Tariffs, Iran War, AI and more leads to Aurora’s $20 million budget hole, officials say

AURORA | The city is facing a more than $20 million budget shortfall for 2027 due to declining revenues and increasing costs. 

Greg Hays, Aurora’s budget manager, told city council at a May 9 workshop that economic projections so far indicate the city will have a budget hole in excess of $20 million next year and will likely need to implement budget cuts, reduce hiring and staff furloughs.

“The economic indicators came in and it’s not necessarily good news for us and we’re not balanced in 2027,” Hays said.

Hays said the three main factors for the city’s budget shortfall are lower revenues than predicted, national economic headwinds and increased costs.

Last year, the city ended with a $1.7 million surplus, but so far this year, sales tax collections through March are .7% lower, or $1.1 million, than at the same time period last year. Sales and use taxes are the most important revenue sources for the general fund, Hays said.

“If (sales and use tax are) falling, that’s a problem for us,” he said.

Last year, the city collected a total of almost $307 million in sales tax revenue, a 4.7% increase over 2024. Sales tax revenue consistently grew year over year since 2023. 

Hayes said a lot of national factors are causing price increases and lost revenue, like tariffs, the war in Iran, artificial intelligence causing job loss, extreme weather events and the K-shaped economy, which describes the phenomenon of increasing incomes for the wealthy and decreasing incomes for the poor.

“(Americans) saved during Covid, but they’re not saving now and why that’s important for Aurora specifically is that we don’t tax groceries, we’re taxing those bigger things that you buy,” Hays said. “So if you don’t have a savings account, you may not be going out and getting that car or that big TV.”

While sales and use taxes are falling, the city is collecting more from audit and interest revenues than they predicted, which is helping to offset the tax loss. The city also has sent aside funding for recessions, which it can lean on next year, though Hays noted that any money borrowed from the fund will have to be paid back.

Additionally, Hays said they would be looking to lower costs wherever possible.

“We’re going to be trying to decrease some of our costs, make sure people turn off their cars when they’re working, try to save gas and electricity,” he said.

City Manager Jason Batchelor said layoffs would be “the last resort we would want to go to.”

Councilmember Gianina Horton said the city should focus on reducing the impacts to staff as much as possible.

“Trying to reduce the amount of furlough days for employees, I hope is a top priority for leadership and that we make sure that we’re protecting the individuals who make our city run,” Horton said.

Councilmember Françoise Bergan questioned whether the city should be hiring council aides while facing a budget hole, a move that progressive council members have pushed for recently. The city is currently hiring three full-time council aides.

Batchelor said the three aides would not be adding staff but filling existing vacancies, adding that if the positions aren’t filled, the city would try to avoid the elimination of the positions because of the workload impact to other staff.

“The purpose behind me recommending filling these positions is to have dedicated resources to provide that support directly,” he said. 

Bergan responded that she still didn’t support hiring aides when the positions have been vacant for years.

“I don’t understand why we need those positions at this time during a deficit,” she said.

Another suggestion from Mayor Pro Tem Alison Coombs was for the city to consider asking voters to bring back an employment tax.

“That’s revenue we used to have ongoing every year and, as we do have employment growth, that revenue would have grown were it there,” Coombs said.

The city council repealed its occupational privilege tax, or so-called “head tax,” last year following a controversial proposal by former city councilmember Danielle Jurinsky. 

The tax required employees and their employers to each pay $2 per month per employee. The tax was initially intended more than 20 years ago to help fund city services for workers who might not contribute through other taxes. It was estimated to generate $5.9 million annually in 2025.

To reinstate the tax or something similar, the city would need voter approval.