City of Boulder officials have identified a $6.5 million shortfall in the 2027 budget, setting the stage for another tight budget year as key sources of city revenue are not keeping pace with expenses.
The economic outlook builds on several years of relatively slow revenue growth. For the first time since the start of the Covid-19 pandemic, Boulder’s city manager last year recommended cuts to General Fund spending, the city’s largest source of discretionary money, to help close a $7.5 million shortfall in the 2026 budget.
For the latest potential gap, the city manager has asked all departments to prepare ongoing 4% reductions, with an emphasis on permanent cuts, according to a presentation from city officials to the Boulder City Council last week.
“It is a hard conversation that we will be having again,” City Manager Nuria Rivera-Vandermyde told members of the Boulder City Council last Thursday.
Sales tax revenue has flattened in recent years. In 2025, sales tax revenue, the city’s largest single source of money, came in below projections used in the budget. At the same time, the city has lowered its property tax revenue projections due to state legislation that reduced assessment rates.
One driver of the flattening sales tax is the shift to remote work, which has reduced downtown foot traffic and consumer spending. About 30% of downtown offices are vacant, according to a recent report by The Colorado Group, a local real estate firm.
Boulder is also experiencing the effects of a broader national slowdown in retail sales growth and rising inflation. Colorado gas prices rose 93% from January to May, reaching $4.50 per gallon, due to the war in Iran, according to a presentation from CU Boulder’s Leeds School of Business.
“People feel like they may need to hold back more or change their spending patterns,” Brian Lewandowski, executive director of the Business Research Division at the Leeds School of Business, told councilmembers.
Sales tax growth does appear to pick up slightly in 2028 based on projections. “We have slow but steady growth throughout the horizon,” Lewandowski said.
In 2025, Boulder’s year-over-year sales tax growth lagged behind Colorado and many Front Range communities, according to a Leeds School of Business presentation. Among the factors particular to Boulder, the Leeds School of Business cited the high cost of living, housing prices and the concentration of tech jobs, which have been hit by recent layoffs. The Trump administration is also seeking to dismantle the National Center for Atmospheric Research, and some uncertainty persists at the National Institute of Standards and Technology.
The Leeds School of Business cited the Sundance Film Festival, which will debut in Boulder in January 2027, as a potential revenue opportunity, but city officials said they will incorporate the festival into the sales tax model only when actual revenue from the event materializes.
“We are taking a realistic approach in year one of Sundance … and making sure that we do not overprogram any revenue that we have not yet received,” Scott Carpenter, the city’s principal budget analyst, told councilmembers last week.
The city has separately identified $400 million in unfunded needs for facility renovations or replacements, including repairs for its recreation centers. Councilmembers last week directed city officials to poll likely voters on potential measures to raise property taxes and take on debt to help cover this funding gap.
The City lost approx. $75,000 annually in sales tax when it allowed the 50-year old Boulder Arts & Crafts Gallery to close in 2021 after the pandemic because the landmark shop couldn’t afford the exorbitant monthly rent of $30K+ it was being charged by the landlord. Big loss not only for the city but for artists, Boulderites, and tourists. The building sat empty for years. Doubting Kuhl does that well for the City.
Just what Boulder needs – yet another outdoor retailer catering to the wealthy and looking for a tax write off. The city has no idea how to prevent Boulder from deteriorating into a retail Disneyland for tourists. They can’t be bothered to care let alone figure out how to intervene.
The Boulder Arts and Crafts Gallery was a cooperative retail venture that sold local artist’s work and was manned by the artists who sold there. It was a great place to visit and buy a unique piece of art and tourists and Boulder residents shopped there.
Boulder has lost a lot of its art galleries and exhibiting spaces in recent years due to soaring rents. There is a “pop up” gallery on east Pearl street in one the empty new retail spaces built in Transit Village operated by Boulder Open Studios. Boulder Open Studios was able to secure a two-year lease. The city arts commission would be wise to help secure more stable venues for the arts in Boulder. It will help with tax revenues and support local artists.
Commercial and residential vacancy tax!
2025 sales tax revenue “came in below projections,” and there are projections for “‘slow but steady growth throughout the horizon.’” Has any type of external audit been done of the city’s projection systems—financial, journalistic, comparison to comparable cities, etc.?
Commercial Real Estate landlords are strangling this city with their greed. What policy levers do we have to incentivize leasing out these units at reasonable rates to small businesses (that we can actually collect sales tax from!) – and disincentivize extortionist rent increases that are driving otherwise healthy businesses out. I’ve considered opening a brick and mortar for my online shop – but the commercial rents for even a small space are just mind boggling.
It’s not easy to incentivize leasing retail space.
https://archive.strongtowns.org/journal/2025/5/21/why-do-commercial-spaces-sit-vacant
So, in the example given in the link, the operator is on the hook for $140k/year because his business is only 50% rented and he’s not pulling in enough income stream to satisfy the loan. One thing that’s clear is that this is the fault of both the bank and the operator. The loan was based on faulty assumptions, or the market changed due to unforeseeable circumstances. The operator assumed he’d be making $1 million/year on rents, and the bank negotiated a cap rate of 5%. Why so pie in the sky high, though? Greed? Stupidity? Lack of caution? They are both to blame for the fiasco of not being able to meet the terms of the loan since they negotiated and accepted the price. In this scenario why not let them both take their lumps.? The operator should default and declare bankruptcy, then the bank which would take a lesser hit should learn its lesson and not negotiate such high loan terms for future operators! Maybe some semblance of normalcy could then be restored.
Not knowing much about the economics of the financial system, it just seems wild to me that the whole local economy is held hostage by these inaccurate predictions that are set in stone. But, hey, that’s the way the system is designed for the benefit of the banks. We need community banks in CO that are beholden to the community instead of these bloodsuckers looking for big bucks to fund big buildings elsewhere.
I would love to see many of the empty downtown commercial spaces used for literally any productive purpose, ideally for ones that allow members of this community to run businesses or sell their creations. Instead, the handshakes between owners and banks will never let this happen. The only thing weird about Boulder is how we let 30% of our potential fall into the hands of wealth-hoarding class.
Oh, and the contracts with Flock will not pull us out of this deficit.