Case Study

Aurora, Colorado
Revenue and Expenditure Study

The City of Aurora is a large, rapidly-growing city of more than 300,000 citizens, with solid financial practices and credit ratings. However, like many similar governments, the 2001 national recession led to a significant financial challenge, particularly for revenues (which are largely dependent on sales and use taxes). While the City experienced some recovery in 2004 and 2005, there were differing opinions among City leaders as to how future population and commercial growth would impact City revenues and expenditures.

PFM was hired to examine Aurora's current and projected revenues and expenditures, determine whether the City's financial difficulties were short term or structural in nature, and make recommendations on methods to improve their current finances. The study was to have both a short term (the next five years) and a long term (next 20 years) outlook. The City also required that the study identify means to broaden their revenue structure and align revenues with services the City provides, both to its current citizens and to new housing and commercial developments.

PFM constructed a short term financial model with a baseline and alternate revenue and expenditure scenarios that indicated the City was facing a structural gap. PFM, with the assistance of a Colorado economics consulting group, developed a 20-year demographic outlook that identified the key trends that would shape revenue and expenditure trends for the City. PFM then prepared detailed discussions and revenue projections on approximately twenty revenue alternatives, as well as concise discussions of another forty options for further study. PFM also prepared funding recommendations focused on the City's identification of needed capital projects and provided an assessment of key budget cost drivers.

As a result of the study, the City has moved forward on several of the revenue-generating approaches and is actively considering others. Using the PFM model as its guide, the City has also updated and expanded its five-year revenue and expenditure models.