City of Blaine leaders are expected to spend the coming months looking for ways to balance an already barebones budget as the drop in Canadians crossing the U.S./Canada border significantly impacts the city’s budgeted sales tax revenue, which is used to fund the police, staff salaries, parks and other critical city services.
The sales tax revenue is the biggest contributor to the city’s general fund. The city anticipates a $368,000 deficit in the general fund to pay for these city essentials.
The general fund is typically the most difficult fund to balance because it relies on outside influences such as tourism. Sales tax makes up about one-third of the general fund revenue. Other large revenue sources include utility and property taxes as well as the business and occupation tax, which is also impacted by fewer Canadians.
“We really only have two levers. One is cut expense. Two is raise revenues,” city manager Mike Harmon said during the May 12 Blaine City Council meeting. “Within the general fund, we’re very limited on our ability to raise revenues.”
The city administrators estimate the city could expect a $292,000 loss in sales tax revenue by the end of 2025, though a lot of uncertainty remains with the border. The 2025 sales tax was down 13 percent from last year through February, Harmon told council, adding that the city won’t know the sales tax numbers for March and April, when traffic really slowed, until this summer. Border traffic is down about 50 percent as fewer Canadians are crossing the border due to political tensions, tariffs and a lower Canadian dollar.
The general fund deficit is also affected by a $52,000 increase in salaries and wages and an insurance increase of 12-15 percent.
“It’s continual cuts. Pretty soon it’s, ‘Where do we cut in a budget of 80 percent staff?’” Harmon said. “It’s the continual pressure of insurance, labor, inflation … and our revenues aren’t keeping pace.”
City staff are reviewing various options and hope to balance the fund before the end of the year, Blaine finance director Jennifer Spidle said.
“We’re not anticipating any layoffs for city staff at this time,” Spidle said.
The operating budget forecast for the next five years doesn’t look bright.
In addition to the general fund, the individual utility funds – water, sewer and electric – also aren’t doing well as utilities and rates aren’t keeping up with costs. While those funds won’t be in a deficit this year, Spidle said it’s a long-range projection that city leaders are watching and working to change.
“If nothing changes and we don’t have any additional revenue, then we would be projected to go into the red in our utility funds,” Spidle said. “The important part is, ‘If nothing changes.’ If we don’t increase revenues or decrease expenditures, take out a loan if it’s for a large capital project, or get additional grant funding.”
In its operating budget, the city’s cash flow is expected to dip over the next five years in every fund except for required reserves, which is anticipated to grow about $2 million to nearly $7 million, and its public works administration and stormwater fund, which will remain about the same.
If projections play out, the first fund to go negative would be streets in 2026, followed by sewer in 2027, water in 2028, and the general and electric funds in 2029.
The city’s general fund, which had a cash flow of about $2 million at the end of 2024, is expected to have the most significant negative cash flow in the operations budget of nearly $11 million by December 2030. Following the general fund, the city’s water and electric funds are expected to be negative by $7.5 million each at the end of 2030. The streets fund would be negative $4 million and the sewer fund negative by $1 million at the end of 2030.
The city’s parks fund is also expected to go negative in 2026 if nothing changes, Spidle said.
Spidle said the utility operating funds also go into the red to pay for improvement projects when there’s not enough funding in the capital budget.
Unlike the general fund, the city can increase utility rates to stabilize the utilities budgets if needed.
The city has been in financial woes since the pandemic, but was able to keep afloat with Covid-19 stimulus money. However, a combination of Covid-19 funding ending, lower cross-border traffic during the pandemic border closure and inflation brought budget concerns to the forefront in early 2023.
Then-finance director Dan Heverling told city staff and councilmembers in early 2023 that the city budget was set to be in a $1 million deficit by the end of that year. At that time, Heverling anticipated the city could deplete its $4 million in general fund reserves by 2026 if it followed the trajectory predicted in the 2023 budget. The city planned to cut about 10 percent of its 65 full-time staff, which was the largest round of layoffs since Semiahmoo Resort closed in 2013, but through attrition only ended up needing to lay off three people. The city finished 2023 with a slight surplus and operated on a barebones budget in 2024.
As for 2025, Spidle, a Ferndale resident, said she’s switched to a Blaine dentist and hair dresser. In light of fewer Canadians crossing the border, she asks Blaine residents to consider doing the same.
“Anything the community can do inside the city is going to help the city of Blaine,” Spidle said. “People can explore the services in their own backyard.”
Comments
No comments on this item Please log in to comment by clicking here