"As a result of a smart, conservative fiscal philosophy shared by my administration and the Denver city council, coupled with a decade of strong economic conditions, we now enjoy a more diversified and stable economy that has helped to significantly improve our city's financial condition," Webb adds. "Our economy is now defined by a variety of large industries and small businesses.''

Denver's economic growth was fueled by construction, telecommunications, tourism, and rapid in-migration and during this period, the general fund's carryover balance has increased reserves from $30 million in the late 1980's to over $103 million at the end of 2001.

During this period of strong economic growth, annual growth in sales tax has averaged 7.5% with a high of 13.5% in 1998.

"We also recognize that the uncertainty of the economy requires us to take bold steps to further protect the city,'' Webb says.

Last year, Moody's bond rating agency upgraded the city's bond rating fromAa2 to Aa1. In that rating, Moody's cited Denver's sound fiscal managementin times of both slow and strong economic growth.

"Contrary to what some would like the public to believe, the sky is not falling,'' Webb says. ''The sky may be a little cloudy, but every day, the entire nation is beginning to see more and more sunlight peeking out. And Denver is more fortunate than most cities around the nation. We've seen more blue skies and sunny days over the past decade than most cities and we've prepared ourselves to weather a storm better than most and this has been substantiated by third-party bond-rating agencies as well as current reserves.''

Webb says that strong sales tax growth allowed the city to transfer $91 million over a three-year period from the general fund to the capital fund to address critical capital needs while at the same time taking a conservative approach to increasing operating costs, knowing that the rate of extraordinary economic growth could not be sustained.

The city may move forward on fewer construction projects than in the past.

Webb ordered the mayor's office and finance staff to perform a comprehensive evaluation of outstanding capital project funds and needs.

For the first time since 1988, sales tax revenue did not increase from 2000 to 2001. The preliminary estimate of 2001 total General fund sales tax revenue is $387 million, which is $9 million below the revised forecast of $396 million. Since August, monthly sales tax collections in 2001 declined from 2000. The most recent figures indicate that January 2002 sales tax collections are less than those for 2001.

According to Margaret Browne, the city's finance director, the 2001 recession and the tragic events of Sept. 11th hit certain industries particularly hard, including travel, tourism, and telecommunications.

Denver ranks fourth among cities' exposure to telecommunications that now has the greatest excess capacity of any industry nationally.

"There is some indication of improvement in the national economy," Browne says. "No matter when the recovery occurs, economists agree that the recovery will be slow. The slow down in the economy was swift and dramatic and it is not known when the local recovery will occur or how strong the recovery will be. Given this situation, we must take action now to ensure that the city maintains its strong financial position."

The city is reducing the 2002 sales tax forecast by $15 million, from $412 million to $397 million and is identifying other general fund revenue sources that need to be reduced by an additional $5 million.

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Mayor Says City Surviving Economic Slump

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