While most municipalities have recovered from the fiscal hardships of 2020, familiar challenges remain. Colorado Municipal League: 2022 State of Our Cities & Towns Report
Photo by Saheb Creation
The COVID-19 pandemic brought an unprecedented level of uncertainty for municipalities across the state, and 2020 was fraught with fiscal challenges for Colorado’s cities and towns. Findings from the 2022 Colorado Municipal League State of Our Cities & Towns survey show that thanks to robust federal assistance and higher than expected revenue, most municipalities have quickly recovered from the fiscal hardships of 2020. However, familiar challenges remain. Lack of affordable housing is the largest issue facing municipalities in 2022, followed by a tight labor market and unfunded street/road maintenance. Looking ahead to the next five years, housing affordability remains the number one challenge, followed by budget constraints, policing, and transportation funding.
Top challenges for the next five years
Reported by Colorado’s municipalities
Now in its 14th year, the Colorado Municipal League’s State of Our Cities & Towns survey seeks to better understand the challenges facing Colorado cities and towns and the innovative solutions municipal officials implement in response.
The 2022 survey, administered from August to October 2021, inquired about the continued operational and fiscal impacts of COVID-19 as well as the ongoing challenges related to housing supply and affordability, public safety, and infrastructure funding.
Key Economic Findings
A majority of respondents reported a better overall economy (51%) in 2021 as compared to 2020 and better revenue (57%) as compared to 2020.
One main component of the higher revenue reported by municipalities is an increase in sales and use taxes in 2021. Due to the watershed decision inSouth Dakota v. Wayfair, and the adoption of a new sales tax system in Colorado, out-of-state retailers began to pay regional and local sales tax in 2019. Through the COVID-19 pandemic, there was a dramatic increase in online shopping, bringing out-of-state sales tax straight to Colorado’s cities and towns.
Another component leading to the quick economic recovery was the federal investment in local governments through the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the American Rescue Plan Act (ARPA).
83% of respondents reported that the funding available through the Cares Act and ARPA sufficiently addressed their municipality’s needs.
When asked how they plan to use ARPA funds, respondents answered*:
One pressing issue for municipalities across the state looking towards 2022 is infrastructure costs.
Large municipalities are more concerned about transportation funding than smaller towns and cities, with 86% of municipalities with populations of 25,000 or more noting this concern. However, a lack of sustainable transportation funding has been an ongoing issue throughout the state. And during the 2021 legislative session, the General Assembly passed Senate Bill 21-260, functionally changing how the state funds transportation projects. Early estimates show that local governments will see a dramatic increase in funds earmarked for transportation projects and maintenance through a series of new and expanded enterprises, hopefully addressing the shortfall in funds available for road and streets in cities and towns.
Larger municipalities reported that the ability to invest in public health infrastructure and address negative economic impacts caused by COVID-19 was only made possible through federal stimulus. Smaller municipalities reported that stimulus funds made it possible to invest in water and sewer infrastructure.
Municipal officials do not have the option or the desire to shy away from difficulties.
As seen in Thornton, Steamboat Springs, and Mancos, Colorado, public servants across the state are rising to the occasion to respond to these challenges, whether the challenges are emerging, like the public health emergency of the last two years; familiar, like the housing supply and affordability crisis; or evolving, like the expectations and demands placed on public safety agencies.
When the novel coronavirus arrived in Colorado in early 2020, the city relied on Thornton Fire (TFD), which provides fire and emergency medical services and serves as the city’s hazardous materials and infection control expert, to respond.
Lack of affordable housing is the largest issue facing municipalities in 2022 and into the next five years. Most municipalities report that housing supply issues have worsened over the past three years.
Municipalities experience police recruitment and retention difficulty. Respondents reported the impact of housing supply and affordability when it comes to attracting and retaining candidates.
Though 2020 brought great uncertainty and fiscal strife for cities and towns, 2021 was the bounceback year municipalities needed. Thanks to robust federal assistance and higher than expected revenue, Colorado’s cities and towns have been able to stave off the worst of the pandemic’s hardships. However, in 2022 and beyond municipalities will face housing and labor shortages. On top of that, local governments are beginning to see strains from increased construction costs, supply chain challenges, and labor shortages, making much needed investments in housing and infrastructure more difficult. Municipalities’ general funds may have recovered from the cuts they faced in 2020, but challenges still lie ahead.