"The reality is, 2021 is just as uncertain as the last six months have been, because the pandemic is ongoing," Hancock said during a September 15 budget presentation to members of Denver City Council.
The proposed 2021 budget is based on a $1.33 billion general fund, which represents a 10.6 percent decrease from the original $1.485 billion general fund budget for 2020. The Hancock administration made cuts to that budget in recent months, resulting in a revised forecast for 2020 of $1.265 billion.
That translates to a $220 million general fund budget gap forecast for 2020 and a $190 million gap for 2021. And these numbers are based on the assumption that there will not be a resurgence of COVID-19 in late 2020 and early 2021; if a resurgence does occur, the city will revisit its projections.
"It would be disastrous for us to go through this scenario once again and dip even further into reserves or to further cuts," Hancock warned. Prior to the pandemic, the City of Denver had anticipated a $250 million reserve at the end of 2020; after the city tapped some of it for emergencies, the reserve will likely be at about $160 million at the end of the year.
Hancock administration officials will officially present the budget to Denver City Council in coming weeks; councilmembers must ultimately sign off on the budget.
Over the course of 2020, Denver has taken huge hits in certain revenue streams.
For starters, there's been a 66 percent decrease in lodger's tax revenue compared to the projection for 2020. In 2009, during the Great Recession, Denver lodger's tax revenue dropped 18 percent.
The city predicts a 50 percent recovery of lodger's tax revenue next year, "contingent on further loosening of public health restrictions," according to Brendan Hanlon, the city's chief financial officer.
"We don’t have conventions in this city, and conventions brought in hundreds of thousands of people over the course of the year," Hanlon said at the presentation, noting that attendees not only spend money at conventions, but book hotels and shop and eat in town.
Restaurants and retail outlets have been hit particularly hard during the pandemic, and retail and food service tax revenue is projected to be down 15 percent in Denver this year. Transactions at small businesses are down 21.9 percent, which is a little worse than the 19.1 percent decrease tallied nationwide.
The head tax that employers pay to the city per employee is down 11 percent in 2020, reflecting layoffs.
In a year that members of the public and some on council are calling for shifting funds from traditional law enforcement purposes into mental health care and housing and homelessness services, the proposed budget does include some cuts to the police and sheriff department budgets.
However, "this budget does not support a false choice between safety and transforming our criminal justice system," Hancock stated, pointing out that while increases were made to alternative policing methods, such as sending mental health professionals to certain 911 calls, the city also simply needs to balance its budget and make cuts in the police and sheriff departments, as it does in all other departments.
For example, the police budget is dropping from a 2020 allocation of $254 million to $229 million. But the majority of that budget decrease will come from shifting funding from the general fund to special revenue funds in order to avoid the need to keep an unnecessarily high contingency fund. In actuality, the decrease will be closer to $6.5 million rather than $25 million. That $6.5 million cut will come from savings through smaller police academy class sizes, keeping positions vacant, and reductions in overtime pay.
The budget for the sheriff department will drop from the 2020 allocation of $151 million to $148 million; those savings will come from not filling positions that have remained empty for a long period of time and also reducing postings, since the jail population is anticipated to be lower in 2021.
The city also plans to save $39 million through reduced hiring and keeping vacant positions unfilled in other departments.
In addition, the city will save $12 million through employee furlough days of anywhere between six to nine days, depending on the income level of the employee.
And finally, to stimulate economic activity, the city plans to accelerate projects associated with the Elevate Denver bond program, which will lead to the spending of $478 million over the next three years. For every million dollars spent on these bond programs, city officials expect two million dollars in economic return.