Summers without ships bring Ketchikan $3.4 million budget shortfall

The Sapphire Princess docks in Ketchikan. (Ed Schoenfeld/CoastAlaska)

Faced with the prospect of another canceled cruise season, Ketchikan’s borough is projecting a multimillion dollar deficit. But despite an estimated $3.4 million shortfall, officials said the borough won’t burn through all of its savings.

“The borough is fortunate in that we do have strong reserves,” said Ketchikan’s finance director Cynna Gubatayao. “Even having to revise our revenue figures downward for the loss of the cruise ship season this year, we still have enough reserves that we do not have to take immediate drastic action.”

Gubatayao told the assembly last month she was expecting sales tax revenue to take a hit from the vastly-reduced cruise season. Sales taxes are the biggest source of general revenue in the borough — property taxes fund the school district.

After Canada announced it would keep its ports closed until next year, Gubatayao is revising those projections further.

But she told KRBD Friday the borough still has money in the bank.

That doesn’t, however, that it’s going ahead as if it’s a normal year, she said. She’s recommending the borough postpone any new capital projects, hold off on hiring its seasonal workforce, and continue a freeze on almost all travel.

But she and borough manager Ruben Duran said services shouldn’t be cut, and nobody should lose their jobs.

“At some point, if the cruise industry, and if the economic decline here goes too deep, I would expect that we would have a much more severe hiring freeze,” she said. “At this point the manager and I are not recommending making any kind of fee increases or adding any new fees or taxes.”

That’s partly because the deficit for fiscal year 2021 — from July 2020 through June 2021 — wasn’t nearly as big as local officials initially thought it would be. A projected $3.2 million deficit was revised down to roughly $1 million.

Gubatayao said federal pandemic relief filled some of the gap, though separate transportation grants on top of the roughly $10 million in CARES Act funds local officials spent on relief programs in 2020.

The smaller-than-expected deficit is projected to leave the borough with an estimated $11.6 million in the bank at the beginning of July, more than three times the borough’s projected deficit for this coming year.

And more help could be on the way.

Gubatayao said a Biden administration package now pending in Congress could provide as much as $2.7 million in federal relief for the Ketchikan borough.

Gubatayao is scheduled to take questions about the impact of a canceled 2021 season on the budget at the borough assembly’s meeting on Tuesday, where the assembly is set to consider a joint resolution with the cities of Ketchikan and Saxman urging the state’s congressional delegation to waive federal laws that require foreign-flagged cruise ships to stop in Canada.

The delegation issued a statement earlier this month saying they were “exploring all potential avenues, including changing existing laws, to ensure the cruise industry in Alaska resumes operations as soon as it is safe.”

The document also asks the federal Centers for Disease Control and Prevention to issue guidance that would allow cruise lines to start sailing again.