BLAINE - The city of Blaine could increase property taxes by 3 percent, lay off three employees and cut its contributions to the Senior Center as well as the Boys & Girls Club to balance its budget.

City officials are grappling with a $536,000 shortfall in the general fund, which pays for the daily cost of running the city.

The shortfall already totaled $350,000 before the owners of the Semiahmoo Hotel announced plans to close Dec. 1.

In addition to the potential loss of 224 jobs at Blaine's largest employer, the closure is expected to add to the shortfall because of loss in revenue from sales and utility excise taxes.

Richard Warnick, the president of Warnick + Co. in Phoenix, had confirmed that he was negotiating to possibly buy the property, but he said there were no guarantees.

"We're just planning that we're going to lose that revenue," City Manager Gary Tomsic said. "I haven't heard that the (hotel) has a buyer. Even if they were to put something together, it wouldn't help us much for a while."

City officials are proposing to take the legally allowed 1 percent property tax increase, as well as 2 percent in banked capacity from years when they didn't increase property taxes.

The combined increases would generate an additional $27,000 for the 2013 budget.

The owner of a house assessed at $200,000 would pay about $13 more per year, according to Tomsic.

As for the initial $350,000 shortfall, Tomsic said that was because of fixed costs such as benefits and salaries, as well as the proposal to hire and train three police officers to replace the three that left in the past 18 months.

The costs related to those officers included overtime needed until the newly trained officers were on board, according to Tomsic.

The city is proposing instead to hire just one officer, although the overtime request will remain.

Hiring one officer would save about $154,736.

As for laying off three other employees, that would save $176,523 in salary and benefits, according to Tomsic.

The city also proposes to cut $10,000 in contributions to the Senior Center and $5,000 to the Boys & Girls Club; eliminate a 1.5 percent wage increase for all employees to save $30,000 (although some workers still will get step increases); and increase businesses licenses by $10 to generate another $9,000 at least.

The city also is proposing to take $25,000 from its reserves.

The proposed 2013 budget is expected to go before the City Council on Dec. 10 for approval.

In addition to a hit to the general fund, a Semiahmoo Hotel shutdown would mean a loss of an additional $180,000 in hotel and motel tax revenue.

Tomsic has said those dollars pay for most of the city's tourism activities, including the visitors' center, special events such as the jazz festival, the Plover ferry and some July 4 events.

ATTEND THE MEETINGS

What: Two public hearings for the 2013 preliminary budget for Blaine.

When: Tuesday, Nov. 13, and Monday, Nov. 26. The Tuesday meeting will include the proposal to raise property taxes by 3 percent. Both begin at 6 p.m.

Where: City Hall, 435 Martin St., inside the Banner Bank building.

Reach KIE RELYEA at kie.relyea@bellinghamherald.com or call 360-715-2234.