MAYOR HANCOCK: Denver Facing $226 Million Budget Shortfall

Denver Mayor Michael Hancock speaks on Thursday, May 14, 2020. (Photo: YouTube screenshot)

The COVID-19 chickens are already coming home to roost.

Thursday, Denver Mayor Michael Hancock said the economic impact of the virus on the city and county of Denver was worse that they thought it would be.

"We are now projecting a 226 million dollar budget gap due to lost revenue."

That's $46 million more than the April estimate of $180 million.

The mayor said he is using a multi-faceted approach to close the gap.

"Let me be clear," Mayor Hancock said. "We are going to have make significant cuts in spending to close this budget gap here in 2020 and as we look towards 2021."

First, Denver will tap into its financial reserves to the tune of $90-100 million dollars. Currently, Mayor Hancock said the city has $261 million put away for emergency situations such as this.

"It is a blessing to have that tool kind of tool available to buy us some time to make the tough choices we're going to need to make," said Brendan Hanlon, Denver's Chief Financial Officer. "Our commitment is to make sure we minimize those services' impact to the public as much as we possibly can even though with millions of dollars worth of revenue challenges, that will be extremely, extremely difficult. We're going to be really thoughtful and intentional about this."

Mayor Hancock said city and county agencies are required to reduce their budgets by 7.5 percent.

Discretionary budgets such as travel or training have been greatly reduced or slashed entirely.

In addition, while there is not a hiring freeze, Denver has slowed hiring for open positions for the time being.

Finally, Denver has temporarily stopped capital equipment and fleet purchases as a way to save additional money.

"But unfortunately, those measures will not be sufficient to meet the challenge that we're facing," Hanlon said. "Because of that, we had to announce eight furlough days for city employees for this year."

Five of the furlough days will be fixed around holidays and the other three will be flexible for each employee.

Mayor Hancock said the furloughs apply to non-uniform city employees. He said they are having conversations with leaders of uniform employees to see if there is a way additional savings can be found.

He added that the furloughs were the last item they turned to.

"We recognize that this is a burden on city employees. I know that. I'm hearing from city employees today. I know this is difficult and that's why it's a very difficult ask to make," the mayor said.

Mayor Hancock said the furloughs are voluntary for elected officials due to a clause in the state Constitution which stipulates the salaries of said officials cannot be increased or reduced while they are serving.

The mayor said he will write a check back to the city to cover the cost of his furlough days.

Mayor Hancock said all the steps they are taking, and potential additional steps in the future, are necessary given the lost revenue due to the COVID-19 crisis.

Hanlon said the 2020 sales tax revenue is projected to be down 16.8%.

"That is for 50 percent of the revenues in our city's general fund, the fund that provides street maintenance, our rec centers, finance, police services, fire services. [It's] a tremendous impact to that revenue stream."

Another source of revenue hit exceedingly hard is the lodgers tax.

"It's truly breathtaking the impact that' we're seeing in our hospitality and tourism industry," Hanlon said. "They are a significant driver, not just due to lodgers tax collections, which is a tax that's charged on a room night of stay in a hotel room, but you to think also about the secondary and tertiary impact it has on our economy. Those people travel to Denver. They don't live here. They then spend money in our stores and restaurants and different businesses."

Hanlon said the projected revenue loss from the lodgers tax alone is a staggering 62.8 percent.

"It is some of the most challenging numbers that I've ever seen for that category. It exceeds anything we have seen in history," Hanlon noted.

One final piece of solving the financial puzzle for which Mayor Hancock is lobbying is federal assistance.

"I want to say loud and clear to our leaders in Washington, this is why our cities and states need relief in the next stimulus package. Cities account for 91 percent of this country's GDP. We are the economy. The House is voting on a new relief package. We need the Senate to follow their lead and not drag their feet on this bill. We need our entire delegation to be in lock-step to help the state of Colorado and our cities to begin the process of a very important recovery."

The mayor's full news conference is below.

5-14-20 Denver Mayor Michael Hancock

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