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Westminster staff outline budget shortfall, heavy reliance on sales tax and $4.5 million gap in 2025 projections
Summary
City staff told council members at a budget workshop that Westminster's operating budget depends heavily on sales and use tax and that current forecasts show a roughly $4.5 million shortfall versus the 2025 budget; staff flagged tight reserves and asked council to prioritize services for the 2026 budget.
City staff told the Westminster City Council at a May budget workshop that the city's finances remain solid but face narrowing margins and a potential near-term shortfall.
The city began the year with a projected $125,000,000 across all funds and budgeted revenues of $369,000,000 against expenses of $371,500,000, leaving much of the difference to be covered by fund balance, staff said. Across all funds, sales and use tax comprise about 40% of revenues; within the general fund sales and use tax account for about 64% of the general fund's revenue mix.
The city highlighted the degree to which that concentration creates sensitivity to consumer spending and construction cycles. Staff summarized quarterly financial results through March and said sales tax collections were near projections year‑to‑date but that March collections (vendor remittances for February purchases) showed mixed monthly performance. Use tax, driven by one‑time construction activity and vehicle purchases, was stronger than 2024 through the first quarter.
University of Colorado Leeds (CU Leeds) economic forecasts the city commissioned projected modest national growth but flagged a potential short, mild recession. Using CU Leeds' baseline, staff reported a projected difference between the city's 2025 budgeted sales and use tax ($136.9 million) and the forecasted collections ($132.3 million) of about $4.5 million. Staff said they will track receipts closely for the remainder of the year and adjust the 2026 proposal as needed.
Staff also reviewed reserves and structure: the city seeks to maintain both a general fund reserve and a general fund stabilization reserve; staff listed approximate beginning‑of‑year reserves of about $20 million in general reserves and $7 million in stabilization reserves (roughly $27 million total) and said the general fund stabilization target is typically in the 5–10% range of sales and use tax revenues.
Why it matters: Westminster's heavy reliance on sales and use tax (rather than property tax) means a slowdown in consumer spending or construction activity can create immediate budget pressure. Staff told council the current budget cycle is unique: early projections show little or no general fund carryover into 2026, which reduces discretionary flexibility and places a premium on council direction about priorities.
What happens next: Staff said it will return to council with more detailed scenarios and recommended next steps on June 2, including phased funding options and sensitivity analysis built from the CU Leeds baseline forecasts.
