full-time employee roster, a situation that is not too far out, and a scenario that Graham and Maestri both hope never has to come.