Fort Collins staff projects another difficult budget cycle despite steady tax growth

Fort Collins finance staff told City Council on May 26 that the city is heading into another difficult 2027-28 budget cycle, using cautious tax-revenue assumptions and still expecting a governmental-fund shortfall in roughly the same range previously discussed. Staff said the baseline outlook points to a gap similar to the $15.5 million shortfall addressed in the 2026 revision process, with some increase tied to higher expected compensation costs.

In the revenue presentation, staff said sales and use tax make up about half of Fort Collins’ governmental revenue and remain the city’s most flexible major funding source. Chris Conway said the city is forecasting 2% sales-tax growth in both 2027 and 2028 under its baseline scenario, while use-tax growth is projected at 8% in 2027 and 2% in 2028. He said collections are running above budget so far in 2026, with sales and use tax combined $5.6 million over budget year to date, but he cautioned that January accounted for about half of that overage and that monthly performance has been uneven.

Conway said Fort Collins is seeing softening across many sales-tax categories except those dominated by online retailers. He pointed to employer uncertainty, weaker economic sentiment and inconsistent month-to-month trends as reasons for taking a conservative approach. He also said Fort Collins has one of the higher combined sales-tax rates in Northern Colorado at 8.3%.

On property tax, Conway said staff is projecting 4% growth in 2027 and flat growth in 2028. Property tax accounts for about 10% of governmental revenue, he said, though roughly two-thirds of the city’s share goes to the Poudre Fire Authority under an intergovernmental agreement. The 2027 increase reflects final valuation information that came in above the amount budgeted for 2026.

A finance staff member later told council that even with some revenue growth, the city still needs to bring ongoing costs and service levels into line with available revenue. Staff are developing about $20 million in reduction proposals to close the gap, focusing on areas such as cost recovery, operational efficiencies, vacant positions and possible service-level tradeoffs. More detailed discussions of those tradeoffs are expected in July, with the recommended budget scheduled for release in September.