Pueblo Mayor Faces Legal Battle Over Economic Development and Fiscal Mismanagement

Pueblo, Colorado – The city’s mayor, Heather Graham, is under scrutiny after a series of decisions that have led to a $12 million budget deficit and a lawsuit from the Pueblo Economic Development Corporation (PEDCO). The dispute centers on the city’s use of a half‑cent sales tax that was approved by voters in 1984 to fund economic development.

PEDCO was created in 1981 by Pueblo leaders to spur job creation. The organization was funded by dues from businesses and later by taxpayer dollars. In 1984 voters approved a half‑cent sales tax to support PEDCO’s work, including capital projects and equipment purchases for new and expanding businesses. The tax was intended to generate “primary jobs” – full‑time private‑sector positions that bring money into Pueblo from outside the city.

Mayor Graham has repeatedly criticized PEDCO and, in December 2025, ended the city’s 40‑year contract with the organization. PEDCO filed a civil complaint in March 2026, alleging that the city breached its contract. The case is now pending in Pueblo District Court.

The mayor’s actions have raised several questions. She has created a new economic‑development entity called Advance Pueblo, which has not been approved by the city council. According to reports, she transferred funds from the half‑cent sales tax to support Advance Pueblo, a move that could violate the original intent of the tax. She also took out a $9.1 million loan to purchase a building for municipal offices instead of leasing commercial space that could generate income for the city. The interest from the sales tax was reportedly used to pay $834,000 in annual debt service on that loan, again raising concerns about the proper use of tax revenue.

In addition, the mayor proposed using $1.8 million from the sales‑tax fund to support a new nonprofit museum, including salaries for 25 staff members. The move may also conflict with the tax’s purpose. Meanwhile, funding for other nonprofits, such as the Pueblo Zoo, has been curtailed. The zoo faces closure if a November ballot initiative fails to secure operating funds.

Last year, Graham suggested a grocery‑tax measure at a time when grocery prices were high and many residents were struggling. The proposal was withdrawn after community backlash.

Graham’s latest proposal is a 1 % sales‑tax increase, split evenly into four 0.25 % components for roads, parks and recreation, non‑departmental groups, fire services, and technology. Critics argue that these items should be funded from the general fund, which already carries a tax burden.

The mayor’s involvement with the Pueblo Urban Renewal Authority (PURA) has also drawn attention. Colorado law allows the mayor to appoint 10 of the 13 board members, including one elected city official. Graham appointed herself to the commission. In a recent board meeting, she voted with five other members in a 6‑5 decision to move PURA offices into city office space at no charge. The move would make PURA a tenant of the city, potentially compromising its autonomy. Graham declined to recuse herself, and the city council will review the action at a future meeting.

The city’s fiscal situation is precarious. Officials say the $12 million deficit is approaching a fiscal cliff, and the city’s budget is in need of significant restructuring. The legal dispute with PEDCO and the mayor’s controversial financial decisions have intensified calls for greater transparency and accountability.

The outcome of the PEDCO lawsuit and the city council’s review of the PURA decision will shape Pueblo’s economic future. Residents and stakeholders are watching closely as the city navigates these challenges.

The city’s official website and local news outlets continue to provide updates on the lawsuit, budget proposals, and council actions.