The city of Blaine is on track to use significantly fewer reserves after losing four staff positions that haven’t been refilled and improving sales tax revenue.
City finance director Daniel Heverling said the city will spend about $150,000 of its reserves, instead of the $950,000 it anticipated using for the 2023 budget, if midway budget trends continue through the end of the year. This will allow the city to keep about $800,000 it would have spent of its $4 million reserve.
City staff approved a conservative 2023 budget last fall that would have resulted in a nearly $1 million deficit in the general fund. The deficit came as the city’s revenue, impacted by the fallout of the U.S./Canada border closure, didn’t keep pace with high inflation and increased staff salaries. The city also no longer receives the Covid-19 stimulus funds that kept the budget balanced during the pandemic.
“Long term, we either need to bring more revenue to the city or there’s got to be a way to cut expenses,” Heverling said.
The general fund pays for daily government operations and is often the most difficult to balance because it relies on tax revenues that need voter approval to increase. Stagnant sales, property and utility taxes largely support the general fund; higher employee costs totaled over 60 percent of expenses in the 2023 general fund.
Inflation was up 8 to 10 percent in 2022, when the budget was configured, compared to 1 percent in 2019, according to consumer price index data from the U.S. Bureau of Labor Statistics for the Seattle area. Heverling said he expects inflation, at 4.6 percent in June, to remain around 4 percent next year.
The lower-than-anticipated expenses are mostly the result of the city having four staff vacancies, Heverling said. The staff vacancies are in the police, planning and IT departments.
The city is also seeing growing sales tax revenues that are expected to be $100,000 higher than the $1.9 million originally budgeted. For comparison, the city budgeted $1.8 million in sales tax in 2019.
Heverling attributed the higher revenue to more tourists, as the Blaine Tourism Advisory Committee’s funds were at an all-time high in 2022, along with more people moving to east Blaine.
“It seems like, in general, there are more people who are starting to shop in the area,” Heverling said. “There are more people coming across the border. It’s an increase from post-Covid to normal.”
The gas tax is doing better than expected but was budgeted conservatively. The gas tax is predicted to come in at $60,000, which is $10,000 higher than the $50,000 budgeted.
“That sounds great but a $50,000 budget is bad,” Heverling said. “It’s been above $100,000 previously.”
In March, Heverling told The Northern Light that he was afraid the city would deplete its reserves by 2026 if it kept the pace it was going with expenses outweighing revenue. Staff vacancies and increased sales tax have tamed these concerns now that the city will save over one-quarter of its $4 million reserves.
“I would say the risk has been eliminated,” Heverling said. “The risk of us using all reserves in 2026 is very slim now.”
The 2023 budget totaled $75 million and prioritized economic development, parks and facilities maintenance, transportation and utility infrastructure. While remaining close to the 2022 budget, it aimed to fund professional services cut during the pandemic. None of those additional positions, such as an administrative coordinator for the planning department and police detective, have been added, Heverling said.
City department heads are preparing for the 2024 budget, and the city will begin formally looking at the budget in September, a month earlier than usual.
This article has been updated from the print issue to clarify the amount of reserve that could be saved.
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