City finances 'worse than our worst-case scenario,' council told

Colorado Springs consumers held tight to their money in December, sending sales and use taxes plummeting that are likely to trigger even deeper cuts in city services amid the worsening recession.

January sales and use tax collections from sales in December were down 15.82 percent from a year earlier to $11.1 million, Colorado Springs officials learned Monday. It was the third consecutive month collections have dropped by double-digit levels and the 10th time in the past 12 months collections have declined.

"This is worse than our worst-case scenario," said Terri Velasquez, the city's chief financial officer.

Officials presented a plan based on budget cuts of 14.5 percent for most city departments, including 80 layoffs and $10 million slashed from government spending. If the plan is implemented, its effects will be wide-ranging - bus service reduced by a third, big fee increases for participation in sports programs, and reduced street paving and maintenance. The plan also includes 1 percent reductions to the police and fire department budgets.

No one will know the extent of the cuts for about two weeks. The City Council on Monday delayed a final decision, saying the public deserves a chance to weigh in on what programs should be eliminated or preserved. The council set a public meeting for the evening of Feb. 17 at which the nine members will hear from anyone who wants to speak. Afterward, they'll meet at a later date to hash out specific cuts before making a formal decision at a Feb. 24 meeting.

"We are hitting some things that the public has taken for granted for a long, long time," said Councilman Jerry Heimlicher.

Sales and use taxes account for about half the city's general-fund budget. The city forecasts that sales and use tax collections will fall 12 percent, or $15 million, short of the $123 million budgeted for 2009. Velasquez said that forecast doesn't include the effect of about 10 major retails shutting down between December and March, or the expected arrival beginning in June of more than 8,000 troops at Fort Carson. The troops are returning from Iraq or relocating from Fort Hood in Texas.

Velasquez said her office is preparing a new forecast that incorporates both the store closings and troop arrivals that will be ready for a mid-year budget review the council is expected to begin in May.

"This was anticipated, the extent (of the decline) was never envisioned. I don't see any strong improvement. The arrival of the troops will at best stabilize the weak economic environment and prevent further deterioration and won't start until the third quarter," said Fred Crowley, senior economist at the Southern Colorado Economic Forum.

Much of the drop in sales taxes came from falling purchases of big-ticket items such as cars, building materials, appliances and electronics.