City officials say Durango is in a financial pinch. Some residents disagree. The city says it needs to increase taxes to pay for a range of capital projects and services. Some residents say the city has plenty of money – it’s just not using it appropriately.

The different opinions grew louder during this year’s election season, after the city put a measure on November’s ballot asking voters to increase taxes. The city says roads are falling apart, the Durango Police Department building is too small and “dysfunctional,” and codes need to be enforced with more officers, all things the city says it doesn’t have money to address. Officials asked voters to raise sales tax by 0.55 percent and property tax by 5.4 mills to help pay for these needs.

Voters gave them a resounding “no.” Ballot question 2A failed by more than 20 percent.

John Simpson, a resident who championed opposition to tax increases, said the city has plenty of money; it simply needs to prioritize its spending.

After the tax measure failed, Simpson said: “Maybe the city didn’t quite show the accountability that’s required to pass such a tax increase. There’s a lot of work to be done still, and I hope the council will start listening to the community more on how to solve those problems.”

The measure was designed to raise up to $7.5 million in revenue annually. The tax increase would have raised up to $187.5 million for the city by 2043 to pay for streets and sidewalks, law enforcement and buildings.

Voters’ rejection means the city won’t be able to fix some roads and the police department will have to continue to adjust its needs for now. The rebuff at the ballot box also means the city must find ways to operate as its fund balance, or savings account, continues to decline.

“This is not doom and gloom,” Durango Mayor Sweetie Marbury told The Durango Herald after the election in November. “We’ll go back to the drawing board and have discussions. That’s what City Council does.”

After the City Council announced it would ask voters to raise taxes, questions swirled around the city’s spending priorities. Some residents have also said they want a clearer picture of how the city collects and spends money.

Here are answers to some of those questions:

“Can’t the city redirect the money earmarked for parks and recreation and spend it on other needs?”

The quick answer is “no” – at least not without another vote.

The Parks and Recreation Department accounts for about 17 percent of the general fund, spending more than $8 million in 2019.

Parks and open space also have two, voter-approved dedicated sales taxes. One was approved by voters in 2015, a 0.5 percent tax that’s used, in part, to pay for parks, open space and trails. A 0.5 percent sales tax passed in 2005 is also dedicated to open space, as well as paying for debt incurred when the city resurfaced Florida Road and built the Durango Public Library.

“If the voters or council wanted to use the 2015 or 2005 dedicated revenues for something that’s other than what was in the original ballot language, it would have to go back to the voters,” said Assistant City Manager Amber Blake.

Some residents argue the dedicated funds should be redirected to pay for streets, law enforcement and buildings. But because those tax increases were approved by voters, the city is required to hold a vote if it wants to reapportion the dedicated sales taxes.

Marbury has been adamant that those dedicated sales taxes were approved by voters for a specific purpose and that money shouldn’t be reapportioned because that’s not what voters asked for when they approved the taxes. Voters approved the taxes for parks and recreation, she said, not for streets, law enforcement and city buildings.

The city has a $92 million budget. Where does all that money come from and where does it all go?

The city has two mechanisms through which it can get funding: taxes and fees.

Fees are assessed to residents who use direct services provided by the city, such as water, sewer and recycling. Taxes are assessed on goods, services and property, a flat rate that everyone pays to fund city operations. Those funding mechanisms are used to generate revenue for different parts of city government – money that’s, at times, earmarked for a specific purpose.

For example, water fees are used to pay for the water service the city provides. Those fees are the only source of revenue for the water department. The water department operates as a business run by city employees, sustaining itself with the fees it assesses to ratepayers. The water department operates with a budget of more than $10 million.

Other proprietary funds – city operations funded by fees – include sewer service, the airport and transportation services. Fee rates are decided by the City Council. Proprietary funds account for $33.33 million – or about 36 percent – of the budget.

Taxes are used to pay for city operations that do not collect revenue, such as streets, law enforcement and open space. Most of the funding for nonrevenue generating operations – which ends up in the general fund – comes from sales tax receipts. The general fund is expected to bring in about $41.69 million in 2019, about half of all revenue the city collects.

Sales tax in Durango is 7.9 percent, 3 percent of which goes to the city.

So what happens now that the tax measure failed?

The city has just enough money in its general fund to operate and sustain what it has. All that general fund money is earmarked to keep the city operating, paying for street and park maintenance and employee salaries. There’s no money left over for major improvement projects, such as building a new police station or resurfacing many of Durango’s streets.

Simpson has suggested money for major improvements could come from the Parks and Recreation Department, which he says is overfunded. City councilors have said they don’t think it is appropriate to ask for another tax increase come April.

While it’s up to City Council to decide how it will fix the financial squeeze it is in, voters are the ones who will approve any new taxes or repurposing of existing 2005 and 2015 tax increases.

The City Council has until Feb. 1 to make a decision about what an April ballot question to raise taxes might look like. That question would be intended to overcome looming annual deficits that would begin in 2020.

bhauff@durangoherald.com