The city of Durango is considering asking voters to approve a tax increase in November to address a looming budget shortfall and pay for major construction projects.
The city expects a budget deficit of about $100,000 starting in 2020, which is expected to grow annually unless more money is raised or cuts are made. Without budget cuts or tax increases, by 2027, the annual gap between revenues and expenses for city operations would be about $2.3 million, data show.
The deficit is specific to the city’s general tax collections, which pay for police, 911 communications, city streets, city planning and other services. Services such as water, sewer, trash and recycling are paid for through monthly utility bills.
Councilors reviewed options for increasing taxes this week but did not come to consensus on a tax increase to pursue. They praised city staff for holding extensive public meetings ahead of a potential ballot question.
“This is really, really good to get aggressively in front of it,” Councilor Dean Brookie said.
Several councilors seemed to support putting a question on the November ballot and not waiting for 2019, when it could compete with a statewide ballot question to fund transportation.
“It behooves us to not be on the 2019 ballot,” Councilor Dick White said.
In addition to an operational shortfall, the city has a long list of construction projects. It needs a new $19 million police station, $2 million annually for street maintenance, between $3 million and $4 million a year for street reconstruction and between $750,000 and $1 million annually for storm-water infrastructure construction.
In addition to the new police station, the city estimates it needs $15 million to upgrade other buildings. For example, if the city built a new police station, the existing station could be renovated and used as a city hall annex that would replace River City Hall near Camino del Rio and west 12th Street.
The city estimates it needs $8.6 million to $10 million annually to cover the operational shortfall and needed construction.
Voters could be asked to increase sales taxes, property taxes or a combination of both, Assistant City Manager Amber Blake said.
If voters increased property taxes by 8 mills, that would raise an additional $4.35 million a year for the city. The owner of a home with an assessed value of $350,000 would pay $222 more a year in property taxes.
A property tax increase of 16 mills would raise an additional $8.7 million a year. The owner a home with a value of $350,000 would pay $444 more in property taxes.
A 1-cent sales tax increase would raise about $8.3 million a year. Shoppers would pay an additional $1 in taxes on a $100 purchase. A half-cent sales tax increase would raise about $4.15 million and shoppers would pay an additional 50 cents on a $100 bill.
Durango shoppers currently pay 7.9 percent in sales tax, which includes state, county and city tax collections. The city’s portion is 3 percent. Mayor Sweetie Marbury expressed reluctance to raise it.
“I don’t want to drive anybody down to Farmington to shop,” she said.
To better understand what the public is willing to pay for and what residents value, the city started an engagement process in March. The city has held two large forums, 48 workshops and collected more than 4,000 comments.
The main message was: “We want you to maintain what we have,” Blake said.
Residents also expressed a willingness to pay for transit, trails, street maintenance, public safety and Sunday hours at Durango Public Library, among other items.
Residents also expressed a willingness to cut funding in certain areas, including Durango Government TV the city’s social media presence, public art, Lake Nighthorse and other services.
But some of the items residents suggested for the chopping block are not huge expenses for the city. The city budgeted $24,135 for public art in the 2018 budget. The city’s TV and social media services cost less than $8,000.
Residents also asked the city to examine ways for programs to be funded through user fees when possible.
For example, the city could stop subsidizing spring and fall cleanup and increase the monthly fee for the cleanups from $1.50 to $3. The city could also end one of the two annual cleanups.
The city is about halfway through its public engagement process and expects to hold two more large community forums and send out a statistically valid survey to help gauge what kind of tax increase residents would find palatable, Blake said.
City Council has until September to decide whether to place a tax increase on the ballot. It is scheduled to revisit the issue during a work session later this month, Blake said.