The economic fallout from the coronavirus pandemic will be one of the worst in Denver’s history, the city’s chief financial officer said Thursday.
The Hancock administration is projecting a revenue loss of $226 million, about $46 million more than the city had originally forecasted.
“I could've never imagined seeing the numbers that we're seeing right now and the gravity that it means to the services that we provide to the public every day here in Denver,” city CFO Brendan Hanlon said during a press conference Thursday.
The city's finance department projects a loss of 10.5% in its general fund revenue compared with a drop of nearly 6.5% in 2009, following the 2008 financial crisis.
Denver’s revenue is primarily driven by sales and use tax, lodgers' tax, occupational privilege tax and parking revenues, Hanlon said. “And we’ve seen downward trends in each of these areas.”
Hanlon and his team are mostly focused on the city’s sales and use tax, which represents roughly half of the general fund. That's where the city draws its money from to support its “core services,” such as the police and fire departments, street maintenance, trash collection and more.
Some of the economic losses seen in Denver are more significant than what is being seen nationally, Hanlon said, which “presents us with a particular challenge.”
Nationally, retail sales fell by 6.2% in March. In Denver, however, that number was nearly 25%.
“It’s unfortunate to have to note that in April the report is expected to be one of the worst months ever, both nationally and here at home,” Hanlon said, adding that further updates on those numbers are expected soon.
Denver is also looking at a huge hit to its hospitality and tourism industry, which inevitably will effect retail sales, Hanlon explained.
The city experienced an 18.5% decline in its lodger's tax revenue in 2009 amid the Great Recession, and “those were staggering numbers when we first saw them,” Hanlon said. The city is currently forecasting a 62% loss for 2020.
“It is some of the most challenging numbers that I have ever seen for that category,” he said, “and it exceeds certainly 2009 and anything we’ve seen in history.”
Nevertheless, the city is focused on a “U-shape recovery,” Hanlon said, “which would show us recovering financially over time after a significant shock in revenue.”
Hanlon highlighted the fact that the credit rating giant Fitch Ratings recently reaffirmed Denver's AAA bond rating and projected the city would bounce back post-pandemic, a testament to the city's financial management practices, he said.
"When we see a problem, we respond immediately," he said. "We do not wait."
Financial models largely depend on what’s happening across the state and country, however, so projections could still change, he cautioned.
About $261 million is sitting in Denver's reserves, Hanlon said, but the money won't be spent lightly. Up to $100 million could be spent by the end of this year.
Denver has responded to the revenue loss, in part, by reducing capital equipment purchases, slowing its hiring process, restricting employee travel and identifying 7.5% reductions in the 2020 budgets of all city agencies.
The administration has also required roughly 77% of its 13,000 employees to take eight furlough days, which will save the city $16 million, Hanlon said. The city’s nearly 3,000 uniformed employees, such as police officers and firefighters, will not be required to take any unpaid days off.
The city charter prevents elected officials from making salary adjustments, except in the months prior to city elections when they are set for the succeeding four years, but Mayor Michael Hancock said during the press conference that he and his administration would voluntarily be taking furlough days and would return the money made on those days to the city's general fund by check, to get around charter restrictions.
Hancock commented on the fact that City Councilwoman Candi CdeBaca was the only council member not to agree to take furlough days, a move she made in solidarity with city workers and in opposition of what she called a "grossly mismanaged" general fund.
He paraphrased the Prophet Jeremiah, “because it fits the situation,” he said.
“Jeremiah said, ‘If I am a voice of justice for my people, but I don't lead with love, with a strong work ethic, a willingness to strategize on solutions and to come to the table with a collaborative spirit, then I'm just a resounding bong and a clamoring symbol.’
“And that’s really the reality of what we’re faced with,” he said.
Editor's note: This story has been updated to reflect the correct number of city employees due to inaccurate information provided by a city official.