COEUR d'ALENE - Residents can expect a tax bump and maintained city services in the upcoming fiscal year.

The Coeur d'Alene City Council voted 5-0 on Tuesday night to approve a 1.5 percent property tax increase for the 2010-11 fiscal year, along with a $77,913,463 budget.

"I know it's tough, and it's tough for me and all of us because we're going to get yelled at," said council member Deanna Goodlander, before the vote in the community room of the Coeur d'Alene Public Library. "But you've got to do what's right. And I feel this is right."

Council member Al Hassell said the only alternative to the tax increase would be city layoffs.

"That makes a recession worse in Coeur d'Alene, not better," he said. "We're doing our best to maintain services."

The new budget is roughly $4 million higher than the current fiscal year's budget of $73,729,137, said Finance Director Troy Tymesen.

"A great question is, why during these economic times would we grow the budget?" Tymesen said.

He explained there are federal funds available now that the city has been prepared to take advantage of.

That includes funding help for multiple improvements on Government Way, including paving for five lanes from Dalton to Hanley and Hanley to Prairie.

Curbing and paving would also be done for 15th Street, from Margaret to Dalton.

Of the $7.5 million in improvements, Tymesen said, the city will only pay for $300,000, all from impact fees.

"We did not see this happening now, but we have moved it forward," he said.

The 1.5 percent tax increase is expected to bring in $237,675, which will go toward new library books, a copy machine for city hall, three new police vehicles and new police radios.

Tymesen pointed out that all the expenditures are overdue.

When council member Ron Edinger asked what could be dropped if the council only raised taxes 1 percent, Tymesen said the city would have to pass on new police vehicles, which are not mandated.

"We could run with police cars that have 80,000 miles and don't work real well," he said, adding that the city hasn't purchased new police cars in two years.

In an overview of the city's financial status, Tymesen said that Coeur d'Alene is expecting $468,906 from new growth.

Building permit revenue is expected to decrease $289,000, however, and state revenues will plummet $155,749.

The city will have no income from annexation fees, which Tymesen was optimistic about.

"Annexation fees are not an ongoing source of income," he said. "We need to get away from using one-time money to pay for ongoing expenses."

Even without a tax increase, he said, the levy rate would still rise above the current level of 4.92 percent because the city's overall assessed valuation is forecasted to drop 15 percent.

With the tax hike, the levy will rise to 5.03 percent.

The city has been restructuring to save money, Tymesen said.

The municipality has dropped 10 staffing positions in the last two years by not replacing employees who retired, he said. There are also five police positions funded by grants.

The personnel restructuring has saved $642,651, he said.

"We did whittle and whittle and whittle at services," Tymesen added, pointing to the $33,907 saved in services. "Travel and training is down to an absolute minimum."

Five city residents gave testimony decrying the tax increase, some wondering why money couldn't be taken out of the city's $4 million fund balance.

"I am a person who works with people with needs - homeless, people in need of assistance to buy food for their tables," said Earl Kondle, a volunteer for various nonprofits. "This 1.5 percent tax increase isn't going to hurt me, but it will hurt them. The people on the fringe."

Dan Gookin also worried that the tax increase would deter small businesses from relocating to the city.

Tymesen replied that the city partners with St. Vincent de Paul to provide services for the homeless at the HELP Center. Coeur d'Alene's amenities maintain its appeal for businesses, he added.

He and the council members also said the fund balance must remain full to act as a rainy day account.

Council member Woody McEvers was absent from Tuesday's meeting.

The city's new fiscal year begins on Oct. 1.

Council member Mike Kennedy said that despite citizens' complaints of the tax increase, he hasn't heard any demands to cut services.

"It's the price of democracy in some ways," he said. "Just because we're in a recession doesn't mean we have to stop living. And we need to figure out a way to do that right."