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Lakewood Fiscal Facts
Every Member Material - September 2005
The League of Women Voters of Jefferson County has prepared this informational paper to guide discussion concerning the upcoming Lakewood city election to increase sales tax from 2% to 3%. The 1% increase would exclude grocery food and prescriptions. Lakewood has not had a percentage increase in sales tax since 1972. This paper includes comparison to other cities, efforts to reduce expenditures, budget, reserves, debt, Public Improvement Fees (PIFs) and pros and cons.
Comparison of Lakewood with other metro area cities
At 2%, Lakewood has the lowest sales tax rate of any city in the metro area. Examples are:
Broomfield 4.15%; Denver 3.50%; Westminster 3.25%; Edgewater 3.0%;
Northglenn 4.00%; Greeley 3.30%; Arvada 3.21%; Wheat Ridge 3.0%;
Aurora 3.75%; Boulder 3.26%; Golden 3.00%; Lakewood 2.0%;
Of this group, only Aurora and Denver exempt food from tax. Lakewood currently taxes food.
Revenues
Lakewood’s overall expenditures have increased 5% over the last four years while revenues have increased only 2%. Lakewood, like most cities in Colorado, depends on sales and use tax for most (52%) of its revenue. Other sources of revenue include fees, property tax and gas tax. Total sales and use tax revenues have gone up 3/10th of 1% compounded in the past five years to 46.1 million in 2004 from $45.5 million in 2000. The following chart shows examples of expenditure increases that the city cannot control:
2001 2005 Annual Growth Rate
Gasoline & Diesel Fuel $ 734,918 $ 1,015,734 8.4%
Worker’s Comp., Property &
Casualty Insurance $ 1,050,000 1,910,000 16.1
Utilities $ 2,344,138 3,431,267 10.0
Monthly Medical Premiums
Per Employee $ 600.58 981.72 13.1
Why have revenues been lower than expected? The overall economy of the U. S. has fallen over the period of the last four years and people are buying less. Colorado still has a net loss of 60,000 jobs. Also, internet sales, which generate no taxes, have increased from $42B to $144B a year in the U. S., reducing sales tax revenues, nationwide. Sales tax revenue for Lakewood for year 2000=$37,556,587; 2001=$36,850,000; 2002=$36,396,000; 2003=$37,466,139; 2004=$38,436,714.
Budgets
Tax revenues have been less than expected, forcing budget cuts. The 2004 budget was $71.8 million; revenue was $68 million. The shortage of $3.8 million was made up from reserves.
Lakewood has cut $13.2 million from the city budget during the last four years, including:
Eliminated 101 jobs.
Cut $2.3 million from Lakewood police department, eliminating the School Resource Officers and Anti –Gang, Vice, and Graffiti units which had 800 arrests in 2004.
Made large cuts in parks, recreation centers, public works, and programs for older adults, youth, and the arts.
Froze city employees wages for the year 2004.
Street maintenance was $6.4 million before 2004, $4.2M in 2004 and $2.2M in the proposed 2006 budget.
Lakewood’s operating reserves ($7.7 M) at 10% of the general fund are the lowest in the metro area. This is equivalent to about five or six weeks of expenditures. Reserves on average for a city are between 15 and 20 %.
Lakewood has a projected budget shortfall, if the sales tax increase does not pass. $10.2 million per year would be cut from each year’s budget. Thus, the following cuts will be implemented if the sales tax increase is not approved:
Eliminate 72 full time jobs.
Cut asphalt and concrete repair from 32 miles per year to six miles per year (creating a replacement rate per mile of 63 years).
Reduce snowplow fleet (from 30 to 21 to 19).
Mothball 70 of Lakewood’s 90 parks (no watering, mowing, or trash pick-up, and closing bathroom facilities).
Reduce Lakewood Cultural Center offerings, resulting in a loss of Tier Two status SCFD and thus a loss of $200,000, annually.
Close all outdoor pools.
Eliminate street landscaping.
Eliminate open space and park acquisitions.
Reduce animal control unit from 8 to 4. (This would eliminate response to barking dog issues).
Cut services to disabled persons, including Rise Above recreational program for people with disabilities, Special Olympics and independent living.
Cut recreation center and indoor pool hours.
Close the Heritage Center and its programs.
Eliminate transportation for seniors and people with disabilities.
Cut hours and days at the Clements Senior Center.
Loss of federal, state, and open space matching funds: Matching fund entities usually require a 20% match from a city. This year Lakewood was not able to use Jefferson County Open Space funds to purchase the YMCA park on 20th Avenue or the gully at Florida and Alameda. Grants from Colorado Lottery (GOCO), the Division of Wildlife, the Colorado State Historical Society and the Land and Water Conservation Fund require matching grants and so will have to be bypassed. Many federal transportation projects require a match. Examples of past leveraging with the use of matching funds are as follows:
$3.2 M of city money to Parks and Recreation has leveraged $13M from other sources.
