Plan for flat revenue in 2026.
That’s the message city finance officials gave members of Denver City Council’s Budget and Finance Committee as preliminary efforts to organize and establish guidance for the 2026 budget planning process kicked off Monday.
While sales and revenue taxes accounted for more than half (56%) of the city’s general revenue fund in 2024, city finance officials warned that even with no spending expansion, the city’s “natural” spending growth is on track to outpace revenue.
“Over the last decade or so, we’ve averaged about 4% general fund revenue growth,” City Budget Director Justin Sykes said. “However, in 2024 we were lower than that historical average and we expect that this trend of attenuating revenue growth is likely to continue, given everything economically that we right now.”
In September 2023, the city originally forecast its 2025 sales and tax revenue at $970.6 million. A year later, that number dropped by more than $33 million to $937 million.
The actual numbers, reported this month, totaled $930.3 million.
Overall, the city’s general fund balance — or “piggy bank” — has also seen a marked decrease, dropping from $391 million in 2022 to $239 million in 2024.
Unexpected expenses attributed to Mayor Mike Johnston’s efforts to house the homeless, along with a $90 million bill to pay for the city’s response to the illegal immigration crisis spilling over into America’s interior cities from the southern border.
City finance experts blame four economic shocks for the decrease: tariffs, supply chain disruptions, financial market conditions and unprecedented uncertainty due to changing federal policies.
Finance experts said strong economic headwinds also contribute to consumer nervousness, citing budget shortfalls in Chicago, Los Angeles, Colorado Springs, Loveland and Aurora, but could not provide estimated budget shortfalls for Denver.
“We do not have a forecast at this point,” Sykes explained. “We are continuing to look at the numbers; we are watching the news, which seems to change day by day. We will be coming back to agencies with a specific target, but at this point, I think the genuine answer is we are monitoring and will continue to monitor, but there’s no specific number that I can give you right now today.”
“I really don’t like that answer,” District 2 Councilmember Kevin Flynn said. “Because you told me what Aurora’s was and what Chicago’s is, you should be able to tell us what ours is, because you work for us.”
Going forward, finance officials said the outlook remains positive, but the next several months will be “very uncomfortable.”
At a minimum, finance officials are recommending the 2026 budget starting point be “as flat as possible or less than 2025.”
Budget reductions made this year will be reapplied in 2026, meaning that positions underbudgeted in 2025 will not be budgeted for in 2026, and cuts in services and supplies will also be carried over into the coming year.
However, even with budget concerns, the city is still on track to spend up to $70 million to acquire land for a new women’s soccer stadium and ask voters in November to approve a new general obligation bond to fund parks, infrastructure and other projects.
Officials warned that, given ongoing trends, 2026 budget changes should “be sustainable and not be viewed as temporary.”
Johnston’s proposed budget must be released by Sept. 15. City Council’s deadline to approve the budget is Nov. 10.
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