Solving the city’s budget woes not a simple task

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Last week, voters told city leaders to find a way to secure Colorado Springs’ long-term sustainability that doesn’t include raising taxes.

To do that, economic development needs to be integrated and diversified. But getting there won’t be easy.

“We cannot continue to work around the fringes. We have to say the tax structure in the state of Colorado is broken — and it has to be fixed somehow,” said Tom Zwirlein, director of the Southern Colorado Economic Forum. “We have to have a presence from El Paso County and the Pikes Peak region (in the capital) to make recommendations to improve the state’s tax structure. Gallagher is a problem. TABOR (Taxpayer’s Bill of Rights) and Amendment 23 are a problem.”

The city’s Sustainable Funding Committee report, the Operation 60Thirty-Five study, Pikes Peak United Way’s Quality of Life Report and the Dream City 2020 study provide numerous options for improving infrastructure, the city’s tax base and primary job growth.

But the recommendations are useless without any action.

“We’ve put several plans and studies in place,” Zwirlein said. “Now we need to implement them.”

The city needs a healthy funding structure that addresses “expected city services and infrastructure needs,” wrote Dan Stuart, chairman of the Sustainable Funding Committee, in an introduction to the committee’s 294-page report, which made recommendations about public financial management, city-owned enterprises, transit services, fleet division, the police and fire departments, the engineering division, taxing services, increasing taxes and a consolidated asset review.

The report shows that compared to 10 other cities by PFM index, Colorado Springs (at $402) had the second lowest general fund tax revenue per capita for the 2009 budget. Denver was the highest, at $1,008 per capita.

Compared to the average of the 11 cities, Colorado Springs collects about one-third less.

And lodging and rental car taxes paid by tourists and business travelers are much lower than in comparable cities.

At 2 percent, the Springs’ lodging tax is 72 percent lower than the average of Fort Collins, Denver, Aurora and Westminster. And the auto rental tax, at 1 percent, is 71 percent below the 6.9 percent average of cities studied.

But the Springs’ challenges aren’t just on the funding and revenue fronts. It also needs stable, primary employers, and certain industries have significantly higher tax multipliers per job than others.

For instance, the hospitality industry has a tax multiplier of two. The industry doesn’t employ many people. But the electrical equipment industry has a tax multiplier of 13 — “they employ a lot of people who pay taxes,” Zwirlein said.

“We lost a lot of diversified and high-paying jobs in 2001 and 2002,” he said. “And we have to create the environment for bringing those jobs back.”

During 2001, cluster industries provided 40 percent of local wages. That has dropped to 35 percent during 2009.

Cluster jobs not only provide primary jobs, but a solid economic base and secondary jobs.

While rental rates for office space in Colorado Springs are low, “our manufacturing rent is among the highest, when compared to other cities,” Zwirlein said.

Because of the Gallagher Amendment, commercial property is taxed at a higher rate than residential property — which could be causing the higher per-square-foot cost in manufacturing, he said.