Funding the Future: An Origin Story

Boulder's revenue instability, beyond that associated with the erratic business cycle of a free market economy, is a product of Colorado's public finance structure and policy choices made by the city.

(Blue Ribbon Commission on Revenue Stabilization, Report to City Council, January 15, 2008)

Boulder's financial transformation began almost 20 years ago. From 1950-1980, the city had experienced enormous population and revenue growth. Service levels expanded rapidly. By the early 2000s, population growth and revenue were slowing. Forward-thinking city leaders recognized the threat this revenue slowdown posed to service delivery for future residents, businesses, and workers.

The 2006-2007 Council chose "financial stabilization" as a work plan priority and designated a Blue Ribbon Commission comprised of community leaders and public finance experts to establish a long-term, balanced, and stable revenue stream for Boulder that could accomplish public priorities while allowing flexibility to meet the city's varied and changing needs over the next 24 years.

Over 18 months, the Commission investigated the city's financial challenges. It generated a wealth of data and conclusions, summarized in the 2008 Blue Ribbon Commission on Revenue Stabilization Report.

If you have time to read a 54-page report with 11 appendices, you'll have a solid foundation for understanding the city's financial outlook in 2025.

If you don't have time, here are some of my takeaways:

• Boulder's revenue was projected to grow by about 3% annually through 2030 (vs. approximately 4% annually for expenditures), leaving a $9oM gap by 2030.
• Relying heavily on a volatile revenue source like sales tax posed a significant risk to the city's programs and services, especially given modest population growth and a shift toward an older population.
• Dedicating revenues to specific sources (e.g., open space) limited the city's flexibility to address emerging needs or shifting priorities.
• New services would require additional revenue, productivity gains, or eliminating existing services and programs.
• The city would need to diversify its revenue sources and avoid dedicated funding, except for capital purchases and construction.

The Commission identified some specific things to consider, such as not tying infrastructure maintenance or personnel costs to expiring revenue sources (e.g., a tax that ended in 10-15 years), only using debt financing in specific circumstances (e.g., for major capital construction projects), and considering big box retailers to diversify sales tax revenues.

The Commission also assessed dozens of revenue sources based on a clear rubric and recommended developing a comprehensive financial plan.

Twenty years, a Great Recession, and a global pandemic later, we are ready to go!

What struck me most in rereading these historical documents was their conclusion that a primary change we need to make is a cultural change.

The 2010 Blue Ribbon Commission Phase II Report stated:

The organization, both internally and from an external political perspective, must change in order to adapt and ensure its long-range financial sustainability. Specifically, the city must change its long-standing practices and culture of

• Expecting that the city will be "everything to everyone"
• Reacting to interest groups that advocate for specific city services without considering other service needs
• Fostering a silo mentality where each department and service seeks to protect its own budget rather than viewing its budget as part of the total city budget
• Viewing city services in isolation
• Considering the majority of city services to be essential or core rather than embracing a more rigorous prioritization

The 2010 report outlined a new budgeting process that would help shift this culture by prioritizing city services based on their individual and measurable contributions toward overarching city goals, incorporating broad community input to inform the budgeting process, and improving transparency to inform trade-off conversations and decisions.

The city began implementing these budget process recommendations in 2019, shortly before the pandemic. This year, we should have measurable impacts for every city service and program to inform trade-off conversations for the 2026 budget. This is crucial progress.

Boulder is now ready to create a Long-Term Financial Strategy. In the coming months, the city will begin extensive community conversations about how we fund the next 25 years of our city's future. I hope you all will participate.

I'll write more about these issues in the coming months as the city expands these conversations. In the meantime, I'll leave you with another quote from the 2010 Blue Ribbon Commission Phase II report, which emphasizes the challenge, and importance, of working together to fund our future:

Implementation of the strategies described in this report will not be easy and will not occur over night. It will take a commitment on the part of all city stakeholders, require difficult decisions and will have to be adapted and adjusted as new information becomes available... The looming fiscal constraints will require changes beyond just managing the city's spending and budget. In order for these strategies to be successful, it is critical that the city organization engage the community in a robust public process. This process must be a two-way dialogue. The city organization needs to inform the community regarding current and long-range financial challenges and the corresponding difficult trade-off decisions; and the community needs to inform the city regarding which services are most important on a comprehensive, citywide basis. The traditional practice of each group protecting its own political turf and self interest does not produce positive results. This will lead only to viewing services in isolation rather than the balanced perspective necessary to meet the needs of the broader community.