Feeling the Squeeze

Colorado Municipal League: 2023 State of Our Cities & Towns Report

For the first time in the 15-year history of the Colorado Municipal League’s State of Our Cities and Towns survey, municipal officials consider inflation to be the greatest cause of concern, followed closely by the tight labor market, affordable housing, unfunded street and road maintenance needs, and unfunded water and wastewater improvement needs. The 2023 State of Our Cities & Towns survey, administered from August to September 2022, inquired about the impacts of staffing shortages and inflation on municipal operations, as well as challenges related to housing supply and affordability, water, and navigating the state and federal funding available to address these challenges.

Map of Respondents

163 of CML’s 270 member municipalities responded to the 2023 survey, for a 60% response rate. Responses came in from the Western Slope to the Eastern Plains, from the northern mountains to the San Luis Valley. Municipalities of all sizes were represented – 62% of municipalities under 2,000 population participated, as well as 59% of mid-sized municipalities, and 57% of municipalities over 25,000 population.

Key Economic Findings

Most municipalities are experiencing negative impacts on their expenses due to recent inflation, which has drastically increased costs for capital projects and further complicated the recruitment and retention of employees, already made difficult by the lack of affordable and workforce housing.

98% of municipalities are at least slightly concerned about inflation’s impact on their community.

Impact of Inflation

Impact of Inflation by Region

% reporting moderate or significant negative impact

Impact of Inflation by Population

% reporting moderate or significant negative impact

In the previous 14 years of the survey, inflation had not once broken into the top five challenges listed. The other top challenges in 2023 look much more familiar.

Top challenges in 2023 State of Our Cities & TownsRanking in 2022 State of Our Cities and TownsRanking in 2021 State of Our Cities and TownsChange of Rank Over Two Years
1. Inflation819Up 18
2.Tight labor market25Up 3
3. Lack of affordable housing11Down 2
4. Unfunded street/road maintenance and improvement needs33Down 1
5. Unfunded water/wastewater improvement needs44Down 1

Even as municipalities are feeling the squeeze due to inflation and unfunded infrastructure needs, one-third (33%) report that they feel their local economy is somewhat or much better, and 42% reported feeling that their municipal revenues are somewhat or much better, than 2021. In addition, 38% reported the revenues are about the same as last year, building on the 58% who reported an improvement in 2021. This positive outlook on the economy is seen more along the Front Range, as fewer communities on the Eastern plains and on the West Slope reported an improvement in their economies.

In the 15 years CML has conducted the survey, more respondents have reported better revenues over the previous year than those who have reported worse, with the glaring exceptions being the two years following the Great Recession, and in 2020, in the first several months of the COVID-19 pandemic.

Staffing Shortages

Almost one-third of municipalities report that inflation is having a positive effect on their revenue, but it may not be enough to address the similarly rising fiscal demands of providing services, thanks to increased costs for capital projects and in hiring and retaining employees. The State of Our Cities and Towns survey affirms what CML has been hearing from our members all year: staffing challenges are leading to delays in projects, reduced programming or service hours, and an excessive burden on the remaining staff.

Over two-thirds (69%) of larger municipalities are experiencing somewhat more or much more turnover than last year, and over half (52%) of all municipalities are having a somewhat or much harder time hiring than in 2021.

62% of municipalities are experiencing moderate to significant operational impacts due to staffing challenges, and 78% are experiencing at least a little impact.

What do those impacts look like?

“Staffing shortages have required additional help from other departments to complete critical operations such as water, sanitation, electric and wastewater, resulting in us falling behind with mowing operations, parks maintenance, and street maintenance operations.”

—Home Rule City, Eastern Plains

Staffing challenges are more apparent than ever. We’ve had to pause specific projects and, in some instances, do the minimum to maintain business levels. We’ve had to cut back operational hours in some places open to the public and be more strategic in how we operate.

—Home Rule City, Mountains/Western Slope

Finding suitable police officers has been an issue for several years and is not improving. Our current officers are working overtime to cover shifts. We have removed our SRO from our schools to help answer 911 calls.

Statutory Municipality, Mountains/Western Slope

While customer service has not been negatively impacted, current staff have had to double-up on duties, learn new duties, and work additional hours to ensure that the work is completed.

