Manitou Springs faces $4.3M budget shortfall as marijuana revenue drops

MANITOU SPRINGS, Colo. (KRDO) - Manitou Springs leaders are grappling with a projected $4.3 million budget gap for 2026, largely because marijuana tax revenue, once the city’s biggest financial boost, is drying up.

For years, those taxes helped fund city services and capital projects, but that changed when Colorado Springs legalized recreational marijuana sales this spring.

"The theme is the loss of marijuana money. This is something we all knew would happen at some point, we suspected it," Manitou Springs Mayor John Graham said during a recent meeting.

He added the city had long worried about this day, using marijuana funds to catch up on projects while the money was there. "In the last five or six years on city council, we've always feared what would happen if we lost the money. We've, I think, tried to tackle a lot of capital improvement projects and other projects to get the city a little more up to standards, to use the money while we had it. We have to deal with the future now," Graham said.

Mayor Graham told KRDO 13 the shortfall stems almost entirely from the loss of marijuana revenue. Early talks included ideas like cutting the city’s ambulance service or closing the community fitness center, but city officials stress those were raised as worst‑case scenarios, not plans they want to pursue.

Instead, Mayor Pro Tem Natalie Johnson announced what she calls a “Balanced Approach.”

"We believe it bridges the budget gap without a huge property tax increase. It bridges the gap without doubling sales tax, and it bridges the gap with an amusement tax increase of 9%," Johnson said.

The plan would raise the amusement tax, which hasn’t been changed since 1972, by 9% and redirect parking revenue to help cover costs, all while avoiding high increases to property or sales taxes.

The city is also facing a lawsuit from the Cog Railway, which is suing for nearly $700,000, claiming it overpaid taxes under a 2018 incentive agreement. The mayor says that money is already set aside and won’t derail the budget plan.

City leaders will continue working through the fall, with October and November key for budget decisions. Any tax increase, including the proposed amusement tax hike, would have to be approved by voters before it could take effect.

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