Projected $7 million shortfall may force cutbacks

The city will have to tighten its belt to offset a projected $7.4 million shortfall based on revenues received through March, Colorado Springs budget officials said.

How cuts will affect city services isn’t clear. Departments are awaiting directives in addition to a partial hiring freeze imposed May 4. The freeze doesn’t affect uniformed public safety or public works jobs.

The 2007 shortfall may be the biggest since 2004, when a $17 million revenue shortfall forced the layoff of a dozen city workers and elimination of 65 jobs.

Causes of the revenue shortage:

- Sales tax revenue has not met projections. Officials now predict the tax will generate $128.3 million, about $4.5 million less than the budgeted amount.

- Fines and court costs are expected to drop by $2.5 million.

- Planning and public works revenue from fees associated with development are forecast to fall by about $400,000 because of a construction slump.

The Pikes Peak Regional Building Department reported a 42 percent decline in building permits for singlefamily homes issued in the first four months of the year, compared with the same period a year ago.

- The location of big-box retailers outside city limits means less money for the city, as do the prolonged deployment of Fort Carson troops and skyrocketing gasoline prices, which create a drag on consumer spending.

According to a Budget Department memo given to the council Monday, ways to offset the shortfall include a 2 percent across-the-board reduction in operating and capital spending and delaying capital-improvement projects. The delay would not affect road repairs, filling potholes and the street overlay program, however.

How the 2 percent cuts would play out isn’t known.

Parks Director Paul Butcher said a directive to scale back spending usually is accompanied by specific guidelines for what to cut.

“I couldn’t even speculate what impact that would have,” said Butcher, who oversees a $20 million annual operational budget.

He said department heads expect word from budget officials soon on how to carry out the reductions.

City Manager Lorne Kramer said this month he wanted to take steps to curtail spending now to avoid a crisis later in the year if the local economy doesn’t show signs of improvement.

Budget officials also looked ahead to 2008 and predicted a greater shortfall, up to $12.4 million, if sales tax revenues don’t pick up. That gap is based on city workers receiving a 3.25 percent pay raise, which would cost taxpayers $4 million, and $728,860 more in medical insurance premiums.

Similarly, the economic doldrums affect receipts of the public safety sales tax, which are expected to be $890,000 below the budgeted amount this year. Officials did not say how the shortage will affect police and fire construction and operations.

CONTACT THE WRITER: 636-0238 or pam.zubeck@gazette.com