Denver Health spent much of the last year laying the groundwork for a proposed sales tax increase that its leaders see as crucial for shoring up the system’s long-strained budget.
But just as the Denver City Council was considering sending that tax to the ballot in June, news emerged that Mayor Mike Johnston was teeing up an even bigger ask for voters: a new dedicated sales tax — the largest in city history — to pay for his affordable housing initiatives.
Now both are on Denver’s November ballot, and if both pass they would add a combined 0.84 percentage points to the city’s effective 8.81% sales tax rate — pushing it to 9.65%, among the higher rates in the state. At least two council members have expressed worry that asking voters for too much at once could sabotage the chances of getting Denver Health, the city’s safety-net hospital, out of financial trouble.
Denver Health lost about $30 million over the last three years. Executives have said that if it doesn’t receive more stable funding, Denver Health would have to make service cuts — though they haven’t specified which services would be on the chopping block.
If passed, the sales tax would raise about $70 million a year to fund specific areas of care, including mental health, addiction treatment and pediatrics. Johnston’s affordable housing tax proposal would raise an estimated $100 million a year to invest in new projects and preserve existing income-restricted housing.
Denver Health CEO Donna Lynne, in a recent meeting with Denver Post journalists, didn’t directly criticize the decision to ask for two sales tax increases at once. She noted that Johnston is supporting the Denver Health tax, and he spoke at the Sept. 10 launch of the campaign to pass it.
If voters don’t pass the tax, she said, the health system would be out of options, other than cuts. For years before they pitched the tax, Denver Health’s leaders have asked the city for more support to help with the rising toll of uncompensated care — largely unsuccessfully.
“He’s the mayor. He can do whatever he wants,” Lynne said. “But I would argue if ours doesn’t pass, it results in some very bad consequences.”
Councilwoman Stacie Gilmore, who represents the far northeastern corner of the city, said she was concerned that both measures would fail in November, further undermining Denver Health’s ability to take care of low-income patients.
According to rough math done by her office, the average annual cost to families if both taxes were to pass would be $244 per household, she said. That number is based on national average spending.
Gilmore voted in favor of referring the Denver Health question to the ballot, she said, because its leaders spent nine months gathering input and because of the value she saw in its services. Those include operating a local clinic in Montbello, providing care in the county jail and running clinics in Denver schools.
She voted against the housing measure because she thought it needed more public input.
“All of those are essential services,” she said of the Denver Health programs, “and I just don’t understand why we might be putting that at risk by rushing something.”
Mayor: “We want to support them”
On the city’s ballot for the Nov. 5 election, voters will decide on Ballot Issue 2Q, which would raise sales taxes by 0.34 percentage points to fund Denver Health, and Ballot Issue 2R, which would increase the tax by 0.5 percentage points for affordable housing programs and project support.
If both pass, the combined increase would add 84 cents in taxes on a $100 purchase.
Johnston, who made affordable housing the centerpiece of his campaign last year, says voters understand that the city faces multiple problems — and it needs both more housing and a health care safety net.
“We want to support them in their success, and we believe that passage would make a dramatic difference for them,” he said about Denver Health at this month’s ballot campaign kickoff news conference. “If it doesn’t pass, we’ll be at the table with them working through whatever the other options are — but that would be a far, far tougher outcome for the city and the state if they don’t pass.”
Like Gilmore, Councilman Chris Hinds has also had concerns about the overlapping timing of the tax questions. He represents central Denver and has credited Denver Health for saving his life after a car struck him years ago. He voted in favor of placing both questions on the ballot.
“It sure would be easier if voters could consider one and then the other,” he said during a council meeting in August. “We’ve already referred Denver Health to the ballot, and, frankly, we knew about the Denver Health measure for months. And this (the affordable housing tax) was just kind of sprung on us — almost as if it was just shouted to an audience, instead of shared with us more directly.”
