COEUR d'ALENE - The city of Coeur d'Alene must ask for a tax increase to maintain its current level of service for residents, the City Council agreed at a budget workshop on Thursday night.

After reviewing the preliminary financial plan for fiscal year 2010-11, the council unanimously agreed on a 1.5 percent property tax increase that will be included in the city's budget hearing in September.

"We're asking the citizens an awful lot, but this is the best balance we can come up with," said Mayor Sandi Bloem.

City Finance Director Troy Tymesen, who walked through the proposed $77 million budget, pointed out that levy rates will increase no matter what.

The city's overall assessed valuation, last totaled just under $4 billion, is forecasted to drop 15 percent, Tymesen said.

The city has estimated that would automatically raise the current levy rate of $4.92 to $4.97.

On top of that, the city is still looking at a budget gap, Tymesen said, partially due to a lack of new property annexations.

"Last year we had $200,000 in annexations to fill in the gap of people and benefits," he said. "When annexations stop, the payments stop. But the people are still here."

A 1.5 percent property tax increase, which would raise the levy rate to $5.03, is crucial to maintaining the city's current level of service, he said.

Pointing out that there was no levy increase last year, Tymesen said the increase would bring in an additional $237,675. The funds would go toward new police vehicles, a new $14,000 copier for the city, $20,000 worth of library books, and new radios for the police department that are mandated by the federal government.

The city skipped buying a new copier last year, Tymesen said, but it can't hold off any longer.

"We see the copy repair man weekly," he said.

If there was no levy increase, he added, the city would have to resort to dipping into the city fund balance, currently at $4,154,324.

"The rule of thumb is to have three months worth of cash to cover yourself. So we're sitting close to where we need to be with cash," he said. "I would not like to dip into the fund balance, because we can't put money back into that fund. That is not in this proposal."

City departments are still making plenty of sacrifices.

Wendy Gabriel, city administrator, said employees have been asked to waive their contractual raises, and departments have slashed supplies and training.

Five city police positions are also currently paid for by federal dollars, saving the city $642,651. The police are also freezing two positions that would have been paid for by the city's general fund.

Council member Woody McEvers said that he hadn't wanted to look at any raises, but feels that the 1.5 percent is acceptable.

"I'm OK with 1.5, hearing that everybody has given a little bit up," McEvers said. "What I'm learning is this job is always about a little compromise."

Council member Al Hassell said he had also initially hoped for no raises, but some issues, like old police vehicles, aren't in his control.

"If we don't replace some of these vehicles along the way here, we'll have breaking down police vehicles, and we can't have that," Hassell said. "For that, I can agree we do need to make a minor adjustment."

The increase could be worse, said council member Rod Edinger.

"I do not like layoffs. If we can keep the people with this 1.5 ... I don't like layoffs. I don't want layoffs anyplace," Edinger said.

Another budget change Tymesen noted is that the city has forecasted $7.8 million in capital projects for the next fiscal year, a $5.8 million increase from last year.

Of that, $300,000 will be paid for by city impact fees, and $7.5 million is expected to be paid for with federal funds, Tymesen said.

The projects will include work on Government Way and 15th Street.

The council still needs to vote on a resolution on the final proposed budget numbers. It will hold a public hearing over the proposed budget on Sept. 7.