Cortez officials revealed in October that a city sales tax to fund the Recreation Center was collected at a higher rate, even after voters approved a reduction in 2018.
City Manager Drew Sanders told City Council in mid-October that the collection rate of 0.55% – meant to be reduced to 0.35% in 2018 – had gone unnoticed for years.
“We have been collecting at the 0.55% rate all along, unbeknownst to any of the current staff or the current council,” Sanders said during the Oct. 14 meeting. “But because we found this, we are obligated to bring it forward and present it to council and the community.”
Put differently, for every $10 spent at a Cortez business, 5.5 cents have gone to the Cortez Recreation Center, even after voters opted “yes” in 2018 for that amount to be 3.5 cents.
Based on preliminary calculations made by The Journal, the city might have overcollected an estimated $2.6 million from the start of 2022 until September this year.
Cortez’s financial statements from 2017 to 2021 were not immediately available on the city’s website. The Journal filed a Colorado Open Records Act request the statements Monday morning.
Sanders told The Journal Monday afternoon that the city had not yet calculated how much was over over-collected, so he could not comment on the accuracy of our estimate.
“That's not our focus right now,” he said. “Our focus is how to address it and get it dealt with immediately. This is something that happened before we were here.”
City Council will hold a public hearing at its Wednesday, Nov. 12 meeting, during which elected officials will likely pass an ordinance to reinstate the 0.35% sales tax rate approved by voters in 2018. The previously seated City Council was supposed to have passed an ordinance putting the approved ballot measure in place. That never occurred.
Some questions remain unanswered. It’s still unclear how the error persisted, how much exactly was over-collected, and what other approaches the city might take to address the mistake.
“We will investigate and try to figure out exactly how much it was,” Sanders said. “We want to be open with the community.”
Sanders told councilors that voters approved a measure in 2001 allowing for a 0.55% sales tax intended to help construct the Cortez Recreation Center. Money from the tax was supposed to keep the building running and pay off debts tied to it.
The tax dollars used to fund the 46,000-square-foot center were scheduled to expire in 2018. In April 2018, Cortez voters approved a measure to reduce the sales tax by 0.20 percentage points, Sanders said.
The Journal reported that the vote passed 1,009 to 465.
Sanders said City Council at the time was supposed to pass an ordinance amending the tax, following the decision made by voters.
“During the budget preparation this year, we inadvertently came across this and realized that never occurred,” he said during the Oct. 14 meeting, adding that the mistake was discovered three weeks prior.
The additional 2 cents per $10 spent have gone entirely to operating the Recreation Center, Sanders said. Debts associated with the center’s development were paid off in 2022, he said.
“We cannot and have not used that for other funding streams,” Sanders told The Journal.
On Wednesday, Nov. 12, City Council is slated to consider amending the city code – through Ordinance No. 1350, Series 2025 – establishing the sales tax approved in 2018. That date will include time for a public hearing.
Oct. 28 was the original date set for the ordinance to be considered on second reading, but a processing error led to delays, Sanders said during the evening’s meeting.
“As far as we can tell no, there is not a statutory penalty of any kind,” Sanders said Monday. “But that doesn’t make it right.”
Sanders said that correcting for the sales tax mistake would be tricky. Tourists visiting Mesa Verde National Park and other attractions pass through Cortez, with various estimates pinning dollars spent to the tens of millions. Plenty of that money inevitably goes into the rec center sales tax.
The city has not been in touch with any relevant Colorado agency about the matter, such as the Department of Local Affairs, Sanders said.
Cortez Finance Director Randy Bailey responded to The Journal in an email last week that more comment would have to wait until the week of Nov. 10. Bailey did not respond to a request for comment Monday.
“I will add, this ordinance was brought forth with urgency for council consideration given the date of the action authorizing it, and the rapidly closing window to implement the change at the start of the fiscal calendar should council approve the ordinance on November 12th, and desire the earliest effective date possible,” Bailey said.
“Researching the history of this matter in detail will be our focus after the ordinance is approved, and we have a plan for implementation by the effective date,” he said.
“The city was in trouble back then to the tune of being behind five years in audits,” Sanders said, referring to Cortez in 2018. “We inadvertently found this problem. I called the council immediately.”
On Oct. 28, Bailey told City Council that the 2026 proposed budget presentation was accommodating the shift in sales tax, given the ordinance likely to be passed by councilors.
“We’ve also adjusted downward the sales and tax revenue forecast for the recreation center fund in light of Ordinance 1350 that is currently in process,” Bailey said.
