No one should be surprised that Denver is scaling back hiring and spending for 2025 and 2026.
The city has been living high on the hog for more than a decade, growing city government services and hiring hundreds, if not thousands, of new employees. Like a majority of Denver taxpayers, The Denver Post editorial board has supported much of the spending (as both investment in our city and as a way to recover from the dark days of COVID).
We’ve also opposed some of the more outlandish pet projects that we feared frittered away the city’s sales tax revenue. It’s too late now to rededicate those millions of dollars in sales tax increases to the city’s general fund operations.
Almost two years after taking office, Mayor Mike Johnston will oversee a reduction in staff and services for the first time since the aftermath of the 2008 housing crisis and Great Recession. Sales tax revenues will be down $50 million this year from projections and down $100 million in 2026 from 2025 levels. That represents about a 7.5% reduction in revenue, not accounting for anticipated increases in costs for inflation and city growth.
Layoffs, furloughs coming for Denver employees amid budget crisis, mayor says
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Given that bleak outlook, we are disturbed that up until last week, the city was considering hefty raises for staffers in upper management positions. City Council smartly sidelined that proposal from the mayor’s office, and in sharp contrast, Johnston’s furloughs will be graduated, so lower-income employees will take two days unpaid, and higher-income employees will take up to seven days unpaid.
The cuts will come at a terrible time – reductions in staff from President Donald Trump have left thousands of federal employees who live in Colorado out of a job, and the state of Colorado is slowing the pace of growth in accordance with TABOR spending limits. Luckily, private-sector hiring has remained strong across the U.S., according to the most recent jobs report, cutting the risk of a possible recession.
Johnston is correct, however, to make adjustments now in the budget.
Certainly, this could just be a mini-downturn that could be weathered with a combination of discretionary spending reductions, contingency funds and rainy day funds. But federal policy is causing uncertainty, to put it mildly, and that can have disastrous consequences.
Consumer confidence is extremely low, meaning more people are spending less across the country, including downtown Denver, where the majority of the city’s sales tax revenue is generated. Big cities like Dallas, Denver, Chicago, Houston, New York, Miami and San Francisco are also being hit by the effects of vacant office buildings. Cities across the nation are cutting their budget.
In Denver, office buildings are selling for far less than they did even 10 years ago, and vacant office space means fewer commuters spending their dollars in the city. Add on top of that a false perception that Denver is unsafe or that it is filled with homeless encampments, and you’ve got a perfect storm.
Getting Coloradans and tourists back to the city, and spending their money, is a key part of recovery for the city. Recovery is also crucial for our small businesses, especially retail stores, restaurants and bars. No one can patronize businesses that aren’t open.
Johnston has a plan to bring people back downtown. Some of those plans are immediate – finishing the 16th Street project and increasing the presence of police and other security services. Some of those plans are ongoing — Johnston has already cleaned up the homeless encampments in downtown, leaving not a single tent in the urban core as the city has provided housing options to more than a thousand people. The city will continue to spend millions on the program so the camps don’t just spring right back up.
Most of the city’s capital improvement projects are funded with dedicated bonds paid for by property tax mill levies. That revenue stream is still growing despite the sharp decline in commercial real estate evaluations. The increase is driven by the continued growth in residential home values.
These are strange economic times, and even top economists are finding it hard to predict what will happen next.
In such days, fiscal conservatism is prudent. Hiring freezes, furloughs and layoffs may seem dramatic for a city that only a few short years ago had 16% fiscal reserves, but taking action today will forestall more dramatic cuts should the economy take a turn for the worse.
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