Denver Mayor Michael Johnston, center, speaks during a rally in support of Ballot Issue 2R outside of The Burrell Denver in Denver on Sept. 17, 2024. The Affordable Denver campaign formally kicked off with a press conference and rally in front of the newly built affordable condominium complex in Five Points. (Photo by Helen H. Richardson/The Denver Post)
Denver Health’s struggles have a long history. When the city and Denver Health legally separated in the late 1990s, Lynne said, the understanding was that the city would continue to pay toward uncompensated care as its budget allowed — to help offset the cost of care for people who are uninsured and unable to pay.
Instead, its contribution barely budged in 25 years and has remained at $30.8 million per year since before the pandemic. Even small increases would have helped if the city sustained them, she said, but city officials focused on other priorities.
“The promise that the city made to us has not been kept,” she said. “What happens every year is: I go to the city and say, ‘We need more money.’ And they say, ‘Gosh, we have problems.’ ”
The city will spend about 3% more on its contract with Denver Health in the coming budget year than it did this year. The money will provide raises and cost-of-living increases to its employees who work in the jail and other public facilities. But the city won’t make any changes to its own contribution to offset the cost of uncompensated care.
“We continue to prioritize support for them,” Johnston said.
But failing to address the city’s housing needs would also result in consequences residents don’t want, he said. He has estimated that over the next decade, Denver will be short about 45,000 apartments, condos and other homes that are affordable to people struggling to stay in the city — a dynamic that possibly will force working families to move out.
“Doing nothing is not an option,” Johnston said.
Denver tax votes often succeed
As November approaches, the city’s recent history with sales tax votes appears encouraging both to Denver Health and affordable housing advocates.
In 2018, Denver voters raised the sales tax by 0.66 percentage points by approving four separate requests in the same election. In the last six years, nine of 10 proposed sales tax requests — some of which made prior increases permanent — won voters’ approval.
But at some point, city voters may decide that the sales tax rate shouldn’t go any higher, said Paul Teske, the dean of the School of Public Affairs at the University of Colorado Denver. No one has solid data about where that mental threshold might be for likely voters, he said.
“In many ways, it’s an interesting test to see how generous — for lack of a better term — Denver voters are going to be,” Teske said.
This year, some voters may be feeling more of a pinch in their wallets.
As of July, after spikes in inflation in recent years, the price of a predefined basket of goods and services in the Denver area was about 8% higher than it had been in 2022, according to data from the U.S. Bureau of Labor Statistics and the Colorado Division of Local Government. That price was 26% higher than it was in 2018.
Even if both tax increases pass in November, Johnston points out that Denver will still have a lower tax burden than most large cities. A study by the city’s finance department didn’t project any loss of population or that residents would do their shopping elsewhere, he said.
“We feel very confident about the ballot,” he said.
But the increase would make Denver’s sales tax rate stand out among its metro neighbors. At the statewide level, the higher rate would remain below those of some mountain communities.
Lynne said during her meeting with The Post that polling in November and April found a sales tax in Denver was the best option for sustainable funding. City voters weren’t keen on a property tax, and asking surrounding counties to approve a regionwide tax would have thinned the margin of support to uncomfortable levels, she said.
People who don’t live in Denver pay about one-third of the sales taxes the city takes in.
Denver voters have approved tax revenue-retention questions more recently, but the last request for a tax increase was in 2021, when Initiated Ordinance 300 went on the ballot. It would have raised the sales tax on marijuana to pay for research on pandemic prevention at CU Denver.
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Since-disgraced cryptocurrency mogul Sam Bankman-Fried was its only major proponent, and CU Denver said it had no plans to set up a pandemic research program. The ordinance failed, with about 40% of voters supporting it — though Denverites that year did pass four out of five requests to allow the city to raise money by issuing bonds.
Another factor in the mix this year is that voters will have to make dozens of choices if they fill out the full November ballot, Teske said.
If significant numbers of voters only want to support one of the two sales tax requests and don’t know much about either, he said, Denver Health’s proposal may have a slight advantage. That’s because the health system can point to services that the public would lose if it doesn’t get needed funding, he said.
“On some level, voters can understand that pretty well,” Teske said.
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