Statutory Municipality, Mountains/Western Slope

Around three quarters of municipalities (73%) reported that offering competitive wages is a moderate to major challenge in filling full-time positions. Other common challenges included increases in the cost of living, attracting workers to their communities, and general competitiveness with private sector jobs.

In response, 80% of municipalities are increasing wages to be more competitive in the job market, and nearly two thirds (65%) increased wages outside of their normal budget cycle.

That’s not all municipalities are doing:

Like the rest of Colorado, the City of Craig and the Town of Fraser are facing staffing challenges, especially with the more specialized positions. The two mountain communities have implemented a variety of methods to address the staffing shortage and have seen success. While both municipalities have implemented monetary incentives, they have also found a winning strategy in the face of the limited availability and high cost of housing: finding and developing local talent.

Read more about how Craig and Fraser have found home-grown solutions to staffing shortages.

State and Federal Funding

The second most common challenge CML staff heard as we visited our members in the fall of 2022 was concern about navigating state and federal funding available through the federal Bipartisan Infrastructure Law and multiple housing grant and loan programs created via state legislation in 2022. In the survey, members reported an interest in this funding for a variety of uses:

Expected Funding from State or Federal Government Stimulus Programs

48%

Water and Wastewater

33%

Transportation

28%

Affordable housing

18%

Broadband

15%

Climate, energy, and environment

34%

No response

Almost half of municipalities (47%) – especially those in the Eastern Plains – reported that they have low or no confidence in applying for Bipartisan Infrastructure Law (BIL) funding.

The survey revealed similar concerns about applying for state programs for affordable housing: over one-third (38%) of municipalities reported not being aware of these programs, and of those who are aware, 46% have low or no confidence in applying for them. For both federal and state funding, the largest concerns are navigating funding opportunities and  the ongoing program-related compliance and reporting.

The projects being tackled by CML members with this influx of federal and state dollars are substantial and often cross-jurisdictional. Colorado cities and towns are working with partners, including neighboring municipalities, counties, housing authorities, higher education, special districts, and state and federal agencies to meet their community’s needs. In Larimer County, the Town of Estes Park is partnering with the Estes Valley Fire Protection District to leverage federal funding to implement the Estes Valley Fire Protection District Community Wildfire Protection Plan, updated in 2022 through a collaborative effort of the town and district, as well as county, state, and federal agencies.

Read more about multi-jurisdictional efforts to protect the Estes Valley from wildfire.

Affordable Housing

A lack of affordable housing first appeared as a top challenge reported by State of Our Cities and Towns survey respondents in the 2014 report, when it landed at number 6. It has been named as a top 3 challenge every year since the 2016 report, taking the top spot four of the last eight years. It remains a top 3 challenge in 2023.

Colorado cities and towns recognize that they have a key role in promoting affordable housing. Over 40% of respondents – including over half of Western Slope/Mountains municipalities and 45% of Front Range municipalities – representing almost three-quarters (72%) of the municipal population covered by the survey, are:

What do these measures look like in action?

Collaborating with counties, housing authorities, and other local governments on workforce and/or senior housing

Mixed-use zoning to encourage transit use and work-live environments

Micro-housing units or other permanent supportive housing options to provide homes to individuals experiencing homelessness

Cross-jurisdictional outreach teams to provide resources, services, and grants to individuals experiencing homelessness

Inclusionary zoning ordinance

Offering a density bonus

Rehabilitation of unoccupied homes

Waived tap fees

Multi-jurisdictional land-banking program

Use of vacant public land for affordable housing

Regional housing needs assessments and coordinated code updates

Building affordable housing themselves

The City of La Junta, in southeastern Colorado, and the City of Loveland, in northern Colorado, are 3.5 hours apart in distance and have a tenfold difference in population, but they are both facing a dearth of affordable workforce housing, especially for households between 70% and 120% area median income (AMI). In response, both cities have updated policies, worked with a variety of partners both public and private, and dedicated fiscal resources to produce housing units suitable for their community’s needs.

Read more about how the City of La Junta and the City of Loveland are encouraging the development of affordable housing in their respective communities.

The coming years will continue to bring challenges for our cities and towns, and as Colorado continues to grow, municipalities will have to become more creative in how they address these problems. As cities and towns experience strains from inflation and labor shortages, they will need continued support from partners like CML, the state, and neighboring jurisdictions to thrive.