COEUR d'ALENE — A budget-ceiling for the upcoming fiscal year was narrowly approved Tuesday night by the Coeur d'Alene City Council, despite continuing contention over a proposed 3 percent increase to property taxes.

Cities in Idaho, according to statute, are required to establish a high water mark — a dollar figure that cannot be exceeded as the overall budget develops throughout the year — prior to finalizing their budget for the upcoming fiscal year during a public hearing in September. The main purpose of the mark, according to Finance Director Troy Tymesen, is to inform the public of the funds municipalities expect to receive from property revenue.

"We can reduce the high water mark, but we cannot go the other way," said Mayor Steve Widmyer, with others mentioning the council initially set a higher property tax increase last year before lowering it while finalizing the budget.

The total of the proposed budget, according to Tymesen, is $95.7 million, with one of the biggest increases to the overall budget coming from additional salary to account for a 2 percent cost-of-living adjustment and merit-based raises. Another large cost, Tymesen added, is plans to hire more personnel in the city's police and fire departments.

The proposed property tax increase, Tymesen said, is expected to generate an additional $588,663 in revenue for the city. Tymesen noted the city has increased property taxes by a total of 3.5 percent since 2010, adding state statute allows a maximum 3 percent increase annually.

"We need the cash flow (from the increase) to take care of people," Tymesen said. "If we don't have that cash flow, I cannot continue to go into the fund balance for a number of years to cover that."

The city has an expected fund balance of $7.6 million.

When asked by Councilman Ron Edinger what would happen should the council approve a 2 percent increase, rather than the proposed 3 percent, Tymesen replied officials would either have to cut more from the budget, or dip into savings to cover costs.

Tymesen added several factors — including the de-annexation of urban renewal properties, growth in property values, and a state-level increase to the homeowners exemption — would actually contribute to a reduction in property taxes paid by most homeowners in Coeur d'Alene.

To illustrate this point, Tymesen said the levy rate would go from $6.09 per $1,000 of home appraisal, to $6.05.

Tymesen's point was further stressed by City Administrator Jim Hammond, who added the city's finance department has already cut more than $2 million during the initial creation of the budget.

Councilman Dan English called the budget, and proposed 3 percent tax increase, a modest and reasonable effort "that won't break the bank." Those thoughts were echoed by Councilman Woody McEvers.

"We can take 3 percent and I'd actually pay less," he said. "I don't want to take money out of people's pockets. But guess what? We aren't."

However, Councilman Dan Gookin disagreed with the 3 percent increase and advocated for further cuts to the budget.

"We can go the extra mile and find things to cut," he said. "I would like to do everything possible."

The proposed budget, including a 3 percent tax increase, was approved by a vote of 4-2, with Gookin and Edinger voting against. A public hearing, which will include a final vote on the budget, was scheduled for Sept. 6.