In the first discussions of the 2022 city operating budget, officials said they expect Denver’s revenue to recover significantly in the upcoming year, nearly reaching 2019 rates.
According to the preliminary revenue forecast, Denver is expected to reach $1.372 billion by the end of 2021 and $1.405 billion in 2022. This is a big improvement from Denver’s $1.274-billion revenue in 2020; however, even the 2022 projection falls short of the 2019 revenue of $1.406 billion.
Denver Budget Management Director Stephanie Adams presented the projections Tuesday during the Denver City Council’s Finance and Governance Committee meeting.
Adams said since the city likely won’t reach 2019 levels, they will not be able to restore all service reductions made during the COVID-19 pandemic in 2022.
“We know that we don’t have the capacity to be able to restore all reductions,” Adams said. “There is no automatic restoration of reductions for the 2022 budget process and we’re not going to plug in any kind of non-mandatory increases.”
Because of this, the city's goal is to reset a base that allows for growth, including the future restoration of reductions and expansion of existing services.
However, city spending will also significantly depend on Denver’s portion of the $1.9-trillion American Rescue Plan, passed by Congress earlier this month to foster recovery from the COVID-19 pandemic.
Brendan Hanlon, Denver’s chief financial officer, said officials are unsure how much relief funding Denver will receive as it depends on whether it is considered a city, county or consolidated government.
Based on the distinction, Denver could get $140.04 million, $170.04 million or $310.08 million from the federal government.
Adams said the city hasn’t yet received any funding or guidance from the U.S. Treasury Department about how much Denver is getting or what specifically they can use the funding for.
Generally, the funding can be used to pay for pandemic response, essential workers, infrastructure and assistance to small businesses, households and industries.
The funding can also be used for government services cut during the pandemic.
Approximately two out of every five municipalities in Colorado cut their general fund budget – typically spent on services like police and parks – because of the pandemic, according to a Colorado Municipal League survey.
In Denver, this resulted in the implementation of furlough days for many city employees, which Adams said is one of the first things the city hopes to address with the American Rescue Plan funding.
“For 2022, we start with assuming that we are not going to need furloughs. I feel confident that that would not be one of the triggers that we’d need to pull for 2022,” Adams said. “We will at minimum reduce the number of furlough days.”
Adams said in the next few months, officials will work to develop a plan that will maximize federal funds – including American Rescue Plan and program specific funds – and leverage the general fund in a way that is sustainable and equitable.
The City Council’s budget priorities include but are not limited to: mitigating and reducing displacement of community members; increasing affordable housing and homelessness support; and supporting the recovery, resilience and innovation of Denver businesses, organizations and workers.
During Tuesday’s meeting, officials also presented Denver’s economic data from 2020.
In 2020, Denver’s unemployment rate steadied greatly after hitting a peak in April. In the Denver metro area, unemployment rates decreased from 12.4% in April 2020 to around 7% in October 2020 through February 2021.
Unemployed Denver residents in 2020 were disproportionately women, Black and/or Hispanic. The youth and those without a college education were also disproportionately unemployed.
Denver’s small business industry took a major hit in 2020, with the number of small businesses open dropping by 30.5% in the Denver metro area, according to presented data.
Small businesses in the leisure and hospitality industry decreased the most, dropping by 43.5%. Retail and transportation decreased by 29.2%, professional and business services by 12.9% and education and health services by 30.2%.
Sales tax revenue – which accounts for 50% of Denver’s general revenue fund – decreased by 11.2% from 2019 to 2020.
Food and drinking services sales tax dropped by 39%; real estate, rental and leasing by 28%; hotel and accommodation by 73%; and clothing and accessory by 26%. A few industries did see an increase in sales tax, including food and beverage (+7.7%), non-store retailers (+8.9%) and retail marijuana (+18%).
Lisa Martinez-Templeton, an economist with the Denver Department of Finance, said the city expects major economic growth beginning in mid-2021, including a sharp uptick in consumer spending and domestic tourism.
“As more of the population becomes vaccinated in the coming months, people will steadily feel more comfortable leaving the house to spend their extra cash,” Martinez-Templeton said.
Martinez-Templeton said the city is predicting in-person office occupancy recovery to begin in mid-2022 and swift job gains by end of 2022.
Preparations for the 2022 operating budget will continue through June.