The budget trap

Do you remember the first time you encountered a finger trap puzzle?

I was in elementary school. I remember feeling panicked as I tried to pull my fingers out of the tube. The harder I pulled, the more stuck my fingers became!

It took me a minute to realize I needed to push my fingers farther into the trap to get free. It was hard to believe such a counterintuitive approach could be effective.

The finger trap puzzle is an excellent analogy to what is happening with the city budget right now. Our available funds for maintaining programs, infrastructure, and services are shrinking due to the same inflation households are experiencing. For example, costs to replace aging fire-rescue equipment have tripled in the past seven years.

At the same time, like many households, our revenue is not growing.

In the face of our tightening budget, the intuitive response is to demand the city dedicate more funding to specific topics, such as:

• arts and culture programs
• outdoor dining and gathering spaces
• multiuse paths and protected bikeways
• a new South Boulder rec center
• additional snow plowing services
• additional pothole repairs
• tennis and pickleball courts
• buying the Iris ball fields from Boulder County
• wildfire protection
• services for people experiencing homelessness and
• public transportation.

The topics listed here are excellent ways to spend funds. I also aspire to fund them!

The problem is that we don't have enough money to fund the backlog of unfunded and underfunded programs, services, and infrastructure we have now.

Prioritizing any one area for additional funding without considering all the city's expenses will create a shrinking pool of funds for everything else on the list.

Like a finger trap, the harder we pull in one direction, the more stuck we will get.

Understanding the counterintuitive moves that will free us from the budget trap requires understanding how the city funds its programs, services, and infrastructure.

Sales and use tax

The city's largest single revenue source is sales and use taxes. These taxes are assessed on all sales, purchases, and leases of tangible personal property and taxable services sold or leased by persons engaged in business in the city.

For every dollar collected in sales tax revenue in Boulder, 43 cents go to the city:

• 19 cents go to the general fund
• 9 cents to Open Space
• 8 cents to Transportation
• 3 cents to Parks and Recreation
• 3 cents to Community, Culture, Resilience, and Safety, and
• 1 cent to the Arts, Culture, and Heritage fund.

That means 24 of the 43 cents we collect from every dollar of sales tax revenue go to a specific fund (56%). Only 19 cents is available in our shrinking pool of funds for general use (44%).

The other 57 cents of every dollar collected in sales tax revenue go to the state (32 cents), special districts (RTD and a Scientific and Cultural Facilities District) (12 cents), and Boulder County (13 cents).

Property tax

The city generates three times as much revenue from sales and use taxes as property taxes. In 2025, the anticipated sales and use tax revenue is ~$180M, and property tax revenue is ~$59M.

For every dollar of property tax collected in Boulder, the city receives 13 cents. Of these 13 cents:

• 9 cents go towards general city operations
• 2 cents go towards Public Safety
• 1 cent goes towards parks and recreation
• 1 cent goes towards the Community Housing Assistance Program.

This means that 4 of the 13 cents Boulder gets from every property tax dollar (31%) go to a specific fund. While nine cents of each property tax dollar (69%) is available for everything else, property tax revenue is much lower than sales and use tax revenue.

The other 87 cents of every property tax dollar go to Boulder Valley School District (55 cents), Boulder County (27 cents), and the Boulder Public Library District (4 cents). The other one cent goes to various programs, such as the Mile High Flood District.

How to get unstuck

Part of the city's Long-Term Financial Strategy is thoughtfully balancing its revenue sources to avoid being overly dependent on any one source, especially a source that is as vulnerable to economic shifts as sales and use tax.

The council will hear more about this topic and the process for generating a plan to better balance revenue sources on April 3.

Unfortunately, this approach is not a fast fix despite our urgent need to diversify our revenue sources. The city will spend the next two years engaging the public and developing a comprehensive transition plan that will unfold over decades.

However, moving too quickly to diversify revenue sources without a long-term strategy risks future generations getting stuck with similar problems.

The other necessary change is to move us away from dedicated funding rather than toward it. Although dedicating taxes to specific purposes can seem helpful, it's a quick way to get more stuck.

In the meantime, buy goods and services within city limits if you'd like to generate more revenue for arts and culture, parks and recreation facilities, transportation, and more. Now that you understand more about Boulder's revenue structure, consider how to adjust your spending habits to keep more money in our local businesses and nonprofits. Then, encourage others to do the same.