The Manitou Springs City Council last week amended its first budget reading, pulling about $690,000 away from a tax reimbursement agreement with the Pikes Peak Cog Railway to fund wildfire mitigation efforts instead.

“We feel like we’ve been living on borrowed time,” Mayor John Graham said on wildfire risk for the mountain city popular with tourists west of Colorado Springs.

The reimbursement has been a source of contention between the city and one of its largest tourist attractions. This is the second year the city council has decided not to allocate a reimbursement to the cog in the annual budget, a decision that last year prompted a lawsuit from the company that owns the railway.

In the lawsuit, the Manitou & Pikes Peak Railway Co. claims that a tax agreement obligates the city to reimburse the cog all revenue from excise taxes above $500,000.

An excise tax is a levy on tickets and door fees. Tickets to the cog railway are Manitou Springs’ largest contributor to tax revenue from this source. The railway’s lawsuit concerns the allocation from the 2025 budget, which comes out to $638,536.

The railway is owned by Denver-based Anschutz Corp., whose Clarity Media Group owns The Gazette.

The reimbursement is in exchange for payments the railway company made to the city totaling $1.25 million to offset financial hardship while the cog was closed for a $97 million renovation project. In exchange, the city would make excise tax reimbursements for the next 50 years.

The city, in its response, has claimed the agreement does not require reimbursements in any particular year. The next court date for the lawsuit is a status conference scheduled for Dec. 18.

Graham said using the reimbursement amount for wildfire mitigation felt like a necessity for the city due to rising property insurance costs and safety concerns. He said the money would likely be earmarked for removing vegetation that could become fire fuel in the foothills around Manitou Springs.

The latest wildfire to threaten the city was the Waldo Canyon Fire of 2012, which prompted a brief evacuation and was a major factor in deadly flooding the next year. About 70% of the city is at moderate to high burn probability assuming extreme fire weather conditions, according to the Manitou Springs Fire Department’s Community Wildfire Protection Plan published in March.

Graham said the allocation would allow wildfire mitigation on a “much more ambitious scale” than in previous years.

The Manitou & Pikes Peak Railway Co. declined comment on the budget allocation, citing the pending litigation.

The allocation comes during a tough budget year for the city, which faces about a $4 million deficit due to lost marijuana revenue, according to city estimates. The city claims competition from recreational sales in Colorado Springs significantly reduced sales in Manitou Springs’ two dispensaries.

Increasing excise tax revenue was part of the city’s strategy to make up the difference. The Manitou Springs City Council backed a ballot measure this fall that would have increased the tax rate from 5% to 14%. Tourism businesses in the city opposed the measure, which failed with voters.

The balanced budget the council is now considering would dip into Manitou Springs’ reserve fund, a situation that Finance Director Rebecca Davis told councilmembers was “not a sustainable solution.”

Councilwoman Judith Chandler said at the meeting she was disappointed with the process so far, especially when it came to a November budget retreat where she said councilmembers did not discuss their ideas for major reductions.

“That was an opportunity that was completely cut off from us,” she said.

Chandler, along with councilwoman Julie Wolfe, voted against the budget amendments that included the wildfire mitigation fund.

The second reading and a public hearing for the finalized budget are scheduled for Thursday, Dec. 11. Changes to the budget afterward to reflect changing financial realities are expected, however.

In February, the city plans two town halls to explain the budget and discuss the possibility of service cuts.

The first is scheduled for Feb. 19, from 5:30 p.m. to 8 p.m. The second is set for Feb. 21, from 9 a.m. to 11:30 am. Later in the month, the council will also have a second budget meeting that Graham told councilmembers would be a time to bring “sharp knives and pencils” to lower expenses.

 “I anticipate that we’re going to have to make some pretty significant cuts,” said Graham in an interview.