Denver’s financial outlook for the next five years relies heavily on its five-year revenue forecast.

And that forecast, in turn, depends on the final numbers approved in the city’s 2026 spending plan, which is expected on Nov. 10.

City budget officials said they first started seeing “a lot of anomalies” in revenue projections back in 2023 – anomalies that eventually would lead to the city revising its 2025 forecast and Mayor Mike Johnston scrambling to fill a $250 million hole in the city’s current and future budget.

They credit the use of the extended forecast in helping identify indicators, which, Johnston has said, played an essential part in curbing the number of layoffs and preventing the city’s budget woes from worsening.

City Budget Director Justin Sykes told members of the city’s Finance and Budget Committee on Tuesday that the purpose of the five-year revenue forecast is “not to set policy, but to serve as an objective tool for identifying trends and indicators that can help inform future city decisions.”

Nor does it lock in any future-year funding decisions.

There are several reasons the city prepares a five-year revenue forecast, Sykes said. First, it establishes a baseline projection of what to expect if current economic trends persist. 

Second, it offers historical insight into the city’s revenue and expenditure patterns. Finally, it provides an early warning of any potential gaps in the future.

Focusing on the city’s top 35 revenue streams – which comprise approximately 95% of the general fund revenue – the forecast also offers context for policy decisions and future-year budget planning.

“The city prepares a new five-year forecast each year in early November, which is included in the final budget book,” said Laura Swartz, spokesperson for the city’s Department of Finance. 

Denver is now on track to finalize its new spending plan next month, with budget experts projecting the city’s 2026 revenue to be $1.66 billion, slightly less than what the city forecast for 2025.

According to the Denver Department of Finance, projected revenue for 2026 is comprised of the following:

Sales and use tax: $928.4 million

Property tax: $195 million

Other sources: $540.9 million

The 2025 budget book provides a table of projected general fund revenues, with baseline, optimistic, and pessimistic revenue figures.

But those figures are no longer valid and must be recalculated.

Those numbers, while still available in the 2025 budget book, are now a year old, and Swartz said they “no longer reflect the actions taken in our current budget year – which have significantly reduced expenditures.”

“If you think back to a year ago, we were projecting that our general fund revenues would be higher, and so that was based on the best available information at the time when there were new tariffs declared, when the economic uncertainty that resulted from that kind of came to fruition,” Sykes said. “We revised down that projection for 2025, the current year, by $59 million, and so that is something that, as we’re getting new information, we are incorporating into those projections.”

When the 2026 budget is finalized, the five-year forecast will also be updated with new projections that go through 2030, incorporating figures from the 2026 adopted budget.

City officials have blamed flattening city revenues, driven — they said — by national economic uncertainty and rising costs, for much of Denver’s fiscal woes. They argued that, with early action to slow hiring in 2024, reduce the size of government in the 2025 budget and freeze hiring this year, the city managed to minimize the impact to employees and public services significantly.

Because of those early adjustments, the layoffs will only affect “171 employees, which represents 1.6% of the workforce,” city officials said in August.

Others cite Johnston’s spending on illegal immigrants and sheltering the homeless as factors contributing to the city’s deficit.

Johnston described his proposed 2026 spending plan as “cut to the bone,” calling the 5.8% reduction in spending the “most conservative” in 15 years.

“If there are any amendments to the budget that add cuts to any of the departments,” Johnston cautioned when he released his proposed budget in September, “those would directly either cut these core services or require more limits, because there is nothing left to cut in these departments…”

Swartz added, “The mayor’s 2026 budget will significantly reduce city spending and increase the city’s financial reserves – ensuring Denver is well-positioned to remain resilient if economic uncertainty continues beyond 2026. Identifying sustainable cost savings was an important and strategic focus for the city as part of the budgeting process this year.”