Durango voters approved a half-cent sales tax in November 2019 to pay for road projects and repairs, but how the money is being used reveals a long-standing structural problem in the city’s budget.
The 2019 vote increased Durango’s sales tax by 0.5%, from 3% to 3.5%, and so far, has generated about $5.7 million. A good chunk of the revenue, $1.7 million, has gone toward street maintenance, but some city councilors worry that road upgrades, such as repaired alleys and roads, are being left behind. And that might not be the balance that voters expected when approving the tax.
“Streets and alleys are a crucial component of economic development and growth,” said City Councilor Melissa Youssef. “Truly, if infrastructure is failing, nothing else matters.”
Road maintenance and repair is one of the city’s essential services. Keeping roads in good shape extends the life of the road and saves on tax dollars down the line. Poorly kept streets and sidewalks can affect property values, mobility, attractiveness to potential new businesses and the impression of the city.
But for years the city struggled to pay for road upgrades and repair expenses. It could cover personnel from the general fund but drew from city reserves to pay for project costs. In 2019, the drawdown “came to a cliff,” said City Councilor Barbara Noseworthy.
“They were doing that year after year,” she said. “That starts to become a big structural problem. ... You haven’t budgeted accordingly to cover your essential expenditures.”
The 2019 sales tax served as a temporary solution to the funding problem. Voters approved the tax to pay for projects such as road maintenance, resurfacing, upgrades and alley repairs.
“I believe they felt that more money was going to go to immediately fixing up the streets and alleys that were in need of repair and upgrades,” said Noseworthy, who was concerned the city was sending too much revenue to the general fund to cover maintenance costs, such as salaries and materials.
There is a limit to the amount of revenue the 2019 tax can gather. It will last for 10 years, until 2029. Each year generates an estimated $4.4 million per year, or about $44 million total.
Because of the economic impacts of the coronavirus pandemic, the tax brought in an estimated $3.7 million in 2020, and city staff members expect it to generate about $4 million in 2021.
Once the tax period ends, the city will once again have to find ways to pay for road work.
“The money will have to come from somewhere,” Youssef said. “If you’re not taking it from the sales tax ... it has to come from somewhere else.”
Of about $5.7 million generated from the sales tax increase so far, about $1.7 million has been used for street maintenance, $1.5 million remains unallocated in the fund reserves and about $2.5 million has been used for street upgrades.
In 2020, the tax helped fix one city alley and paid for 33 ramp improvements in compliance with the Americans with Disabilities Act – about 20,400 square yards of subgrade reconstruction on streets, said Levi Lloyd, city operations director.
That’s in addition to replacing sidewalks, curbs, gutters and road surfaces.
One of the biggest projects in 2020 was the complete street reconstruction of Thomas Avenue, which added about 3,000 feet of curb and gutter work, 5,900 square yards of new street surfacing and eight accessibility ramps to the year’s totals.
Without the tax increase, “we would not have done any of these projects. They would not have been funded in 2020,” Lloyd said.
In 2021, the city plans to transfer another $1.7 million to the general fund to pay for street maintenance expenses.
Of about $9.7 million in revenue gathered between 2019 and 2021, $3.4 million, or 35%, is set to go toward street maintenance costs like salaries and supplies.
“That’s legal by the tax language, but it’s not the best practice because we’ve got to find a way to pay for those essential services out of our general fund,” Noseworthy said.
Mayor Pro Tem Kim Baxter said the fluctuating sales tax revenue was an inherent problem for the city, which is primarily funded by sales taxes.
Other City Council members, such as Mayor Dean Brookie and Councilor Chris Bettin, were more comfortable with the balance of the funds between maintenance and new projects.
“I don’t feel bad, and the public shouldn’t feel bad, about using these tax dollars for a reasonable amount of maintenance,” Brookie said.
One key repair that might get more attention in 2021 is alley repairs. The expensive repairs have often fallen to the bottom of the priority list because they aren’t highly trafficked.
But unpaved or poorly maintained alleys have been a concern for some residents – and were a source of support for the 2019 tax increase. The city plans to push some alley projects to the front of the list in 2021.
The city will have a clearer idea of the appropriate balances for funds and expenditures after completing 10-year operating and capital plan studies scheduled for 2021, Youssef said.
Noseworthy hopes to see a plan that prioritizes street projects and steps down the amount of 2019 sales tax dollars being used in the general fund for street maintenance.
“In eight years when that tax runs out, there’s no guarantee that it will be renewed. Then how are we going to pay for those essential services?” she said.
smullane@durangoherald.com
