Durango sales-tax collections have steadily increased every year since 2010. But those gains haven’t kept pace with expenditures. The city says it has run out of money for street rebuilds and resurfacing.
But with sales-tax collections going up, how is it that expenses are outpacing revenues?
City officials say the answer is complicated, but it can all be traced to one thing: the high cost of infrastructure upkeep.
City councilors are asking voters this April to approve a half-cent sales-tax increase to fund construction, operation and maintenance of streets, alleys, curbs, gutters, sidewalks and related street improvements. It is the second time within a year city officials have asked for a tax increase. In November, the city asked voters to approve a property tax increase and a sales-tax increase, but the measure was defeated by a margin of more than 20 percent.
Failing infrastructure is a nationwide problem that Durango has not avoided: Streets and pipes installed decades ago have not been maintained or are simply outdated. As infrastructure deteriorates, the cost of repairing it grows exponentially.
City officials said that should not come as a surprise.
“The gap between infrastructure maintenance needs and our budget capacity to meet these obligations continues to widen,” City Manager Ron LeBlanc wrote in his 2009 budget message.
Construction costs are outpacing increases in sales-tax revenue, said City Operations Director Levi Lloyd.
Sales-tax revenue has risen by an average of 2.35 percent each year over the past 10 years, according to an analysis of past budgets. But since 2010, as the city rebounded from the Great Recession, that year-over-year average is about 4 percent. From 2010 to 2017, sales-tax revenue increased by about $3.9 million.
From 2012 to 2018, the cost of earthwork, concrete pavement and structural concrete has nearly doubled in Colorado, according to the Colorado Department of Transportation. Earthwork went from $7.48 per cubic yard in the first quarter of 2012 to $14.81 per cubic yard in the third quarter of 2018. In the first quarter of 2012, concrete pavement cost $34.23 per square yard. Come 2018, the cost of concrete pavement increased to $78.40 per square yard. Structural concrete rose from $422.36 per cubic yard in 2012 to $759.65 in 2018.
Lloyd said the city is not keeping up with infrastructure maintenance.
“The cost of doing business has essentially outpaced sales-tax revenues,” Lloyd said.
Lloyd said that 10 years ago, the city was spending “a minimal amount of money on street capital improvement projects.” Capital improvement projects include total street rebuilds or street resurfacing. Street maintenance, like pothole filling and crack sealing, are considered routine and have a budget separate from capital improvement projects.
A lot of the capital improvement projects planned for 2008, 2009 and 2010 were deferred because of the Great Recession, LeBlanc said. In the following years, the city made “significant investments” in street infrastructure, Lloyd said, seeking more than $14 million for repairs in 2012 and 2013.
But since 2013, street capital-improvement project funding requests have dwindled to zero, budgets show. Many planned projects have been deferred because the cost of services, programs and projects keep inflating faster than city revenues, said Assistant City Manager Amber Blake. General fund expenditures, from 2013 to 2017, have risen $6.8 million, or 22.71 percent.
The city has also annexed Twin Buttes and Three Springs subdivisions, putting a strain on city finances, Blake said. While developers built the roads, it is the city’s responsibility to maintain them, she said.
Streets have to be maintained all the time, Lloyd said. If they are not taken care of, they degrade. Taking care of streets is like doing maintenance on a vehicle – it is often easier and cheaper to address a problem when it appears rather than wait until it is broken, Lloyd said.
“You can’t put out new pavement and never have to do anything,” he said
Street conditions are measured every five years by the city based on a national standard: the Pavement Condition Index. The PCI rates streets on a scale of zero to 100, zero being the worst and 100 being the best. Durango streets increased in score from an average of 64 in 2014 to 67 in 2017, during which time it invested $3.4 million in street improvements, Lloyd said. The city wants to be at 70, Lloyd said.
It costs anywhere between $1 million and $3 million to improve a road by one PCI point, Lloyd said. And streets lose anywhere from one to three PCI points each year if maintenance is deferred, he said. The city didn’t perform any capital improvement projects in 2018 because of the 416 Fire, Lloyd said. And in the 2019 budget, there was no money planned for capital improvement projects.
It will cost less to fix the roads today than it will to defer maintenance into the future, Lloyd said.
City councilors have proposed a new half-cent sales tax to solve the problem. If passed, ballot question 1A would raise no more than $4.69 million in the first fiscal year, according to the approved ballot language.