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Loveland City Council signals support for sales tax ballot measure – Loveland Reporter-Herald

Alex Dobson, left, a city of Loveland Parks and Recreation Department employee, plays with Andromeda Ledesma, 1, Wednesday outside the Loveland Public Library. Dobson works with the Parks and Recreation trailer, which travels to different locations in the city providing games for kids to play. The Parks and Recreation Department is one that took a hit in the 2024 budget and is facing steeper cuts in 2025 as the city works to absorb a revenue cut from the loss of a sales tax on food for home consumption. Nearly half of the $12.2 million reductions in 2025 are likely to come from the library, cultural services and parks departments. (Jenny Sparks/Loveland Reporter-Herald)

Raising taxes is a tough sell in Loveland, but, in the face of $10 million to $13 million in revenue losses this year, the City Council is on the verge of giving it another try in November.

At their Tuesday study session on the 2025 “austerity” budget, several members acknowledged that a sales tax increase is the easiest fix for the city’s woes, but expressed skepticism that local voters will go along with it.

“You look at the revenue options, and clearly the option that stands out with different percentages is a sales tax,” said Ward 3 representative Steve Olson, referring to a slide in the budget presentation. “But I’ve been through two sales tax attempts, and I don’t believe the citizens are ready for a sales tax increase yet.”

The theoretical sales tax increase is one of many revenue enhancements that the council is considering as a way to avoid steep reductions in 2025 and beyond. Other options include raising taxes on tobacco, alcohol, lodging and seats at the Rialto. Also in the discussion are boosting tourism and legalizing marijuana dispensaries and charging 15% in sales and excise taxes.

According to projections from the city’s finance office, those options would raise between $450,000 and $3.4 million per year for Loveland, far short of the projected $10 to $13 million revenue gap expected from the elimination of sales tax on food for home consumption.

By comparison, a 1% increase on non-food items would yield a projected $17.9 million in revenue in 2025 and a 1.25% increase would generate $22.4 million, Loveland Chief Financial Officer Brian Waldes told the council.

“And it’s not just the dollars, it’s the time required,” he told the council. “Creating a more robust tourism economy or creating a regulatory structure for marijuana, that’s going to take years. But we don’t have years, because of our fund balance situation.”

Loveland’s fund balance situation was the subject of the first part of the night’s presentation, or, as Waldes repeatedly characterized it, a fund imbalance. With relatively low taxes, the city has been providing a full range of services to its residents without much of a financial cushion over the years, Waldes said, leading to repeated cycles of budget reductions, the most recent in 2021.

“We’ve had a lot of good fortune in non-recurring revenue events,” he said, referring to COVID-19 funding and building fees paid by Amazon. “… And then when we combine that, with the advent of (ballot question) 300 and an actual reduction of our sales tax base, it puts us in this climate of a declining fund balance where our expenditures exceed our revenues.”

In the absence of another revenue stream, the loss of food tax revenue has already resulted in $5.4 million in de-appropriations from the 2024 budget, mostly in the form of lower-priority capital projects in public works and parks and recreation departments. The rest of the projected $11 million to $13 million gap for this year was filled by a budget variance in 2023 from ongoing staff vacancies.

It will be a much heavier lift to find reductions in 2025, which was the middle part of the presentation, led by acting Deputy City Manager Mark Jackson. Now in its third iteration, the “austerity” budget proposes a total of $12.2 million in reductions, nearly half of which are from the city’s public-facing services, including the library, cultural services and parks and recreation.

“The big hits here are going to be hours of operation, some increase in fees,” Jackson said. “The big one, I think, from parks especially, is reducing their capital in their asset management capabilities. So you’re going to see a lot more run to failure, or if things do run to failure, they may not be replaced on a regular cycle.”

The cuts aren’t quite as drastic for the library and cultural services as in earlier drafts of the budget, Jackson said, from 50% of their annual appropriations to just 33%. However, offsetting that is an additional $500,000 from parks and recreation, mostly in the form of single day events, including the annual 4th of July celebration.

“We’ve spent a year contemplating what the trade offs are,” said Parks and Recreation Director Kara Kish, in response to a question from Councilor Andrea Samson about the cuts. “And really, in order to maintain our park system for 365 days a year, we had to look at assets and amenities that served us for one night or a short season.”

Also absorbing some of the budget tweaks is the public works budget for fleet maintenance, which is facing a $550,620 reduction. Facilities is also facing a potential reduction of $1.1 million, or around 10% of its budget, while infrastructure and transit could be reduced by 8% ($1.5 million).

“Both public works and parks and recreation stepped up,” Jackson said. “They’re taking a much larger hit than what you’ve seen in previous presentations.”

As for public safety, the Loveland Police Department is facing $1 million in proposed cuts, which could mean reduction of overtime funds and training programs. Meanwhile, the Loveland Fire Rescue Authority will see a $750,000 reduction in its annual contribution from the city, down from $2 million. It could also face another $187,500 in reductions from the Loveland Rural Fire Protection district.

During the council’s discussion of the proposed budget, there was less focus on the specific reductions and more on their proposed remedies. Four of the eight members still remaining — John Mallo, Laura Light-Kovacs, Andrea Samson and Troy Krenning — were in support of asking the voters for a sales tax increase of at least 0.75%, but had mixed opinions about putting an expiration date on the increase or targeting it towards specific programs or departments.

Two members, Mayor Jacki Marsh and Councilor Erin Black, said they did not support asking residents for a tax increase, although they were in favor of raising other taxes. However, Marsh went on to say that she could be talked into supporting an increase with a sunset, provided the city did not agree to any tax-sharing deals with developers while in effect.

“So in other words, you don’t ask people for more money and then give it away,” she said.

The deadline to add ballot questions to the 2024 coordinated ballot is Sep. 6. The city budget team will be back before the council for another budget study session at the end of the month, followed by the full-day budget planning retreat on Aug. 15.

For more information about the 2025 city budget, including presentation materials from the study session, visit letstalkloveland.org/budget.

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