Denver expects little to no revenue growth through 2027.

And “flat” growth is a “best-case scenario,” city finance experts told members of the Denver City Council’s Budget and Finance Committee, as preliminary efforts to organize and establish guidance for the 2027 budget planning process kicked off Tuesday.

The city anticipates 2027 revenue to remain around $1.66 billion.

Although Denver is in a better position than it was at this time last year, challenges remain.

Officials credit the city’s 2025 cost-cutting efforts and efficient use of reserves with keeping Denver’s 2026 budget on track, but they also signaled that spending for the coming year will remain tight.

The city’s revised revenue projections also proved accurate, with the general fund coming in just $2 million below forecast.

The city’s main sources of revenue — sales and use tax and property tax — have been roughly flat from 2023 through 2025, with overall revenue remaining at $1.6 billion.

Denver is, according to experts, operating in a “structural balance,” meaning that its ongoing revenues roughly equal its outgoing expenses.

While this avoids huge deficits, it also means there’s little room to absorb rising costs without making trade-offs.

“We expect this trend of flat revenue to continue into 2027, which means we will need to continue to be strategic and conservative in how we manage increasing costs,” said the city’s Chief Financial Officer Nicole Doheny in a statement. 

In 2025, Denver brought in $1.664 billion in general fund revenue, which was within 0.1% of the revenue forecast.

Facing a $200 million budget deficit, officials also made major changes in 2025, which included a temporary hiring freeze, two to seven furlough days, and layoffs.

Those changes reduced city expenses to $1.707 billion in 2025 and $1.663 billion in 2026 and were critical to ensuring Denver remains financially sustainable and prepared for 2027, according to a statement from the Department of Finance.

Higher interest rates and reduced spending on cars, homes, and construction, finance officials note, are slowing the inflow of the city’s sales and use tax.

The reason is that consumer spending is shifting away from taxable goods and moving toward services and online purchases.

Additionally, slower wage and job growth, lower consumer confidence, and higher energy prices are leading people to spend less.

Global uncertainty also doesn’t help, Lisa Martinez-Templeton, chief economist for the Denver Department of Finance, said.

“Our economy is on the edge,” Martinez-Templeton said. “We have three supply shocks going on now. We’ve got immigration, you’ve got tariffs, and you’ve got the Iran war.”

Tighter immigration rules, additional costs on imported goods, and higher prices at the pump all have contributed to a cooling economy.

Looking to the future, Martinez-Templeton said there’s uncertainty around the impact of artificial intelligence on the job market.

“If it (AI) proves to be effective enough to quickly reduce the need for large numbers of workers, this could lead to job losses, to increased unemployment, and again, lower consumer confidence and spending,” she said.

Reactions from some Denver City Council members signaled concern.

“I feel like we’re on palliative care here, because I see even more underlying weakness in the sales tax,” said Councilmember Kevin Flynn, who represents Denver District 2.

“I have a lot of concern, there’s not much more to cut, and I’ve been hearing from other departments that cuts they made last year will have to be permanent cuts in 2027,” said Denver City Council President Amanda Sandoval. “So if we have permanent cuts to our fire department, if our police department and our sheriffs are understaffed. I don’t think you can cut much more.”

Another variable budget planners will need to contend with is the expiration of the Xcel Energy franchise fee.

“That franchise agreement will require the City Council to refer it to the ballot and voters to approve it before it is extended, and that franchise fee revenue brings in about $30 million of revenue each year,” City Budget Director Justin Sykes said, adding that the city may not be able to budget for that $30 million of projected Xcel franchise fee revenues in 2027 until the item is referred to the ballot and passed by voters.

Xcel Energy currently adds a 3% franchise fee to Denver residential and commercial gas and electric bills. The pass-though charge is mandated under a 20-year agreement with the City and County of Denver. It is used to compensate for Xcel’s use of public rights-of-way to deliver energy services.

The next steps in the city’s forthcoming spending plan will be the annual budget workshop set for May 14, followed by a Sept. 15 deadline for Denver Mayor Mike Johnston to release his proposed budget.

Nov. 9 is the city’s deadline to adopt the budget.

Last year, Denver City Council members and Johnston locked horns over the proposed 2026 budget, which Johnston insisted would not cut core services, despite significant budget cuts across city departments. 

“If there are any amendments to the budget that add cuts to any of the departments,” Johnston warned, “those would directly either cut these core services or require more limits, because there is nothing left to cut in these departments…”

Members of the Denver City Council ultimately rejected Johnston’s $1.66 billion spending plan. But the proposal, as amended, went on to govern operations, as the charter required the city to have a budget in place by Nov. 12.