$4.8 M of city money to transportation has leveraged $18 M. from other sources.
Debt
Lakewood’s debt is $88,608,000. Most of this debt is in the form of Certificates of Participation (COP), which have not been voted on by the people. All of the cities in the metro area use COP’s. Lakewood carries a lower debt than many other cities in the metro area.
Public Improvement Fee (PIF)
A PIF is a fee collected and used to finance the development of the “Extraordinary Public Improvements” associated with some new developments, generally redevelopment of difficult sites. It is not a tax but it is collected by the city. The developer is being reimbursed the cost of making the improvements to the property that would otherwise be paid for by the city. For example, improvements to street access; street widening ; sidewalk construction ; drainage and utility lines installation; removal of hazardous waste; and provision of open space. Lakewood currently has three projects that involve PIF’s The end dates for the PIF debts are: Colorado Mills, 2028; Belmar, 2023 and Wal-Mart, 2024. End dates for the PIF’s could be paid off earlier or could be extended.
Colorado Mills has a PIF of 1.4% to pay for the “Extraordinary Public Expenditures” of $43 million which the developer incurred. Customers pay a 2% city sales tax, as well. The tax revenue in 2004 was $3.2million, but less than the projected $4.5 million. Voters approved the financing package, including annexation of the land to Lakewood.
Belmar has a PIF of 2.5% to pay for the “Extraordinary Public Expenditures” of $83 million which the developer incurred. A 1% city sales tax is charged as long as the PIF is collected to repay the debt. The projected sales tax revenue is $3-$5 million per year.
Wal-Mart has a PIF of 1.5% to pay for the “Extraordinary Public Expenditures” of $24 million which the developer incurred. Customers pay a 2% city sales tax, as well. Under the agreement reached by the city and Wal-Mart, the city is guaranteed $1,079,000 annually from the sales tax revenue. If the sales tax revenue is 15% more than Wal-Mart’s projected amount, it will be split between the city for general budget and Wal-Mart to pay off more of the debt. Wal-Mart says that it is making more than 50% above projections. The new timetable for the PIF to be paid off is now 8-10 years. This land had been vacant for 13 years.
Colorado Mills, Belmar and Wal-Mart are exempt from the proposed tax increase because of the PIF fees in place. The city has an agreement with Belmar that states: sales tax + PIF will not exceed the average metro sales tax rate of 3.5%. City Council can take action to rescind these exemptions. Taxes charged to customers also include state, county, open space, SCFD, Stadium district and RTD sales taxes. This is true in all other metro area cities as well.
A sales tax increase of 1%, excluding grocery food and pharmaceuticals, would restore part of the programs that have been cut, reduce the likelihood of future cuts, and cover the cost of the new, one-time items listed below. This projected new revenue of $16.7 million would leave the city with a 12% reserve. The ballot question also includes deBrucing language that allows Lakewood to spend the revenue generated by the 1% tax increase.
Lakewood needs the following new one-time expenditures
Building a communication center ($2.5 million estimate, $1.5 million from Homeland Security)
Planning for the development of the new light rail West Corridor ($840,000 est.)
Street improvements :
Colfax and Simms intersection
Wadsworth: Pedestrian underpass
Wadsworth: six lanes (Ohio to Mississippi)
Kipling: three lanes - northbound (Alameda to 6th)
Kipling and Colfax intersection
PROS AND CONS OF THE LAKEWOOD SALES TAX PROPOSAL
THOSE WHO SUPPORT THE 1 CENT TAX INCREASE SAY:
1. The quality of life in Lakewood is the issue. This vote is about city revenues and spending, specifically a shortfall of $10.5 million.
2. The city manager has done an excellent job of bringing in new businesses and taxes. Without the new taxes from Colorado Mills, Belmar and Wal-Mart, Lakewood’s finances would be in more trouble. Whether you think the city manager is good or bad, is paid too much, he is not the issue. Good salaries are necessary to keep quality employees.
3. Without the tax increase Lakewood will be less safe, more run-down, and will not provide adequate, timely services. Property values will go down.
4. No other city can live with a 2% sales tax.
5. Lakewood must be able to take advantage of matching funds. We can’t afford to lose funds for road construction, open space purchase and SCFD money.
THOSE WHO OPPOSE THE 1 CENT TAX INCREASE SAY:
1. This is a 50% tax increase.
2. The city manager salary ($196,000 a year) and benefits are too high.
3. The special deals made to Wal-Mart, Colorado Mills and Belmar caused the lower sales tax revenue.
4. There is no guarantee that police would get any additional funds.
5. Small businesses and established stores will not get special deals like the big developers.
The election will be by mail in ballot. The ballots will need to be returned by November 1, 2005.
Sources: Newspaper articles from The Denver Post, Rocky Mountain News and Lakewood Sentinel. Interviews with Lakewood city officials Larry Dorr, Joni Inman, Mike Rock and City Councilman Bob Murphy.
