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Denver mayor announces $226M budget gap, mandatory furloughs for 9K city employees

Hancock, 12/13 councilmembers say they'll voluntarily take furlough days
michael hancock mayor hancock covid coronavirus budget
Posted at 3:16 PM, May 14, 2020

DENVER – More than half of Denver’s 12,000 city employees will have to take eight furlough days by the end of the year as the city tries to fix a forecasted $226 million shortfall in revenue because of the COVID-19 outbreak.

Mayor Michael Hancock formally announced the mandatory furloughs and the revenue shortfall at a news conference Thursday afternoon.

Denver mayor announces mandatory furloughs for 7K city employees

He said that all of the city’s roughly 9,000 non-uniformed workers would have to take the eight days by the end of the year – five that will be fixed which coincide with national holidays and three more of each employee’s choice, Hancock said. The 3,000 uniformed employees are covered by collective bargaining agreements.

During the news conference, Hancock and Chief Financial Officer Brendan Hanlon misspoke, a city spokesperson said late Thursday afternoon. They had originally said 7,000 non-uniformed workers would have to take furlough days, but the spokesperson said that number was actually 9,000. The actual number of uniformed employees who will not have to take furlough days is 3,000 and not 5,000 as Hanlon originally said.

The mayor said he would also be taking the furlough days as well in solidarity with city employees, and 12 of the 13 city council members – save for Candi CdeBaca – will be voluntarily taking the furloughs as well and will reimburse the General Fund for the equivalent of eight days of post-tax salary since elected officials' salaries are not allowed to be changed under most circumstances.

CdeBaca said in a statement that she did not believe cuts across the board were addressing inequality.

“Rather than surrendering funds that will not make any difference to the Mayor’s excessive budget, I am keeping our limited resources in District 9, which has the highest concentration of homelessness and poverty in the city, in order to serve the more than 75,000 constituents here,” she said in a statement. “My office will use what would be our furlough savings to continue giving back directly to those who need it most in our community.”

Hancock said that the city was doing furloughs across the board in the same way as it did during the Great Recession. In 2009, city workers had to take four furlough days, and they had to take five furlough days per year in 2010, 2011 and 2012, the city said.

“Taking these furlough days helps the City by returning our income for those days, but also demonstrates our support for the dedicated employees who continue work hard through the pandemic and now face mandatory unpaid leave,” Council President Jolon Clark said in a statement.

The City Council and mayor both said the furloughs will help save the city $16 million – just part of the $226 million budget gap. The city forecast a $180 million gap last month.

Hancock and Chief Financial Officer Brendan Hanlon said other efforts to close the gap include reduced hiring by city agencies, requested 7.5% agency reductions and savings from closing buildings and other methods. Hancock also implored Congress to pass direct funding to states and cities in the next funding relief package, as has urged the governor, the state's U.S. senators and legislative leaders.

Hanlon said that the budget gap was being driven by major hits to sales and use taxes, the lodgers' tax and parking revenue while the stay-at-home order was in effect and people were not shopping or traveling, and the city was not collecting parking fees.

He said that Denver financial officials were modeling several different scenarios for economic recovery but are hoping and planning that the recovery will be U-shaped, with a quick decline in tax collections but a moderate recovery over the next few years.

But General Fund revenue is already down 10.5% this year, which is driven by the sales and lodgers’ taxes – which are both also down significantly. The lodgers’ tax revenue to the general fund as decreased by 62.3% so far this year and sales tax toward the General Fund has decreased by 16.8%.

Both of those figures are much steeper decreases the city saw during the Great Recession.

Hanlon also showed a presentation showing that consumer activity at food services and drinking places is down by 50% when comparing March 2020 to March 2019, and that consumer activity involving health and personal care stores and motor vehicle and parts dealers are down in Denver far more than they are nationwide.

But consumer activity in some other areas – like online retailers and food and beverage stores – were up far more in Denver year-over-year than they are nationwide.

Still, Hanlon cautioned that April was worse than March, with the stay-at-home order in effect through the entire month rather than just the first half. He said April was “expected to be one of the worst months ever nationally and here at home.”

He said that the economic impacts of COVID-19 are likely to dwarf those of the Great Recession, when he was also working on the city’s financial team.

“[The Great Recession] was what I expected to be the most challenging period of time in my career,” Hanlon said. “I could have never imagined seeing the numbers we’re seeing now.”

He said that $261 million the city had set aside in emergency reserves will soften the blow and that the city could use up to $100 million of that money this year to do so. He and Hancock said that those reserves had also kept a AAA credit rating for the city in place.

But Hanlon said that addressing the gap was still going to be “extremely, extremely difficult” and that the financial team was going to “lean in as hard as we can.”

Editor's Note: This post has been updated to show that the city misspoke when it talked about the number of uniformed vs. non-uniformed employees. There are 9,000 non=uniformed who will have to take furlough days and 3,000 uniformed employees who will not have to take furlough days, the city said.