The city of Pueblo is considering raising its sales tax in an effort to address a “significant” municipal budget shortfall that appears to be growing.
In a preliminary vote Monday, city council members voted 5-2 to send the proposed ordinance to the November general election ballot. A public hearing and second council vote to finalize the proposal and send it to voters is expected on August 11.
If approved by voters, the measure would increase the city’s base sales tax for the first time in more than 50 years, from 3 percent to 4 percent. A background paper on the proposal said local sales tax revenues have declined in recent quarters and may continue to decline “due to decreased consumer spending within the city.” Without a tax increase, the city would be required to pull money from its reserves to balance the budget, the paper said.
In her State of the City address in January, Pueblo Mayor Heather Graham said the budget deficit for the year was projected to be $8.6 million. Looking at sales tax receipts collected through May, the city is raising the projected deficit to as much as $12 million, according to staff.
The background paper on the proposal estimated the tax increase would generate up to $26 million in additional annual revenue. The base sales tax increase would remain in place unless amended in a future vote.
Whether or not the increase to the base sales tax makes it to the November ballot, Pueblo voters already will have a separate sales tax decision to make that month. A 0.5 percent sales tax specifically earmarked to support local economic development is on track to sunset at the end of 2026. Voters in November will decide whether to extend that tax for another five years.
