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Pueblo briefed on Colorado special session, Prop 123 funding risk
Summary
City consultants and councilors discussed a state special session driven by a roughly $728 million shortfall and how proposed changes to tax credits, reserves and spending could affect Pueblo’s access to affordable housing funds under Proposition 123 and other state grants.
City officials on Aug. 25 were briefed on a Colorado special legislative session called to close an estimated $728 million shortfall and on risks that state changes could make Pueblo temporarily ineligible for certain affordable-housing funds.
The briefing, delivered by consultants from Capital Success Group, described a three-part approach the legislature is exploring: eliminating or reducing several business-related tax credits, drawing down the state reserve and identifying spending cuts. Ryan, a representative of Capital Success Group, said the legislature “worked through the weekend” and that consultants “thought they might be able to finish by tonight, but there's still a couple of lingering issues.”
The panel told councilors the state is considering eliminating a pass‑through business deduction, ending an insurance company regional home‑office credit and ending a vendor fee rebate for businesses, among other changes. The consultants said those moves could cover part of the gap, and drawing down the reserve from about 15% toward 13% would free additional funds. A remaining portion of the shortfall is expected to be addressed with spending reductions the Office of State Planning and Budget and the Joint Budget Committee will develop in the coming days.
Councilors asked for follow‑up analysis of which programs and departments could face cuts and how Pueblo would be affected. Councilor Martinez asked which specific tax credits were targeted; Alec, another Capital Success Group representative, listed the pass‑through deduction (estimated at about $45 million), an insurance company home‑office credit, a vendor fee rebate and changes aimed at preventing international profit shifting. Alec said some family affordability credits could be reduced or unavailable in 2026 and 2027 under current revenue forecasts.
The consultants also briefed councilors on Proposition 123, the statewide measure that dedicates 0.1% of state income tax to affordable housing. Alec said the Prop 123 formula requires local jurisdictions to increase their affordable housing stock by 3% annually for three years to remain eligible for the DOLA grant portion of the funds. He told the council the flat 3% growth requirement “doesn't account for cities like Pueblo that already provide a big share of affordable housing” and that the city is pursuing a legislative fix to the formula in the next session.
Councilor Flores raised health‑policy questions tied to the special session, noting reports that roughly 200,000 people statewide could lose Medicaid eligibility under federal changes and asking how pending health bills could reduce that impact. The presenters said they will deliver a focused report on the health‑bill proposals and their likely local effects, including expected premium increases and proposed offsets such as use of unclaimed property funds.
No formal action was taken at the meeting; councilors directed staff and the consultants to provide more detailed briefings on (1) the specific bills being debated in the special session, (2) projected impacts on Pueblo budgets and grants and (3) the effect of health‑related bills on local hospitals and residents.
The council requested that staff circulate materials from the Joint Budget Committee and presentations from the Office of State Planning and Budget once they are available and that the consultants provide periodic updates while the special session remains active.
