Despite facing millions of dollars in lost revenue next year, the Loveland City Council decided in November against asking voters for a one-percentage-point increase in the sales tax.

In a narrow 4-5 vote, council members at Tuesday’s meeting rejected two motions to put the question on the 2024 ballot – a move that surprised more than one observer.

“This was unexpected,” Amy Phillips, director of the Loveland Public Library, said Wednesday. The deficit puts its budget at risk of being cut by 33% in 2025, and the library’s supporters have been vocal in their support for the increase.

“Now we can only look forward,” she added. “We expect to finalize the decisions about 2025 at the City Council’s budget meeting next week.”

Tuesday’s vote was the culmination of several City Council study sessions on the 2025 budget and the citywide impact of the revenue shortfall. To fill the gap, the city’s finance department has earmarked $12.2 million in cuts, with “public” services such as the library, cultural services and parks being hit hardest.

Given the impending staff cuts, the City Council also considered finding other ways to fill the gap during study sessions, and city staff offered several options, such as increasing the “sin tax” on tobacco and alcohol or increasing the lodging tax.

But raising the 3% sales tax on non-food items proved to be the quickest way to balance the budget. According to figures from the city’s tax office, raising the city’s sales tax on non-food items from 3% to 4% would generate $17.3 million next year.

Before Tuesday, the proposal appeared to have broad support among council members, despite some concerns about voters’ willingness to go along with it.

Those concerns ultimately prevailed Tuesday, despite strong pleas from residents and City Councilwoman Laura Light-Kovacs to seek the increase. Light-Kovacs said the City Council “owes” voters a chance to “do the right thing” and save the 28 city jobs at stake with the 2025 cuts.

“If my job was on the line, I would want the people on this council to take it seriously,” she said.

But those pleas fell on deaf ears. Voting no included Councilmen Steve Olson, Dana Foley and Patrick McFall, all of whom expressed what seemed to be a clear message from Loveland voters about taxes over the past few years.

“We had three initiatives that all expressed that taxpayers want their taxes back,” Foley said, referring to the food, fire protection and TABOR questions that were on the ballot last year. “Let’s put it back in the hands of the voters so they can say they agree with it, but let them drive it, not us.”

Others, however, had other concerns, notably Mayor Jacki Marsh, who denounced the fact that the City Council had offered tax incentives to developers over the past 20 years.

“What I’ve seen both as a private citizen in the audience and as a mayor and a member of this council is that we’re giving away the sales tax,” she said, referring specifically to the Centerra South urban renewal agreement. “…Without language in our second ballot item that says we’re not giving away the sales tax, we’re not refunding it, we’re not crediting it, we’re not reducing it, we’re not diverting it, I can’t support increasing the sales tax. So that’s my bottom line.”

Council member Erin Black also cited previous council decisions in her no vote and said she did not trust the council to make the best use of the additional revenue from a sales tax increase without earmarking the money for a specific purpose.

“I have no confidence that this will save our library services at this point,” she said. “And that’s why I will not support a sales tax increase unless I can promise people they will get what they want.”

Black and Marsh joined Foley, McFall and Olson in voting against the sales tax ballot questions, both phased and unphased. Councilmen Troy Krenning, Jon Mallo and Andrea Samson joined Light-Kovacs in voting for them.

Although the sales tax question was defeated, the City Council approved a question asking voters for a fifth repeal of the TABOR amendment. If approved, the city would keep the additional revenue until 2036. If that fails, local taxpayers would be entitled to a small refund.

Originally published: August 7, 2024 at 17:49