Littleton facing big cuts as tax revenue dwindles

Jobs, services, projects in jeopardy as projections show major revenue shortfalls

David Gilbert
dgilbert@coloradocommunitymedia.com
Posted 4/3/20

Plunging economic activity amid the COVID-19 pandemic will likely have dire consequences for Littleton city government, City Manager Mark Relph said. The city, which draws more than three-quarters of …

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Littleton facing big cuts as tax revenue dwindles

Jobs, services, projects in jeopardy as projections show major revenue shortfalls

Posted

Plunging economic activity amid the COVID-19 pandemic will likely have dire consequences for Littleton city government, City Manager Mark Relph said.

The city, which draws more than three-quarters of its general fund revenue from sales taxes, could see a 25% reduction in expected annual revenue in 2020, Relph said. The shortfall will likely force citywide cuts that could put jobs, services and long-term projects in jeopardy.

“Everything is on the table,” Relph said. “No department will be exempt. The magnitude of these cuts will affect everybody.”

It's too soon to say how much will need to be cut from the budget or where the cuts will come from, Relph said. Tax revenue from March, when widespread shutdowns began, won't be available until the beginning of May. Tax revenues from April could be even worse, and beyond that is uncertain.

'Crisis mode' possible

The city has already instituted a hiring freeze and canceled employee travel, training and education, Relph said.

Littleton's general fund anticipated annual expenditures of more than $48 million in 2020, according to city documents, with more than two-thirds going to employee payroll.

Littleton is required by state law to operate under a balanced budget, and to maintain reserves of at least 3%. Without cuts, the city would burn through its reserve funds by the end of the year, Relph said.

Meanwhile, the city's capital projects fund, a separate part of the city budget that pays for street repair, road projects, city-owned buildings and fleets, could be in trouble too.

The fund is largely supported by gasoline taxes. With stay-at-home orders in place, gas tax revenues could fall woefully short of expectations this year.

With a starting balance of about $6 million in 2020, the fund was already inadequate to meet a growing list of needs citywide, Relph said last fall.

Aside from addressing infrastructure needs that include aging buildings and streets, the fund is also important to provide matching funds necessary to snag state and federal grants for big-ticket projects like a proposed flyover bridge at Santa Fe Drive and Mineral Avenue.

“If our economy slips the way some are predicting, we'll be in crisis mode with infrastructure,” Relph said. “We'll just be chasing things that break.”

Taking steps

The city is hoping to take proactive measures to stem revenue losses, Relph said, such as helping businesses apply for federal stimulus dollars that could cover payroll costs.

The city is also working to promote businesses and restaurants that are still open, and has relaxed codes on how businesses can display signs.

On April 2, Relph roundly rejected a request from the Littleton Business Chamber and the Historic Downtown Littleton Merchants Association requesting a months-long deferment on paying city sales taxes, calling such a deferment a violation of city law and a threat to the city's financial solvency.

“It would simply mean disaster for the city,” Relph wrote to the business groups. “Even without your proposal, this city is going to have to make deep cuts in services across the organization. With your proposal, the city would have to cut essential services such (as) police and public works maintenance staff. I cannot imagine any citizen willing to support such an action.”

Pat Dunahay, the co-president of the Littleton Business Chamber, said deferring city sales taxes could make a lot of difference to struggling businesses. Those that are open are only doing 10% to 30% of their normal business, he said, and many more are closed and facing the possibility of going out of business for good.

“We know we owe (sales tax), we want to pay it, but we just want to defer it,” said Dunahay, who owns PDA Road Gear, a car audio business. “The few thousand dollars a business owes, that could be a couple people's payroll.”

Dunahay said it's too soon to know how many businesses will qualify for federal assistance, how much the assistance will be, or how long the money will take to arrive.

The business groups also asked Relph for help in deferring property tax payments, which are paid to counties and remitted to local taxing entities, including cities, schools and parks.

Relph denied that request too, saying the issue was more complex than it appeared at first glance, as the web of taxing entities is difficult to disengage from.

Dunahay said Arapahoe County has already offered some property tax relief, such as allowing payments to be made in installments, while a state order grants county treasurers the authority to waive delinquent interest on late tax payments.

Dunahay said he was disappointed with Relph's response.

“I know I'm not making any friends at the city, but we're a business chamber, and we're supposed to represent business,” Dunahay said. “I believe the city has an obligation to ensure its own success, and this is how you do it.”

Relph said the pandemic is a colossal setback for everyone, and is a major disruption in city efforts to enact a labored-over comprehensive plan passed in 2019.

“We were on a roll,” Relph said. “We had ambitious plans. What's staring us in the face is a recession of some magnitude. It feels like we have to start all over on everything we've been working on.”

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