The city of Colorado Springs may ask voters in November to keep tax money otherwise subject to refund in a bid to cover revenue shortfall driven by the fallout of the coronavirus.
Mayor John Suthers proposed a ballot question to the Colorado Springs City Council Friday that would ask voters to allow the city to keep $3.9 million in tax revenue. The money that would otherwise be refunded includes $1.9 million in 2019 sales taxes and $2 million in 2020 property taxes.
Another portion of the ballot question would protect the city from an aspect of the Colorado Taxpayer's Bill of Rights triggered by the fall in tax revenue that would slow down the recovery of city revenues in future years.
He described the one-year timeout from the TABOR "ratchet-down" effect as a way for the city to more quickly recover revenues needed to pay for services such as police and fire protection.
"I think this is very prudent," Suthers said.
The council largely approved of the proposal in their work session and agreed to discuss it again in the future. The city needs to decide whether to place a question on the November ballot in July.
"I think this is a great idea. We absolutely need it," Council President Richard Skorman said.
When tax revenue to the city drops in a bad economic year, the amount of revenue that TABOR allows the city to keep in future years also falls, hence the name the ratchet down effect, said Charae McDaniel, the city's chief financial officer.
The growth in tax revenue is then limited to a percentage that equals inflation plus growth.The growth of the city is calculated by construction activity, she said.
The ballot question would pause the ratchet-down effect that the city could see because of the substantial fall in tax receipts, by setting city's base revenue at 2019 levels, McDaniel said.
"This a limited resolution meant to deal with the significant downturn," Suthers said. The economy is likely to rebound in 2021, driving city revenues back up, although the tourism industry may lag behind other sectors, he said.
City Councilmen Don Knight and Dave Geislinger said they might prefer to see the request split into two questions on the ballot, one asking voters to retain the excess tax revenue and one focused on preventing the ratchet-down effect.
"We are dealing with two separate constituent issues," Geislinger said.