MANITOU SPRINGS, Colo. (KOAA) — Manitou Springs faces a nearly $4 million budget shortfall in 2026 due to lost sales tax revenue. Next week, voters will decide whether to approve a significant increase to the city's excise tax on tourism excursions.
The proposed measure would give city leaders the authority to raise the excise tax from its current 5% rate, unchanged since the 1970s, up to 14%. The tax targets popular tourist attractions like the city's zip lines, Cliff Dwellings and other adventure activities.
"I'd prefer to not have to do this, let's put it that way. We need to figure out how we're gonna pay the city's bills," said Mayor John Graham.
The budget crisis stems from the city's loss of marijuana tax revenue.
On April 15, Colorado Springs dispensaries were allowed to sell recreational marijuana, ending Manitou Springs' regional monopoly on recreational cannabis sales.
The city reduced its recreational marijuana tax from 10% to 5% to remain competitive.
Graham said marijuana tax revenue once made up 30% of the city's sales tax income, funding an $8 million reserve and capital improvement projects, including upgrades to the city's 40-year-old water treatment plant.
"It's kinda like, when you win the lottery, you pay off your car," said Graham. "We're now two of 34 [dispensaries], something like that."
Business owners affected by the potential tax increase express concern about its impact on tourism.
Greg Wellens, who owns Adventures Out West and brought his family business to Manitou Springs in 2012, said the proposed 14% rate is excessive.
"When the bill changes from 400 to 500 bucks, fewer people are gonna come here. They're gonna reconsider. They're gonna go other places throughout the state," said Wellens.
At Manitou Cliff Dwellings, owner Rob Hefner calculated the tax impact on his business. An adult day pass currently costs about $13.38 with the existing 5% excise tax. Under the proposed 14% rate, that would increase to $14.60.
"If you spend $30 to $40 more at the Cog, and $30 to $40 dollars more for zip lines, if you're a family of five, that's $60 to $80 dollars you don't have to spend here or elsewhere," said Hefner.
Hefner and his wife took ownership of the Cliff Dwellings in 2021, describing it as an "architectural representation of the ancestral Puebloans up into the cliffs."
"There's a lot of pride in ownership and the way we take care of things," said Hefner.
A "yes" vote would not automatically establish the higher excise tax rate, but would give City Council and the mayor authority to implement increases up to 14% as needed.
If the measure fails, Graham indicated the city would take a close look at its budget and determine if a future tax increase could end up on a ballot in the future.
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